Cook Medical shelves Midwest expansion plans due to Obamacare Tax

[mad1]

Cook Medical Inc. had been planning to open five new manufacturing plants over the next five years in small communities around the Midwest, including Indiana, but has shelved those plans because of the hit it will take from a new U.S. tax on medical devices.

The Bloomington-based medical device maker estimates it will pay between $20 million and $30 million once the tax takes effect in January, Pete Yonkman, executive vice president of strategic business units at Cook Medical, said this week.

The 2.3-percent tax on sales of all medical devices was created as part of President Obama’s 2010 health reform law to help pay for its expansion of health insurance coverage to as many as 30 million more Americans. The tax is projected to raised about $2.9 billion per year.

“It is a challenge for us, no doubt,” Yonkman said in an interview after the IBJ Life Sciences Power Breakfast on Wednesday (see video below). “We have fewer resources to be able to spend on those kinds of projects.

“We had hoped, as we get bigger, that that would be our model for expansion,” Yonkman said. “To take these small manufacturing facilities and bring them to these communities, that had been hard hit by jobs leaving, because the work ethic is amazing and the people are really supportive and excited.”

Cook Medical shelves Midwest expansion plans | 2012-07-27 | Indianapolis Business Journal | IBJ.com

Obama and Pelosi really thought this one through.

I forgot, we had to pass it to see what was in it.

[tony_j15]

2.3 tax on sales was the deciding factor? You actually believe that?

[CERuppel]

Tony: That was my thought also.

[mad1]

2.3 tax on sales was the deciding factor? You actually believe that?

If you read the article you would know that the additional 2.3 sales tax equates to the amount of money needed to open the new facilities.

[brandon184]

I think what mad1 is saying is that he would have preferred single-payer universal healthcare instead of Obamacare. I agree with him on that point.

Why doesn't this company just pass the tax along to their customers?

[mad1]

I think what mad1 is saying is that he would have preferred single-payer universal healthcare instead of Obamacare. I agree with him on that point.

Why doesn't this company just pass the tax along to their customers?

Not correct. My plan was to overhaul medicare and medicaid, remove the fraud and waste. Make this available to anyone that does not have health insurance or anyone wanting to change. Leave the current free market health care system to its own. This would offer two competing health insurance packages.

By passing on the cost to the consumer that would increase the cost. I thought the idea behind Obamacare was to reduce the cost to the consumer, not increase the cost?

[pickel]

Not correct. My plan was to overhaul medicare and medicaid, remove the fraud and waste. Make this available to anyone that does not have health insurance or anyone wanting to change. Leave the current free market health care system to its own. This would offer two competing health insurance packages.

By passing on the cost to the consumer that would increase the cost. I thought the idea behind Obamacare was to reduce the cost to the consumer, not increase the cost?

Removing FRAUD would increase the prison population exponentially. Any savings would go DIRECTLY into the penal system !!!
Ain't NO Way to win.

[brandon184]

Not correct. My plan was to overhaul medicare and medicaid, remove the fraud and waste. Make this available to anyone that does not have health insurance or anyone wanting to change. Leave the current free market health care system to its own. This would offer two competing health insurance packages.

Removing "fraud and waste" from Medicare wouldn't allow it to suddenly accomodate everyone who is uninsured.

By passing on the cost to the consumer that would increase the cost. I thought the idea behind Obamacare was to reduce the cost to the consumer, not increase the cost?

The idea of Obamacare was make sure that every citizen has access to health insurance.

[Chuckiechan]

2.3 tax on sales was the deciding factor? You actually believe that?

He's probably financing his business on a credit line, so a 2.3% increase means he has to increase his borrowing and corresponding debt service by 2.3%. His credit line is probably ~ 5%. And this new cost is an unproductive cost like wrecking a C&C machine or something.

And we don't know who his competitors are, or where they are. And there may be a price fixed as to what the insurance company will pay. If they won't absorb the 2.3% then he has to. If he can't he changes his business model.

He is probably looking to move to Canada or possibly Scotland or Germany.

[MTAtech]

Let me understand this. This business has enough extra demand that they want to expand production but now is going to forgo additional sales because of the tax? On the surface, that doesn't make any sense, especially since the profit margin on medical devices is well beyond 2.3%

Chuck, you don't think they have business taxes in Canada, Scotland or Germany?

[Chuckiechan]

It gets down to cost per unit out the door, including the cost of capital and the cost of regulation. Obamacare has just laid an additional 2.3% mark up on their product the insurance company (might pay), but you certainly will.

Would you suggest forcing them to open those plants that were cancelled?

Lot of of business are cancelling expansion plans for lots of reasons. The USA is not the place to be right now.

[MTAtech]

It gets down to cost per unit out the door, including the cost of capital and the cost of regulation. Obamacare has just laid an additional 2.3% mark up on their product the insurance company (might pay), but you certainly will.

...and that 2.3% comes with millions of new customers who formerly couldn't afford their product.

From the slim information in that article I conclude that it's a poor business decision.

[Theophylact]

My guess is that it's not a business decision at all but rather a political statement.

[tony_j15]

If you read the article you would know that the additional 2.3 sales tax equates to the amount of money needed to open the new facilities.

It doesn't say that anywhere. I must be missing it.

He's probably financing his business on a credit line, so a 2.3% increase means he has to increase his borrowing and corresponding debt service by 2.3%. His credit line is probably ~ 5%. And this new cost is an unproductive cost like wrecking a C&C machine or something.

There are so many hypotheticals there it's not worth commenting on.

And we don't know who his competitors are, or where they are. And there may be a price fixed as to what the insurance company will pay. If they won't absorb the 2.3% then he has to. If he can't he changes his business model.

Everyone is subject to the tax. Both US companies and companies that import to the US. In other words, it affects everyone across the board. Cook Group's situation is not unique.

He is probably looking to move to Canada or possibly Scotland or Germany.

Link?

[Chuckiechan]

Here's another view:

http://dev.medcitynews.com/2012/04/a...pansion-plans/

The tax is on sales, so the impact is greater on a cost basis. Imports will continue to come in cheaper and will pay 2.3% on a lower number.

Since the insurance company is paying the bill, and soon the IRS will be determining how much Obamacare will pay for Grannie's hip, I would expect they will choose the cheapest vendor - which will be an import.

Personally, I think the artificial joint industry is getting so big and new joints so common, the government is scared to death of it in terms of future costs, and wants to "kill it in the crib" before the "boomers" reach their 80's.

It is known that to get less of something, you tax it.

...and that 2.3% comes with millions of new customers who formerly couldn't afford their product.

I wouldn't count on people getting it as easily as before. It depends on the ruling of "The Panel" whether you get one or not.

[MTAtech]

Here's another view:

http://dev.medcitynews.com/2012/04/a...pansion-plans/

The tax is on sales, so the impact is greater on a cost basis. Imports will continue to come in cheaper and will pay 2.3% on a lower number.

Isn't that true without the tax, namely, imports will be cheaper? If so, it's not the tax but cheaper imports.

Since the insurance company is paying the bill, and soon the IRS will be determining how much Obamacare will pay for Grannie's hip, I would expect they will choose the cheapest vendor - which will be an import.

Where did you learn that the government decides the rates? Because it's not true, The insurance company decides how much they will pay and the incentive for the hospital to use the cheapest vendor is the same, whether it's the gov't or the ins. company deciding.

[/quote]

[tony_j15]

The tax is on sales, so the impact is greater on a cost basis. Imports will continue to come in cheaper and will pay 2.3% on a lower number.

But that was possibly true before as well. Right? As I said, everyone pays because of this tax. State-side and importers. So all that has happened is the bottom line has been raised. Of course imports can still possibly be cheaper. The point of this tax wasn't to change that.

Since the insurance company is paying the bill, and soon the IRS will be determining how much Obamacare will pay for Grannie's hip, I would expect they will choose the cheapest vendor - which will be an import.

If granny is on a private plan, her insurance company decides how much they want to spend. If she's on Medicare, Medicare decides how much they are going to spend. The IRS will have nothing to do with it.

Personally, I think the artificial joint industry is getting so big and new joints so common, the government is scared to death of it in terms of future costs, and wants to "kill it in the crib" before the "boomers" reach their 80's.

It is known that to get less of something, you tax it.

I wouldn't count on people getting it as easily as before. It depends on the ruling of "The Panel" whether you get one or not.

I would suggest doing some research. You have a knowledge deficit to overcome before you can safely speak on this subject. Going on about the IRS and Death Panels deciding who gets what is proof that you don't really have a clue.

[MTAtech]

I would suggest doing some research. You have a knowledge deficit to overcome before you can safely speak on this subject. Going on about the IRS and Death Panels deciding who gets what is proof that you don't really have a clue.

My mother died last year at 93. Before she did, Medicare spared no expense in maintaining her life. I didn't see the bills but it wouldn't have surprised me if more expense was spent in her last six months than all other medical cost for the rest of her life.

The idea that the government wants to kill grandma to save Medicare costs is baloney.

[mad1]

It doesn't say that anywhere. I must be missing it.

He referred to a new plant Cook opened recently in Canton, Ill., renovating a plant abandoned by the International Harvester Corp. Cook has invested $30 million in the plant, which will eventually employ 300 or more people, Yonkman said.