Connections : Join the Conversation - The blog of Biomet CEO Jeffrey R. Binder

Oct

An interesting experience in Washington, D.C.

Posted: Oct-6-2009 11:00 AM ET | Add Comment | Comments (2)

As part of our advocacy on behalf of our customers and our industry, we find ourselves frequently visiting Washington, D.C. Biomet recently held meetings with the staff of three senators and three representatives, including in two instances the representatives themselves. Our message to the legislators focused on the importance of preserving patient access to specialty care (see my blog entry “Specialists Under Fire”) and the value of orthopedic surgery.

I also recently spent two days in Washington, D.C., speaking at a healthcare conference and meeting with Senators Evan Bayh (D-IN) and Max Baucus (D-MT). I found the experience enlightening.

My primary topic was a proposed excise tax on medical device companies, which Senator Baucus’s Finance Committee included in its healthcare legislation draft. While we generally support the goals of healthcare reform, including lower costs and improved access and quality, the tax is an immediate threat to medical device companies that demands urgent action from industry representatives.

I believe that this tax will do one of two things, neither of which is consistent with the goals of effective healthcare reform or economic recovery.

The first possibility is that the tax will drive up the cost of medical products as manufacturers attempt to recoup the tax with higher prices. The second possibility is that our customers (hospitals, clinicians, outpatient centers and ambulatory surgical centers), facing reimbursement reductions themselves, will successfully resist higher prices, forcing manufacturers to offset the additional costs.

And the cost will be substantial. For Biomet, the new tax would cost approximately $50 million and amount to $13,300 per team member. To put this in context, we spend about $80 million in the United States annually on Research and Development (R&D). If forced to absorb the cost, Biomet and other device companies would have to reduce discretionary spending elsewhere; R&D budgets would likely be cut, and U.S. employment would be frozen or more likely reduced.

The most likely scenario is that both would occur if the tax were to become law. We would need to eliminate or delay some of the important product development advances we’re pursuing – programs that go well beyond incremental improvements to implant technology. Those advanced implants that we can afford to develop would likely become more expensive, while less differentiated implants would cost more to produce, but generate less revenue, leading to further budget cuts and jeopardizing more jobs.

Thus, the tax would create the worst of all possible situations: escalating costs on the newest technology and reduced capital to invest in jobs and R&D.

I explained all this to Senators Bayh and Baucus. Senator Bayh has publicly expressed support for our position (see http://bayh.senate.gov/news/press/release/?id=0c2b0077-8242-4485-84bc-9cc3441e449c), as have numerous other legislators. They share our commitment to protecting jobs and promoting innovation that delivers life-changing and cost-saving benefits to patients.

Senator Baucus, while not outwardly swayed by my arguments and those of my colleagues from other device companies, was respectful and interested in what we had to say. It was encouraging to know that the Senate’s point man on healthcare reform was open to meeting with industry representatives and thoughtfully considering our position.

Senator Baucus has worked extremely hard to ensure bipartisan participation in a contentious and complicated legislative process, and continues to make himself available to the various stakeholders. He struck me as a practical person and one who is looking for all players to share in reaching appropriate compromises.

This visit to Washington, D.C. was certainly not my first, but it was one of the most important for my company and the healthcare professionals and patients we serve. We will passionately advocate for our point of view, and work tirelessly on behalf of our team members, our industry, our customers, and their patients. We will disagree with aspects of the Senate healthcare reform package, but we will do so with the interests of all these stakeholders in mind.

Forward-Looking Statements

This blog post contains or may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. Those statements are often indicated by the use of words such as “will,” “intend,” “anticipate,” “estimate,” “expect,” “plan” and similar expressions. Forward-looking statements involve certain risks and uncertainties. Actual results may differ materially from those contemplated by the forward looking statements due to any number of factors, including, among others, the factors set forth in the Company’s filings with the SEC, including the Company’s most recent annual report on Form 10-K and quarterly reports on Form 10-Q. There can be no assurance as to the accuracy of forward-looking statements contained in this blog post. The inclusion of a forward-looking statement herein should not be regarded as a representation by the Company that the stated result or objective will be achieved. The Company undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, the reader is cautioned not to place undue reliance on forward-looking statements which speak only as of the date on which they were made.

2 Comments to An interesting experience in Washington, D.C.

The opinions expressed in the comments section of this blog are solely those of the commenter.

Submitted: Oct-27-2009 3:48 PM ET by Joni Clay

While I maintain my own views as an medical device employee, I would like to submit my views as a patient that has received medical device implants. I was lucky enough to have spinal fusion almost 2 years ago. Was it not for the technology and commitments from spinal engineers, my fusion surgery would have not proved to be as successful as it has been. The future of all medical device companies should be looked at as a critical component to our rising healthcare costs. However, at what point do we sacrifice? Our global marketing push has 'one surgeon, one patient'. By withholding r & d expense and cutting employee salaries, does not fix the present healthcare issues. It only puts a bandaid on the situation. What is the answer? Submitted by a Biomet team member

Submitted: Jan-26-2010 1:03 PM ET by Erik Hayes

In the process of applying to a job in Microfixation with Biomet I stumbled across this blog. I am from Washington DC and the best thing that Biomet can do is build relationships with decision makers. We always want to preserve the patient’s ability to get the care they need and want.

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