NCPA - National Center for Policy Analysis

Research and Development Is Moving Abroad

January 29, 2015

One of the little-known impacts of the Affordable Care Act is its threat to innovation, says Scott Atlas, senior fellow with the Hoover Institution. Why?

Most health care innovation takes place in the United States, with new drugs and procedures being developed daily. But research and development (R&D) spending in the United States is growing more slowly than usual, while comparable spending in Asia and Europe is growing faster than the United States. Atlas attributes the slowdown to America's weak economy but also to the Affordable Care Act, whose bevy of new taxes on the health care sector are sending technology and R&D jobs overseas.

Additionally, there are other factors at work. For example, FDA approval for new medical devices takes much longer in the United States than similar approval in Europe -- an average of 31 months, compared to just seven months in the European Union.

Moreover, Atlas points to federal immigration policy as having a significant impact on American innovation. Foreign students who come to study science-related subjects in America are moving home after graduation. Much of this, Atlas says, is due to federal limits on visas for highly skilled foreign workers.

All of these factors are having a significant impact on innovation, particularly within the health care market. Atlas offers a few suggestions for lawmakers, including repealing the medical device tax and the brand-name drug tax and speeding up the FDA approval process.

Source: Scott W. Atlas, "Take Care to Innovate," Hoover Institution, January 28, 2015.


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