Minnesota gov. opposes medical device tax proposal

CHICAGO (Reuters) - The Republican governor of Minnesota has written to the state's U.S. senators asking them to stop a proposed tax on medical device makers as Democratic lawmakers push for health care reform.

A draft of a proposal from U.S. Senator Max Baucus, chairman of the Senate Finance Committee and a Democrat, that would assess $4 billion in annual fees on medical device makers as part of a broader effort to pay for health care reform was circulated among lobbyists last week.

Several medical device makers, including Medtronic Inc and St Jude Medical Inc, are in Minnesota.

In the letter, Governor Tim Pawlenty urged Senators Amy Klobuchar and Al Franken, Democrats, to work to remove the tax from the proposal. "The proposed market-share based tax would be a severe burden on this industry, costing jobs and draining away funds needed for innovative research and development," Pawlenty wrote.

The tax would apply to medical products ranging from pacemakers to wheelchairs and diagnostic tests, and, he wrote, would increase healthcare costs rather than lower them.

A coalition of device industry, biotechnology and medical groups has also opposed the tax.

In a letter to Baucus and Republican Senator Charles Grassley, the coalition wrote that it supported efforts to reform the U.S. healthcare system, but the proposed tax would increase costs for consumers, physicians, and hospitals.

President Barack Obama has said overhauling the $2.5 trillion U.S. healthcare industry should cut costs, improve care, regulate insurers and expand coverage to many of the 46 million Americans without health insurance.

Baucus is expected to unveil on Wednesday a healthcare reform bill costing an estimated $880 million over 10 years.

On Tuesday, Medtronic's Chief Financial Officer Gary Ellis criticized Baucus' proposal as a double hit to medical device makers, saying they are reimbursed by hospitals, which have already agreed to reduced government funding.

Steve Ubl, president and chief executive of the Advanced Medical Technology Association representing device makers, said, "We cannot support a proposal that unfairly singles out the medical technology industry for a tax on innovation on top of the billions in cuts that the industry would already have to absorb within the health care reform proposal," Ubl said.

(Reporting by Susan Kelly)