Controversy rages over medical device tax

Local manufacturer says uncertainty surrounding it plays role in layoffs.

Dr. Larry Dosser, CEO of Mound Laser & Photonics Center (left) and Kevin Hartke, vice president of operations, claim the medical device excise tax that if part of the federal health care overhaul is contributing to uncertainty in the health care industry, forcing them to lay off five workers.

Lisa Powell/staff photo Dr. Larry Dosser, CEO of Mound Laser & Photonics Center (left) and Kevin Hartke, vice president of operations, claim the medical device excise tax that if part of the federal health care overhaul is contributing to uncertainty in the health care industry, forcing them to lay off five workers.

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By Ben Sutherly, Staff Writer Updated 8:19 PM Saturday, January 28, 2012

MIAMISBURG — Officials with Mound Laser & Photonics Center claim the uncertainty surrounding the federal health care overhaul and its excise tax on medical devices already is hurting their business, but others say the tax is being maligned.

MLPC, a laser marking, engraving and etching business at the former Mound Laboratory campus, had grown rapidly in recent years. Last year, employment reached 42 people, while revenues soared to about $5 million, largely on the strength of health care, which accounts for about 70 percent of the company’s business.

But on Jan. 1, MLPC had the first layoff ever in its history, which dates back to October 1995.

It cut five manufacturing jobs to adjust to the loss of business from a California company that supplies medical devices to hospitals.

The California client stopped buying MLPC’s components after hospital demand for those devices drastically declined and the California supplier was left with a surplus.

Dr. Larry Dosser, MLPC’s president and CEO, admits he doesn’t know for sure why the backlog developed. But he assigns part of the blame to the health care overhaul, including a 2.3 percent excise tax that he claims is making the United States a less hospitable place for manufacturing.

After losing much of the region’s automotive manufacturing base, “now we’re going to lose the medical device manufacturing,” Dosser said. “How much more manufacturing base are we going to lose?”

U.S. Rep. Mike Turner, R-Centerville, has held up MLPC and Wilmington-based Ferno-Washington, Inc. as local reasons why the excise tax should be repealed. “By placing a tax on manufacturing, these two companies illustrate that we can render ourselves noncompetitive and lose jobs,” he said.

Turner last year introduced a bill that would repeal the excise tax on first responder equipment, and he has signed on to another bill that would repeal the tax altogether.

Lauren Kulik, a spokeswoman for Sen. Sherrod Brown, D-Ohio, said Brown successfully pushed for the excise tax to be halved from $40 billion to $20 billion over 10 years. The tax doesn’t take effect until 2013, she said, “so how can we blame layoffs now on the fact that it hasn’t taken effect yet?”

Kulik also said the tax will not cause medical manufacturing to move overseas, as some have claimed. She said medical devices are taxed when they are sold to U.S. end users, regardless of where they are manufactured.

“If there’s concern about medical device companies going to Ireland or Costa Rica, if they’re still planning to sell back to American customers, they’re going to be subject to the excise tax,” she said.

Still, other medical device manufacturers think the tax will place a drag on their businesses.

“It’s just one more challenge we’re having to deal with in an already challenging marketplace,” said Greg Blackmore, chief operating officer at Versailles-based Midmark Corp., the region’s largest medical device manufacturer with more than $300 million in annual sales.

Blackmore said the excise tax would apply to about 75 percent of Midmark’s global revenues. The tax could equal almost half of Midmark’s profits in 2009, one of the company’s less lucrative years.

Midmark does not expect to lay off any of its more than 800 employees if the tax and the rest of the health care overhaul survive a U.S. Supreme Court ruling later this year.

The 2.3 percent tax targets medical device manufacturers in part because it was thought they would gain more business as a result of more people having health insurance.

“This is increasing business by expanding their customer base,” Kulik said of the health care overhaul.

But Blackmore doesn’t think the clinicians and others who buy Midmark’s products will purchase more as more people get health insurance. Instead, he predicted, they’ll be forced to become more efficient and make do with the equipment they have.

“We’re not going to benefit from it,” Blackmore said.

Dosser and Kevin Hartke, MLPC’s vice president of operations, said they would prefer elected officials pay greater attention to tort reform, which they say could cut the liability costs built into the price of medical devices.

“Let’s look at the expense side and start there first,” Dosser said.

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