Medical-device manufacturer to lay off 1400 …

posted at 2:05 pm on July 29, 2011 by Ed Morrissey

In March 2010, Nancy Pelosi warned us that we had to pass ObamaCare to “find out what’s in it.”  What is in it is jobs for China.  What’s not in it is jobs for Americans, as the Boston Globe reports today (via NewsAlert):

Boston Scientific Corp. said yesterday that it plans to eliminate 1,200 to 1,400 jobs worldwide during the next 2 1/2 years to free money for new investments, the Natick medical device maker’s second major round of cuts since last year.

The company would not say how many jobs will be lost in Massachusetts, where fewer than 2,000 of its 25,000 employees are based. In February 2010, Boston Scientific said it would pare 1,300 jobs worldwide, but similarly did not say where.

Yesterday’s move, a day after Boston Scientific disclosed it was investing $150 million and hiring 1,000 people in China, raised fears that the company will gradually shift more work to foreign sites with less government oversight and lower costs than the United States.

Massachusetts state Senator James Elridge (D-Acton) reacted … predictably:

“My sense is, sadly, that like many other American companies, they are shedding jobs in Massachusetts and adding jobs overseas,’’ Eldridge said. “And this is a company making greater profits, so it’s even more outrageous.’’

Yes, that’s what happens when the American government makes it more expensive to do business in the US.  And that’s exactly what ObamaCare did, especially with medical-device manufacturers like Boston Scientific.  Fourteen months ago, those manufacturers warned that they would have to cut costs in the US as a consequence of the new taxes imposed on their sales:

Massachusetts medical-device companies say they’ll cut back on operational costs – and jobs – after a planned 2.3 percent tax on their products is implemented in 2013, according to a new survey.

The Massachusetts Medical Device Industry Council, which held its annual meeting yesterday in Boston, said about 90 percent of the 100 medical-device firms said they would reduce costs due to the new tax tucked into the recently passed health-care reform bill.

It’s not as if Boston Scientific didn’t try to warn people about the problem, either.  Less than two weeks ago, they joined hundreds of other medical-device manufacturers to plead for a repeal of the tax:

More than 420 companies including Boston Scientific, St. Jude Medical and Stryker signed on to a letter asking the U.S. Congress to repeal a planned 2.3 percent excise tax on medical devices. The tax could cost $20 billion a year and is set to take effect in 2013 as part of broad health care reform package passed last year.

“The tax is already having an adverse impact on R&D investment and job creation, jeopardizing the U.S. global leadership position in medical device innovation,” said the letter.

“If this tax is not repealed, it will continue to force affected companies to consider cutting manufacturing operations, research and development, and employment levels to recoup the lost earnings due to the tax,” it said. “It will also adversely impact patient access to new and innovative medical technologies,” it added.

“The medical device excise tax is a serious burden for companies struggling to maintain America’s global leadership in the development of medical technology,” said Stephen J. Ubl, president and CEO of the Advanced Medical Technology Association (AdvaMed), a medtech lobbying group that drafted the letter.

The tax wasn’t the only problem in the bill, either, as I wrote at the time:

Taxes on companies aren’t ultimately paid by business entities.  They get paid by the consumer in the long run.  In order to save costs, these device manufacturers will either have to lay off employees or cut back on innovative research — and likely both.  The end result will be higher prices, lower support, and less innovation to meet medical needs of consumers.

That’s not the only problem facing the industry, either.  They now have to provide an accounting for their marketing efforts among physicians, thanks to a new “sunshine bill” that requires full disclosure of any marketing directed at physicians.  That will escalate internal costs, putting even more pressure on device makers to cut elsewhere or raise prices, or both.

The jobs will move overseas mainly to meet demand overseas.  But we could have kept the jobs and sales here, had it not been for the increasing regulatory and tax policies of the Obama administration, starting with — but hardly ending with — ObamaCare.

Update: I changed the headline, because as TNeloms points out in the comments, not all of the closed jobs are in the US.  However, given the reaction of Democrats in Massachusetts, it’s looking like a good chunk of them will be.

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Everything these companies have, buy, inventory and sell is taxed in addition to energy, water and communications + corporate taxes, licensing and various fees + what they have to pay for tax lawyers and tax accountants.

I can’t believe that they can buy a machine and have to pay taxes on it year after year as long as they own it in addition to the original sales tax…built into that are the fuel taxes and other taxes that that manufacturer had to pay, plus the fuel taxes and other taxes in delivering it. I can’t believe they get taxed for whatever items they haven’t sold yet. Total BS.

Dr. ZhivBlago on July 29, 2011 at 4:20 PM

This is one of the reasons I am having trouble finding a job. I went to school to be a biomedical device engineer and now that I’m done with school, those jobs aren’t available because companies are closing up vast parts of their R&D, where I’d likely to be employed.

theguardianii on July 29, 2011 at 4:21 PM

Thanks a friggin lot President Obama.

CW on July 29, 2011 at 4:25 PM

I used to work for Boston Scientific and boy could I tell you some stories about the FDA from my dealings with them and some of their people. Corrupt, corrupt, corrupt.

BakerAllie on July 29, 2011 at 2:18 PM

AGREED! A friend of mine has a small vitamin-supplement business, and has told me numerous horror stories. The FDA is pure 1984-evil bureaucracy in the real world.

dominigan on July 29, 2011 at 4:28 PM

@tneloms

Have you ever heard of transfer pricing or tax strategy? You are right that BSC still has to pay the 2.3% tax on revenue earned in the US, but the whole idea of creating a supply chain with operations outside the US is that you are able to apply more “revenue” to those low tax jurisdictions and less revenue to the final product.

To illustrate

You sell product X in the US for 1000 dollars if you make it in the US you can make it for 900 dollars and you would earn 100 dollars of profit to be taxed on.

Take that same product and move one part of the supply chain to a low tax or cost jurisdiction and say you still sell it for 1000 dollars in the US but you can make part of it for 400 dollars overseas plus add 100 dollars of “value add” (revenue) for the work that entity did for the corporation then it costs another 500 dollars for final assembly in the US for a total cost of 1000 dollars (400 for the labor and materials overseas, 100 dollars of value add, and 500 dollars for labors and materials in the US) you now recognize no revenue in the US (1000 sell price 1000 cost) and 100 dollars in the low tax jurisdiction. You then use those overseas dollars to invest overseas because you cannot bring it back to the US without being taxed. This is why you move operations overseas (or at least one reason)

brilrodion on July 29, 2011 at 4:35 PM

Dr. ZhivBlago on July 29, 2011 at 4:20 PM

Just another form of property tax. Nothing to get excised over. //s

chemman on July 29, 2011 at 5:14 PM

And they thought they had a real winner with the Obama-speculum® too.

andycanuck on July 29, 2011 at 7:03 PM

The jobs will move overseas mainly to meet demand overseas. But we could have kept the jobs and sales here, had it not been for the increasing regulatory and tax policies of the Obama administration, starting with — but hardly ending with — ObamaCare.

It’s pretty amazing that you can take a story about the loss of jobs from the US to China- something that’s occurred for over 20 years- and blame it on a single political party.

Labor will always be far cheaper in part of Asia and lower taxes will never be enough, on their own, to compensate for it.

bayam on July 29, 2011 at 7:15 PM

Have you ever heard of transfer pricing or tax strategy? You are right that BSC still has to pay the 2.3% tax on revenue earned in the US, but the whole idea of creating a supply chain with operations outside the US is that you are able to apply more “revenue” to those low tax jurisdictions and less revenue to the final product.

A better question might be how is it that Germany hasn’t lost so many manufacturing jobs to Asia and continues to enjoy a strong export economy… I can tell you it has nothing to do with tax rates.

The US will never be the lowest cost or lowest tax jurisdiction and attempting to compete solely on either criteria won’t solve the loss of jobs abroad.

bayam on July 29, 2011 at 7:18 PM

The US will never be the lowest cost or lowest tax jurisdiction and attempting to compete solely on either criteria won’t solve the loss of jobs abroad.

bayam on July 29, 2011 at 7:18 PM

For all the leftist talking points you spout, there are times when you hit a home run.

Uncle Sams Nephew on July 29, 2011 at 9:04 PM

The jobs will move overseas mainly to meet demand overseas. But we could have kept the jobs and sales here, had it not been for the increasing regulatory and tax policies of the Obama administration, starting with — but hardly ending with — ObamaCare.

It’s pretty amazing that you can take a story about the loss of jobs from the US to China- something that’s occurred for over 20 years- and blame it on a single political party.

Labor will always be far cheaper in part of Asia and lower taxes will never be enough, on their own, to compensate for it.

bayam on July 29, 2011 at 7:15 PM

Funny you completely gloss over the point about Obamacare and regulation.

A better question might be how is it that Germany hasn’t lost so many manufacturing jobs to Asia and continues to enjoy a strong export economy… I can tell you it has nothing to do with tax rates.

bayam on July 29, 2011 at 7:18 PM

Yeh it has been going swimmingly./

http://www.businessinsider.com/germans-complain-that-all-the-manufacturing-jobs-are-going-to-america-2009-12

The US will never be the lowest cost or lowest tax jurisdiction and attempting to compete solely on either criteria won’t solve the loss of jobs abroad.

bayam on July 29, 2011 at 7:18 PM

Of course that wasn’t the point but you knew that.

—-

The reality is that Washington is more interested in saving Government jobs not creating a climate that fosters manufacturing jobs.

CW on July 29, 2011 at 10:26 PM

It gets worse every day. Will there be anything left by the time he’s out of office…….

he is a destructive narcissistic madman who has NO kinship, empathy or understanding of the American people.

highninside on July 30, 2011 at 10:54 AM

Medical-device manufacturer to lay off 1400 Obama voters. I’m not loosing any sleep.

BDavis on July 30, 2011 at 10:58 AM

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