Tough hike for medical device makers: Colorado innovators weigh impact of contested tax.

AuthorMelani, Debra
PositionACCOUNTING & TAXES

In 2010, laced with paving for Presideto Obama's $1 trillion Affordable Care Art, lawmakers approved the tax, expected. to raise as much as $29 billion in the next 10 years from the $100-billion-plus medical-device industry. The tax made it through the end-of-year fiscal-cliff congressional session intact, but as ColoradoBiz went to press in mid-February, bipartisan bills calling for repeal oldie medical-device tax had been introduced in both the U.S. House and the Senate. At stake, according to those in the field an thousands of jobs and America's leading edge in the medical-device marketplace.

"I am absolutely worried," said Aril Giles. president and CE0 of the Colorado BioScienee Association, which has more than 150 members. "I'm worrried for our small businesses, because it really limits their ability to get their product out into the market in a way that they can be successful and reinvest those dollars back into innovation." The excise tax is levied on total revenue of all medical-device conmanies, regardless of size or profits.

Medical-device companies, responsible for everything from MRIs to hip replacements, are significant players in the national and state economy. working to improve patient care. Colorado employs 27,000 people in the bioscience industry, creating 122.000 direct and indirect jobs. That translates into about $10 billion in payroll, at an average annual salary of 582,000, Giles said. The medical-device sector makes up about half of the state's bioscience industry and has grown by about 1.4 percent in the past three years, she said.

Many startup companies cannot afford the extra tax, as getting a product off the gnat can take years before profits enter the picture, said jack Wheeler, who has been in the state's bioscience industry for 30 years and co-founded MicroPhage in Longmont in 2002. Wheeler has since left the company, currently working with TeraBAT, a Longmont company developing breathalyzer technology that could dramatically speed detection of life-threatening conditions, such as heart attacks.

"For companies with fewer than 50 employees the majority of medical-device companies) a 2.3 percent tax on revenue could be anywhere from 4140 to 60 percent of their income after tax." Wheeler said. "This is what happened with MicroPhage. They were not making profits, but they still had to pay taxes on sales." McroPhage, which developed technology that could detect bacterial infections in hours rather than days. Gird...

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