NCPA - National Center for Policy Analysis

How Much Is Two More Years of Life Worth?

October 18, 2010

A number of makers of medical devices are worried that new taxes will starve them of funds for new research and even could put some of them out of business, says Grace-Marie Turner, president of the Galen Institute.

  • For example, Richard Packer, chief executive officer of Zoll Medical Corp. says a 2.3 percent tax on medical devices in the new health care law will increase his company's tax bill by $7.5 million.
  • Like many companies on the forefront of medical innovation, Zoll Medical is not a corporate behemoth -- it turned a profit of $9.5 million last year.
  • In other words, this new tax could eliminate nearly 80 percent of its profits, leaving the company almost no money to invest in research and development.

Medical-device and pharmaceutical research continues to be one of the most costly -- and risky -- investments in the health sector.  

  • For instance, the pharmaceutical industry spent nearly $59 billion on research and development in 2007, yet just 24 new drugs were approved last year.
  • For every 5,000 to 10,000 compounds tested, just five will make it to clinical trials.
  • Of those five, just one of those will receive Food and Drug Administration approval.
  • And then, just two out of every 10 drugs that reach the market will recoup the costs invested in creating and developing the drug.

It is crucial that government support and not undermine innovation in lifesaving and life-enhancing medicines and technologies.  Policies that tax away the money that companies spend on medical research will lower the quality of care for this generation and future generations, says Turner.

Source: Grace-Marie Turner, "How Much Is Two More Years of Life Worth?" Washington Times, October 14, 2010.

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