Indiana company scraps plans for expansion over ObamaCare device tax
By Judson Berger

Published July 27, 2012
FoxNews.com

(AP)

An Indiana-based medical equipment manufacturer says it's scrapping plans to open five new plants in the coming years because of a looming tax tied to President Obama's health care overhaul law.

Cook Medical claims the tax on medical devices, set to take effect next year, will cost the company roughly $20 million a year, cutting into money that would otherwise go toward expanding into new facilities over the next five years.

"This is the equivalent of about a plant a year that we're not going to be able to build," a company spokesman told FoxNews.com.

He said the original plan was to build factories in "hard-pressed" Midwestern communities, each employing up to 300 people. But those factories cost roughly the same amount as the projected cost of the new tax.

"In reality, we're not looking at the U.S. to build factories anymore as long as this tax is in place. We can't, to be competitive," he said.

Company executive Pete Yonkman first revealed the scuttled plans in an interview with the Indianapolis Business Journal. The company later confirmed the decision to FoxNews.com.

The Affordable Care Act imposed a 2.3 percent tax on medical devices beginning in 2013. It is projected raise nearly $30 billion over the next decade.

But the Cook Medical spokesman said the impact is greater than just a 2.3 percent uptick in taxes. He said the impact on actual earnings is another 15 percent, and he projected the company's total tax burden next year will rise to over 50 percent.

Republicans and medical device makers have been railing against the tax all along, with the GOP-controlled House approving a bill last month to repeal it. The Senate, though, hasn't taken it up.

A recent study by the left-leaning Center on Budget and Policy Priorities, though, said the complaints by the industry are exaggerated.

"The tax will not cause manufacturers to shift production overseas. The tax applies equally to imported and domestically produced devices, and devices produced in the United States for export are tax-exempt," the study said. It also said repealing the tax would "undercut health reform" by requiring Congress to offset the repeal by potentially killing spending provisions in the law and by potentially encouraging similar repeals.

Cook Medical is part of a family of companies that produce medical devices for surgery, obstetrics, gynecology and other fields.



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