[Congressional Record (Bound Edition), Volume 157 (2011), Part 12]
[House]
[Pages 16487-16491]
[From the U.S. Government Publishing Office, www.gpo.gov]




                       MEDICAL TECHNOLOGY CAUCUS

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 5, 2011, the gentleman from Minnesota (Mr. Paulsen) is 
recognized for 30 minutes.
  Mr. PAULSEN. Thank you, Mr. Speaker.
  For the next few minutes, some of us who are members of the Medical 
Technology Caucus are going to share some of our thoughts about some of 
the recent troubling developments that are threatening this American 
industry. I will tell you, as cochair of the Medical Technology Caucus, 
in Minnesota, I get a chance to tour these companies. We all know the 
big names of the big titan companies; but nearly every week, I get a 
chance to tour one of these small companies that might have five 
employees, that might have 10 employees--companies that are not yet 
profitable.
  They're working on these really innovative and neat technologies that 
are there to help patients improve their lives and save their lives. In 
fact, Mr. Speaker, from 1980 to 2000, the medical technology firms were 
responsible for a 4 percent increase in U.S. life expectancy, a 16 
percent decrease in mortality rates, and also an astounding 25 percent 
decline in elderly disability rates. I think, as we'll hear from some 
of our colleagues, particularly from the Indiana delegation, which is 
where we were just about a week and a half ago, we're learning there 
are some new hurdles on the horizon.
  Number one, there is a medical device tax that will be imposed in 
just a little over a year. It's a $20 billion tax, and studies have 
shown it's going to cost the industry about 10 percent of their 
workforce. It's about 43,000 jobs that will be at risk. In fact, I just 
met with an owner of a company today who mentioned that he believes 
this excise tax, if put in place 1 year from now, will cost his company 
at least 50 high-paying jobs.
  Then you have the other issue of just an FDA that has become so 
bureaucratic, so unpredictable, so inconsistent, and so nontransparent 
that it's becoming more difficult for these companies to bring these 
lifesaving technologies to market to make sure that the patients have 
access to them.
  I have traveled the country--to California, to Boston, to New York, 
and we'll have a chance to go to North Carolina--where these pockets of 
industries in the medical technology field are really strong and 
vibrant. One area in particular was Indiana.
  We were there just a little over a week and a half ago, and I will 
tell you, of the folks who testified there--the companies and the 
presence there and the jobs there--it was compelling. In fact, I'll 
never forget the words from one of the testifiers there at the 
committee when he mentioned, when he gets asked for advice on where to 
invest, on where to start up, that his advice to new companies is, Go 
to Europe. Go to Europe.
  That is the wrong message.
  Mr. Speaker, in this down economy, when we are trying to save jobs, 
when we are trying to encourage job creation, we're encouraging one of 
our best American success stories, one of our few net exporters, to 
move overseas.
  We've got legislation that's actually moving forward now. Many of 
these members are coauthors of not only repealing the tax but also of 
streamlining and modernizing the FDA to make sure we're doing what 
Europe is doing, for instance, and to make sure we don't have as high a 
hurdle. We want to make sure there is a strong, relevant, rigorous 
process at the FDA because these companies want the gold standard. They 
want the gold standard of approval, but they don't want the goalpost 
moved in the middle of the process to make it so ridiculous that their 
investments are not going to be worthy of the risk/reward that they 
hope to have pay off.
  When we were in Indiana, we had a bipartisan gathering of Mr. Rokita, 
Mr. Young, Mr. Stutzman, and Mr. Donnelly who were there, along with 
Representative Guthrie from the Energy and Commerce Committee. They 
took the time to come out, to listen to

[[Page 16488]]

these companies that testified and also, more importantly, to listen to 
the patients. We had a patient testify as well, Sheila Fraser, who is a 
young high school student who was testifying about a device that was 
implanted in her leg. It truly is an amazing success story because, in 
a lot of cases, folks like her have to have amputations, and this is a 
device that is now improving her life.
  So I think, as much as we like to talk about the jobs and the 
economic benefits, it's also just as important to hear it from the 
patients' perspectives as to how these lifesaving technologies are 
helping them and how these life-improving technologies are helping 
them.
  As I mentioned earlier, we've been to California, and Mr. Bilbray is 
going to talk in a little while. This is an industry that covers many 
spectrums of the economy across the country. So I just want folks who 
are watching out there in America to understand there are some of us 
who really care about this industry. We're fighting for it, and we 
appreciate the input and dialogue that we've had as a part of that.
  With that, Mr. Speaker, I want to first yield to the gentleman from 
Indiana (Mr. Rokita), who has been a leader already on this issue and 
has helped us get coauthors to repeal that onerous innovation tax.
  Mr. ROKITA. I thank the gentleman for yielding. I also thank the 
gentleman for his leadership.
  We were pleased to welcome you to Indiana, and I know you get that 
same kind of welcome all over the Nation.
  The gentleman from Minnesota, I think, has done an excellent job in 
making sure that this issue not only was formulated the right way, not 
only was formulated in a bipartisan way, but is now on the verge of 
going through committee and coming to the floor so we can take action.
  What action are we speaking of?
  There is an insidious tax that was put in the new health care law, a 
law colloquially referred to as ObamaCare. It is a 2.3 percent tax on 
innovation. I often get asked in Indiana's Fourth District and in other 
places around the State: How do we stay competitive? Why are you 
letting jobs go overseas?
  I am the first to point out that to succeed in this country, to 
succeed in this Nation, if we are to be prosperous--to maintain and 
increase our prosperity in the 21st century--we have got to stay a step 
or two or five ahead of our competition. In Indiana, we're not 
competing with people in Fort Wayne or in Jeffersonville or in Terre 
Haute. We're competing with people from places that we can barely 
pronounce, meaning not in the United States. No country was ever 
ultimately successful by building a wall, whether it's a physical wall 
like we found in ancient China or an economic wall like we see with 
tariffs or, in this case, with taxes on companies and on an industry 
that continues to innovate, that continues to keep us on the cutting 
edge of what the world is doing in this area. That's important. That is 
the key to our success.
  By taxing these devices, by taxing this industry, you're not going to 
get more of it; you're not going to get more innovation. You're going 
to get less. If you want less of something, you tax it. By the way, 
when you do that, you're not even going to get more revenue to pay for 
that all-inclusive, government-run, bureaucrat-interpreted health care 
system.

                              {time}  1650

  I'm really pleased to be a cosponsor. I continue to learn on this 
issue. I learned a lot from the field hearing that was done.
  I would like to echo the point that was made: This was a bipartisan 
hearing. Just like in the last hour, we saw in a bipartisan way that we 
have to live within our means, and we can do that through a balanced 
budget amendment. We had Democrats come to speak on that.
  At the field hearing we had on the repeal bill of the medical device 
tax, we had that same kind of bipartisanship. Bipartisanship does 
exist. It exists in Indiana. And with this bill, it can exist here on 
the House floor as well.
  I was alarmed as well. The person testifying was Steve Ferguson from 
the Cook Group. Mr. Cook, when he started his company, he started from 
a spare bedroom in his apartment and grew it to a multibillion dollar 
operation. He is one of the best examples of an American success story. 
And his partner, Mr. Steve Ferguson, who testified--I will back up Mr. 
Paulsen in this--said, when new startups come to him, when young men 
and women come with an idea and want to start a company, he says, go to 
Europe. Not because he isn't a true-blooded American patriot, but 
because he's giving honest advice.
  Now what does that say about our Federal Government? What does that 
say about our bureaucracy when, instead of going through the FDA 
approval process, the best advice is to go through the bureaucracy of a 
union of countries that can barely stay afloat because of the debt 
they're incurring? Where does that put us in a 21st century world? 
Where does that put us in terms of our ability to continue innovating, 
in terms of our ability to be prosperous?
  We have got to put the swords down, as it was said earlier. We have 
got to come together and realize that it's that innovation, it's that 
economic freedom, it's that liberty to associate and provide an equal 
opportunity for one's own success that has made us the best and most 
successful experiment in self-governance that the world has ever known 
and, as a result, has kept us on the cutting edge of profit-making 
innovations that employ people, that keep taxes low, where we've proven 
time and time again that the way to success is doing the opposite of 
levying a tax, by letting individual men and women rise and fall on 
their own decisions. That's what this medical device bill does.
  Thank you for sponsoring this time, Representative Paulsen. It's been 
an honor and a privilege and a pleasure to work with you.
  Mr. PAULSEN. I thank the gentleman again for his leadership. I just 
want to mention too, you had mentioned all the authors of this bill 
that are trying to repeal this onerous tax. There are actually 204 
Members now, Mr. Speaker, that want to repeal this tax, bipartisan 
support. The amount of money this tax is expected to raise is actually 
equal annually to the amount of money that's invested in the industry 
every year. So it is a very wrongheaded move.
  One of the first coauthors of this bill that would repeal this tax 
and who, I think, recognizes the importance of this industry is my 
friend and colleague from Pennsylvania. I yield to him and thank him 
for his leadership and for being a part of the caucus effort.
  Mr. ALTMIRE. I thank the gentleman from Minnesota. I can't think of 
anybody in the Congress who has done more for medical innovation, his 
leadership on the medical device tax, on FDA reform issues, than Mr. 
Paulsen. It's an honor for me to be here tonight to discuss this issue 
before the House.
  What we have done in a very strong and forceful bipartisan way, which 
is critically important and something we don't do nearly enough of in 
this Chamber, is to send a message that we want to protect the medical 
device industry in America. The innovations that are created in this 
country are second to none. The way that we handle the FDA process 
could be improved, and we are going to talk about that shortly.
  But with regard to medical device issues in particular, I'm fortunate 
that the district I represent is home to a number of large and small 
medical device manufacturers that are doing great work right here in 
America, producing medical devices that we rely on in this country, 
that millions of Americans depend on.
  And when we last year, in the last session of Congress, went through 
the debate and eventually passage of the health care reform bill--which 
I voted against--one of the issues that was in there was the medical 
device tax, which seemed pretty arbitrary. They were looking for 
sources of funding. They were looking for ways to make the bill come 
into balance. And one of the industries that they targeted for

[[Page 16489]]

the tax was the medical device industry. I believe very forcefully that 
it was shortsighted. I think it was something that should not have been 
done. That's an industry that we have international leadership on in 
this country. It's an industry that millions of Americans have an 
everyday benefit from.
  What we did was say, Well, you look at the portion of overall health 
care costs in the country that that industry represents, and you are 
going to create a tax that's going to pay for approximately that 
portion of that industry to go towards the health care bill. I didn't 
think it made sense then. I don't think it makes sense now. What I want 
to do, along with the gentleman from Minnesota and the other 202--the 
total of 204 cosponsors of this legislation--is just put common sense 
back in place to say, we want to continue to have those innovations 
take place in America, not in other countries; to continue to show the 
worldwide leadership that we have shown and to continue to allow 
American citizens to benefit from the great work that's being done 
across the spectrum, large and small, of medical device manufacturers 
in this country.
  So the $20 billion cost that's associated with this tax is just the 
tip of the iceberg. We're going to lose a lot more than just the cost 
of what it's going to take to pay that tax if you're in the medical 
device industry. We're going to lose the innovation. We're going to 
lose the talent because we're competing with other countries for the 
top talent in the world, and where individual people want to reside 
when they undertake research and development of new drugs, new 
pharmaceuticals, and also new medical devices. This tax is absolutely 
the wrong thing to do, and I strongly support the gentleman's effort to 
repeal the tax. We're going to talk later on, and I'm going to join the 
discussion on FDA reform and some of the things we're doing, working 
together, but this medical device tax, the reason it has attracted 
bipartisan support for the repeal is because it makes no sense. It's 
burdensome, and it's absolutely the wrong thing to do.
  Mr. PAULSEN. I thank the gentleman again for his leadership and for 
really standing up for Pennsylvania companies and understanding this is 
an American success story, as he outlined. He is actually a coauthor of 
some bills that are there to streamline and modernize the FDA, which we 
will talk about in a second as well.
  We also have my friend, the gentleman from Indiana, here as well. Mr. 
Stutzman, I think you were at the hearing. Maybe you could share some 
of what you learned from the hearing in Indiana.
  Mr. STUTZMAN. I thank the gentleman from Minnesota. It was a great 
day for us because of the things that we learned from those folks who 
testified at the hearing there in Indianapolis.
  Those of us in Indiana, we love racing, we love agriculture, we love 
manufacturing. But we also have an industry there that we are very 
proud of and is one of the emerging businesses for the world. The 
orthopedic industry has $36 billion worldwide in revenue. And I am 
fortunate enough to represent Indiana's Third Congressional District, 
which includes the city of Warsaw and the areas surrounding Warsaw, 
which is the orthopedics capital of the world.
  I can tell you, you hear a lot of the great stories about racing from 
Indiana. There are also great stories about companies that started in 
apartments or in a garage from folks in Indiana in this particular 
industry. It's an industry that I believe is so beneficial to people in 
a personal way. I can tell you myself that my grandmother had two of 
her hips replaced. And that is the industry that we are talking about; 
knees, joints, hips, other parts of our body that can be replaced to 
increase the quality of life that we enjoy.

                              {time}  1700

  My grandmother had her hips replaced, and I know what it did for her. 
This industry was really started about helping people and increasing 
the quality of life that people have. We had a young lady there, Sheila 
Fraser, who the gentleman from Minnesota mentioned. What a great story. 
What an amazing young lady. She is a senior from Mishawaka, Indiana, 
who had a knee replaced because of cancer in her bone. They can take 
this particular device and extend it. As she grows taller, as her body 
grows, they can adjust this particular device inside her leg as she 
continues to grow. It's amazing technology, and that's why it's so 
important for us to protect this industry, to do no harm to the 
industry because it's growing fast. At a time when America is facing 
high unemployment rates, this industry continues to grow. These are 
high-paying jobs.
  I know it is a huge benefit to the part of Indiana that I represent. 
The jobs that are created, these are jobs that pay well and the type of 
jobs that we want to keep right here in America.
  As we talked about this tax, it is going to be a burden on these 
businesses and on these jobs. I can tell you already after talking to 
the folks in northeast Indiana at these businesses that there are other 
countries like China. China has a growing population. You have other 
countries that are starting to advance in bioscience, and this is why 
it is so important for us to make sure that we don't affect this 
industry in a way that it will start looking to other countries like 
China or India, other places around the world. Europe, obviously, is 
already a mature market. China is an emerging market, and they want 
these particular devices built there. If we build them here, we can 
export them to countries like China, and they can be buying American-
made products from companies and people who live in my community where 
they are building these particular devices.
  As was mentioned, 204 Members of the House of Representatives are 
signed on to the repeal of this tax which I believe is a great number, 
almost a majority. I would urge our leadership to bring this bill 
forward to the floor for a vote because we know if this tax stays in 
place, these companies are going to start looking elsewhere because 
this is a huge burden upon them.
  I thank each Member who was at the hearing in Indianapolis. We saw 
some fantastic, amazing things that are being developed. And if we can 
keep government from hindering this type of technology, this type of 
growth, we're going to lead in new ways in manufacturing. We have the 
automobile industry and the steel industry. This is an emerging market 
that will continue to grow as people gain in wealth and they gain in 
access to these types of services in the health care industry.
  I would just encourage all of my colleagues to sign on to this piece 
of legislation because we don't want to see this type of industry move 
outside of the United States. I appreciate Mr. Paulsen and his 
leadership.
  Mr. PAULSEN. As you mentioned, I think one of the things that folks 
don't often recognize, the medical device industry is high-value 
manufacturing. Boy, I think of a State like California and the high-
value manufacturing that exists there. I visited some companies in 
California one time, and I would like to yield to Mr. Bilbray who has 
been a leader on moving some of the packages of bills to help 
streamline the FDA and to modernize the FDA as well.
  Mr. BILBRAY. I thank the gentleman.
  Mr. Speaker, the gentleman is leading on not just an issue of jobs. 
This is an issue of jobs and lives. I think that is one thing we 
overlook so often. I am glad to hear about the hearing in Indianapolis 
because we had a hearing in San Diego. I'm sure that you guys are glad 
that you didn't have to come to the hearing in San Diego because we 
were in La Jolla overlooking the beach and the surf at the Scripps 
Institution of Oceanography. But maybe some day you will be able to 
break away and come to one of our hearings down in San Diego.
  But, Mr. Speaker, we're talking about an issue that is not discussed 
enough. I guess one of the issues that I'm really excited about on this 
one is it's a bipartisan effort. If there was one thing I want everyone 
to know about Washington, D.C.--Democrats, Republicans or 
Independents--the biggest problem with this town isn't that Washington 
tries new things or that Washington makes mistakes; but when Washington 
tries new things and

[[Page 16490]]

makes mistakes, they're not willing to go back and correct it and 
straighten it out. They ignore it.
  In fact, a lot of times they think the only problem is just throw 
more money or taxes at it or more regulation, and somehow it will make 
it better. I think this is one of those items where Democrats and 
Republicans should get together and say, Look, this was rushed through, 
really wasn't looked into in depth and needs to be corrected and 
straightened out.
  That is what this bill, both the gentleman's bill and my bill say: We 
need a step back period, a cooling off time, and let's look at this and 
straighten this out. And the first thing we have to do is take this 
huge tax off the back of not just the producers but the American 
consumer. We're talking about a tax of $20 billion on an industry that 
can ill afford this kind of burden, especially at this time. We're 
talking in California alone 112,000 jobs, and something that all of us 
will say later if we lose these jobs, Oh, my God, how could we have 
done this. More importantly, we are talking about those lives of the 
people who depend on not just those devices that are out there today, 
but those that will be out there in the future.
  Is there anyone here that can assure themselves that their children 
or grandchildren or granddaughter or grandson or even their mother or 
father won't need to have medical devices somewhere down the line, not 
just to improve the quality of life, but to ensure life extension? Or 
the fact of just being able to survive certain medical crises? Those 
are all questions that we need to ask ourselves individually. But as a 
Nation, we need to ask ourselves: Was this the right step for us to 
take at this time or at any time? And if it wasn't, we have to be brave 
enough to do what Washington doesn't do enough, and that is go back and 
correct the mistakes and move on in a much better and much more secure 
form, something that can be substantiated.
  Let me be very blunt, as someone who has a major medical device 
industry in my community, that there are ways we can correct these 
things. Anna Eshoo and I, back in the 1990s, actually did tort reform 
for medical devices. There was a kind of bipartisan support of it 
saying put politics aside and put people first, and when it comes down 
to it, you do not provide health care to the public by taxing it out of 
the country. You're not going to make those kinds of opportunities 
available to either the people who need the jobs or those who need the 
medical breakthrough.
  I want to say again that I look forward to working on this, and I 
look forward to working on a bipartisan effort with my colleagues on 
both sides of the aisle, things like FDA reform, which is going to be 
another essential step that we have to do to make sure that we keep 
this vibrant industry here, or we will all rue the day, Democrat and 
Republican, if we allow it to leave the country and the jobs and 
medical breakthroughs go with them.
  Also, the huge resources that we have for more research and 
development to be brought back into this country by repatriating 
American money that is overseas, that is being kept overseas, but 
because of punitive actions of the Federal Government here in 
Washington, D.C., $2 trillion that could come back to help do research 
and development, to save lives, to develop the next generation of 
medical devices, to be able to create that opportunity in economics and 
in medical breakthroughs, that's the kind of thing that we need to see 
Democrats and Republicans work together on.
  I look forward to building on the cooperation we see in this bill, 
and work on it in other bills related to public health and the economic 
opportunities of creating jobs in America with American jobs on 
American soil.
  Mr. PAULSEN. I thank the gentleman for being a leader. When folks 
think of States like California, they think of high technology and 
medical devices, but it's the investors who have a large component in 
States like California that invest in these companies. Unfortunately, 
the FDA has become so risk averse that the investors aren't investing 
the resources needed to start the new products, and that's the pipeline 
going over to Europe. That's the challenge we have.
  Someone else at the hearing a little over a week ago was my friend 
and colleague, Mr. Young, who also heard some of these personal stories 
not only from the patient perspective but the innovator perspective.
  I want to thank the gentleman from Indiana for his leadership and for 
inviting me to be a part of that hearing in Indiana.
  Mr. YOUNG of Indiana. I thank the gentleman from Minnesota for his 
leadership and I certainly share your desire to lighten the burden on 
this high-value-added industry. We need to ensure that all of the 
manufacturing jobs, all of the job and economic growth opportunities 
that we can help create an environment for, a nurturing environment 
for, that we do.

                              {time}  1710

  One thing that I hear as I travel around southeastern Indiana and 
listen to my constituents, there's a lot of feedback about the level of 
uncertainty within our economy. There's regulatory uncertainty, there's 
uncertainty about future tax rates, and there's uncertainty about 
energy rates and health care costs. And so these medical device 
manufacturers are certainly laboring under the burden of uncertainty 
with respect to the FDA regulatory process. And then here we add an 
additional excise tax to their bottom line. And so I'm happy to support 
H.R. 436, which would lighten that burden.
  I don't think probably many people appreciate--I certainly didn't 
appreciate it until I started looking into it--exactly how burdensome 
this device tax could be on the medical device industry. The tax is 2.3 
percent of gross sales. So that's a top-line tax before all the other 
deductions and costs come out. So, essentially, that would translate 
into about 15 percent taxation on profits of many of these medical 
device companies. You add that 15 percent profit tax to 35 percent 
corporate tax and the 5 percent tax when you add together the State and 
the local corporate tax burden, and you're north of 50 percent of tax 
on profits. So it's no wonder that so many of these device makers are 
instead deciding to expand their operations or start up new operations 
overseas. And we have to do what we can to prevent that.
  Now, in my home State of Indiana, approximately 40 percent of all 
life sciences sector jobs are related to this devices industry, this 
high value-added industry that improves the lives of so many patients 
and certainly all the workers who work at these companies. My district, 
in particular, has some employers that we'd like to keep around, like 
the Cook Group in Bloomington, my hometown. And then as we head further 
south to Jeffersonville, Indiana, we have MedVenture. And there are 
people everywhere in between that work at this company.
  The tax impact is going to burden not just the large companies, 
however. There are 300-plus FDA-approved medical device manufacturers 
in the State of Indiana. And as my colleague from Minnesota just 
indicated, they're all searching for financing. They're searching for 
venture capital to bring their fledgling operations to the next level. 
So a Cook Group could probably weather this storm and figure out some 
way to remain profitable, but it's the next Cook of the world, the next 
tinkerer in their garage or their spare bedroom that may not be able to 
grow their business and create the jobs that our constituents are all 
demanding should this device tax go into effect January 1 of next year 
as it's currently scheduled to do.
  The regulatory challenges which I've already mentioned are also very 
important. They must be addressed separately. I know there's separate 
legislation out there to do that, and I will be supporting that 
initiative as well. But the bottom line here is that there are jobs at 
stake and there are people's lives at stake as well.
  We heard very powerful testimony from Sheila Fraser. Her name has 
been mentioned here before. She is an outstanding young lady, a high 
school student, who at a very young age contracted cancer, and she was 
going to

[[Page 16491]]

have to have her leg amputated. And because of the ingenuity and the 
entrepreneurship of people in my home State of Indiana, they were able 
to put together a company and sell these products and develop a product 
that benefited Sheila Fraser directly. And now she's living a very 
productive life, and she has both of her legs, thank the Lord. And we 
need other people to benefit from similar sorts of innovations in the 
future.
  I am most proud to be here to speak on behalf of H.R. 436. I urge my 
colleagues to sign on to this legislation and to vote in favor of it.
  Mr. PAULSEN. I thank the gentleman. I'm not sure how much time we 
have left in our colloquy, Mr. Speaker.
  The SPEAKER pro tempore. The time of the gentleman has expired.
  Mr. PAULSEN. Thank you, Mr. Speaker.

                          ____________________