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Medical device tax affects small businesses

Union Leader Correspondent

July 10. 2016 7:50PM
Alpco chairman and CEO Richard Conley shows a 96-well microtiter plate to U.S. Sen. Kelly Ayotte during a visit to the Salem company Friday. (Eli Okun)

SALEM — In 2013, one Affordable Care Act component taking effect — a medical device excise tax — imposed a new financial burden on American Laboratory Products Co.

The 2.3 percent tax on revenue took a bite out of the company’s bottom line, “no question about it,” said Sean Conley, president of the family-owned-and-operated Alpco. “This obviously has an impact on where our funds go and makes it a bit more challenging to continue to create new jobs.”

The controversial medical device tax was a focus of conversation Friday when U.S. Sen. Kelly Ayotte visited the company for a discussion and tour.

Ayotte has helped lead legislative efforts against the tax, including a temporary two-year suspension last December. She said Friday that she will be working for a permanent repeal next year, with some bipartisan opposition to the tax making her optimistic that it could pass.

Alpco employees said the tax harms small businesses, like the 43-employee Salem company, more than large corporations, with the costs ultimately passed on to customers.

The company manufactures medical devices and works in research and development in a variety of areas, including a focus on obesity, diabetes and gastroenterology.

Ayotte said the tax cuts against innovation, consumer access to new devices and efforts to lower health-care costs. An industry survey in 2014 reported that the tax had cost 33,000 jobs in layoffs or new workers not hired.

A nonbinding Senate vote in 2013 saw 79 senators vote in favor of repealing the tax. But not everybody agrees.

Supporters of the medical device tax note that it would raise $29 billion in net revenues over a decade, helping to offset other health-care costs and reduce impact on the federal deficit.

And an independent analysis from the Congressional Research Service, while calling the tax theoretically “challenging to justify,” was considerably less dire. It estimated minor or negligible effects on industry output, employment, bottom lines and health-care costs.

But at Alpco on Friday, the medical device tax was cause for concern — particularly in the broader context of federal regulations that Ayotte and company employees said stifle small businesses.

Alpco leaders expressed particular concern about the Food and Drug Administration’s bureaucracy and slow pace of approval, especially in comparison to regulatory processes in Canada and Europe.

“All the bureaucracy costs are factored into the cost of the product,” said chairman and CEO Richard Conley, who founded and owns the company with wife Janet.

Jamie Tremblay, vice president of human resources, told Ayotte that one-size-fits-all rules from the federal government hamper Alpco — especially when they’re excessively vague.

Ayotte said federal rule-making agencies need more accountability and more employees who better understand their impact on small businesses. “There’s been a big disconnect in this administration,” she said.

Ayotte wants to advocate for a permanent repeal of the medical device tax as part of a broader tax reform package next year, she said.

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