This is an ancient complaint of U.S. manufacturers. But it's not at all clear that the FDA is too strict with its approvals; some critics think it's too lenient. The question is worth debating, but plainly it has nothing whatsoever to do with the Affordable Care Act.
Let's turn to the medical device tax, an issue on which Atlas is simply carrying the device industry's water. The tax, which was one of many imposed by the Affordable Care Act, is pegged at 2.3% of sales of certain medical devices sold in the U.S. It was designed to produce about $30 billion over 10 years, starting Jan. 1, 2013. Certain "devices" customarily provided directly to consumers at retail, such as eyeglasses, hearing aids, sterile bandages and wheelchairs, are exempted.
But a look at the financial reports of some leading medical device companies demonstrates just how hard it would be for a major firm's medical device tax liability to outstrip its R&D spending -- unless the company is spending so little on R&D it barely counts as R&D at all.
That's not surprising, since self-respecting medical technology firms hoping to secure their own futures seem to spend 6% to 12% of sales on R&D. The 2.3% device tax is applied to only a portion of total sales -- eligible products sold in the U.S. -- so a company paying more in the tax than it spends on R&D has to be an extreme case.
If Atlas thinks the medical device tax should be repealed, let's hear his suggestion about how to make up the revenue; the ACA taxes exist only because conservatives in Congress insisted that the act be revenue-neutral.
Congress tried to spread the pain, levying not only the medical device tax but a tax on generous "Cadillac-plan" health insurance policies, new annual fees on health insurers and pharmaceutical manufacturers, even a tax on indoor tanning services. The rationale for the device tax is that the ACA would also give the industry lots more business. Nevertheless, the medical device folks want to be uniquely exempt from chipping in revenue. This is quintessential special pleading, and it ought to be shunned. We examined the industry's claims here, and found them suspect in almost every particular.
The truth is that some aspects of the ACA encourage innovation, and some don't. On the plus side, according to a report by the Clayton Christensen Institute, an innovation think tank, the ACA's individual and employer mandates will increase demand for healthcare. That should spur research into more efficient ways to deliver better care. This hints at the potential profitability of more R&D in the device industry -- and obviously, provides more patients to serve, at a profit.
The ACA also established the CMS Innovation Center, which will be testing "innovative payment and service delivery models to reduce program expenditures … while preserving or enhancing the quality of care."
The Christensen report faults the ACA for imposing minimum benefit standards on health insurance plans, but its gripe is that this prevents insurers from bringing "low-end" insurance designs to market. Well, yes; one purpose of the ACA was to wipe out "low-end" plans, because they too often turned out to be deceptive or worthless. The device industry should consider itself lucky in that respect, because a low-end plan would be less likely to pay for a high-end "innovative" medical device.
In summary, Atlas' critique doesn't hold together. That's increasingly typical of anti-Obamacare dead-enders. One would urge them to do better, but this appears to be the best they can do.