Obamacare – A Drag on Profit and Innovation

The Engine that drives Enterprise is not Thrift, but Profit.

John Maynard Keynes (1883-1946), A Treatise on Money

November 2, 2012 -  Somewhere along the way,  President Obama seems to have forgotten that profit drives American enterprise.  

In the Accountable Care Act, there is provision that taxes medical device companies by 2.3% of their profit.   

This amounts to 15% to 20% of device companies’ revenues and for many companies and stops innovation in its tracks – slowing venture capital investments. stopping business expansions,  and crippling further hiring. It hampers efforts to raise money, expand, or just stay in business.  The 2.3% tax on profits drives device enterprises to raise prices, cut R&D, and reduce staff.  President Obama, given his lack of business experience,   is probably not aware it takes 10 years and $100 million to launch a medical device company and a tax on profits is venture capital deal killer.

Governor Romney, if elected, on the other hand, vows to repeal the Affordable Care Act.  But to do so, he would need a GOP House and Senate which is unlikely. American entrepreneurs and the business community outside of Silicon Valley and Green Industries, oppose Obamcare, which would levy $500 billion in new taxes. There are those in this community who claim the U.S.  will never have a full recover under Obama.

Say business leaders:  “ An Obama re-election, many executives figure, would almost surely mean higher taxes for them, continued pressure from aggressive regulators and more years of frustration from  a one-time community organizer whom they complain doesn’t understand the role of business and is quick to scold them publicly.”

“A Romney victory is more likely to bring  tax relief, government-wide restraint on regulation and affinity with a private-equity prof who describes himself as a friend of business.

In any event,  Obamacare frightens America’s entrepreneurs and innovators and creates enormous uncertainties.  The rest of the world regards America as the seedbed of innovation.  As Olivier  Legrain, CEO of Belgian medical device company Ion Beam Applications,   comments, “Even though they’re moving  towards a more social system, the entrepreneurial spirit – it’s almost, to me, part of the DNA of America.” 

The question within the medical device industry  is: Will Obamacare render America’s DNA DOA?

Sources

1.      Brain Gormley and Emily Maltby, “ Medical Start-Ups Challenged by Health Reform," WSJ, Oct 31, 2012. 

2.      Damian Paletta, Brody Mullins, and Melanie Trottman, “For Business, Vote Holds High Stakes, “ WSJ, November 2, 2012.

3.      Annie Jois, “ A Parable of Helath-Care Rationing, “ WSJ, November 2, 2012.

Tweet:  The 2.3% Obamacare tax on medical device company profits hampers start-ups, raises prices, reduces hiring, and may halt business expansion.