The Deadly Tax on Medical Innovation

For instance, the Zoll Medical Corporation is one of the leading manufacturers of automated external defibrillators (AEDs). These devices are commonplace in airports, shopping malls, and other public places. They are meant to be used by members of the general public to give immediate life-saving electrical shocks to someone suffering sudden cardiac arrest.

Advances in hardware and software have made these devices sufficiently reliable that they can be safely used by "Good Samaritan" bystanders with no formal medical training. The AED device itself analyzes the patient's electrical rhythm and gives voice instructions to the user as to whether and when to safely shock the patient. According to a recent paper in the New England Journal of Medicine, making AEDs widely available to the public could significantly improve the survival rates of cardiac arrest patients.

However, the ObamaCare tax would impose an additional $7.5 million annual burden on Zoll, nearly eliminating their annual profit of $9.5 million. As their CEO Richard Packer recently explained on a Fox News interview with Neil Cavuto:

PACKER: So, it almost wipes out our profits.

CAVUTO: So, you have a couple of choices here. You cut jobs or send them overseas, or you increase the price of your product, not easy to do.

PACKER: Yes, or cut back on research and development. And our business is built around new science, new clinical trials.

CAVUTO: Or a lot more people die as a result...

[Emphasis mine.]

To make matters worse, it is the small startup companies which are the engine of so much innovation that would be disproportionately harmed by this tax.

ObamaCare could thus strangle many promising developments in their cradles before they ever reached the marketplace, such as new cancer treatments, handheld diagnostic equipment, nanotechnology, etc.

And the worst aspect is that we will never know what new technologies could have been developed and how many lives they could have saved -- an example of Frederic Bastiat's principle of the seen and the unseen. As with any exponential process, small changes in the rate of growth will have a dramatic effect on the final total after twenty years.

Most investors already know this. An initial investment of $5,000 compounded at an annual rate of 2% would yield $9,000 after 30 years. If the interest rate were 8%, the return would be over $50,000. If the interest rate were 12%, the return would be nearly $180,000.

Although the investor receiving the 8% return rate would certainly be better off than the investor earning only 2%, he'll never know how much more he would have enjoyed with a 12% return.

Similarly, we will still see some medical advances over the next 20 years despite ObamaCare. But what additional life saving advances will be stifled because of this deadly tax on innovation? Will we miss out on cures for Alzheimer's disease, stroke, or breast cancer?

Fortunately, Americans can still enjoy these future benefits. But to do so, we must demand that our politicians repeal ObamaCare and instead implement free-market reforms that leave companies free to innovate and leave consumers free to spend their own medical dollars for their best interest. The resultant explosion in medical innovation could transform and improve our lives over the next 20 years at least as much as innovations in computer technology have done in the past 20 years.

For most people, using a 1998 home computer to surf the internet in 2010 would be unthinkable. For most doctors, using 1998 medical technology to treat brain tumors in 2010 would border on malpractice. When you need medical care in 2020, don't let the regulatory state handcuff your doctor with 2010-era technology. Your life may depend on it.