CORRECTED - UPDATE 3-Boston Sci shares plunge, CEO warns of tax

* Proposed tax in health reform could lead to job cuts-CEO

* Company's tax burden would double annually-CEO

* Shares down 17 percent day after earnings miss
(Corrects percentage change of St. Jude stock decline in
paragraph 8)

By Susan Kelly

CHICAGO, Oct 20 (Reuters) - Shares of Boston Scientific
Corp (BSX.N) plummeted as much as 17 percent on Tuesday, wiping
out $2.55 billion of market value, after the company cut its
profit outlook and its chief executive warned of dire
consequences from a proposed health reform tax.

The medical device maker, which released its third-quarter
results late Monday, cited decelerating growth and greater
pricing pressure in the market for devices that manage
irregular heart rhythms for the reduction in its full-year
profit outlook.

On Tuesday, it warned that a proposed tax in the U.S.
health care reform bill that cleared the Senate Finance
Committee last week could have serious consequences for the
company, including job losses.

"The bill that came out of the committee last week makes
absolutely no sense and would be very damaging to Boston
Scientific, and the medical device industry as a whole," Boston
Scientific Chief Executive Ray Elliott said during a
post-earnings conference call.

"In a nutshell, it would raise costs and lead to
significant job losses. It does not address the quality of care
but the political scorecard of savings."

Elliott said that the company's tax liability would be
doubled, adding $150 million to $200 million a year, and it
would be forced to make substantial cuts in research and
development spending, which could result in 1,000 to 2,000 jobs
being lost at Boston Scientific.

Shares of Boston Scientific were down $1.67 or 16 percent,
at $8.49 in afternoon trading on the New York Stock Exchange;
earlier they fell as low as $8.39.

Shares of St Jude Medical Inc (STJ.N), a rival maker of
implantable cardioverter defibrillators, fell $1.83, or 5.2
percent, to $32.45. Medtronic Inc (MDT.N), the largest maker of
ICDs, saw its shares fall $1.23, or 3 percent, to $36.76.

St Jude, which issued its own profit warning earlier this
month, is due to report third-quarter results on Wednesday.

Analysts said Elliott's comments highlighted the risk to
medical technology companies should the fee on devices be
enacted, causing some investors to pull out of the stocks.

"When a CEO says something like that, it doesn't bode well
for the entire medtech universe," said Lazard Capital Markets
analyst Sean Lavin.

The Senate bill in its current form contains $4 billion in
annual fees on medical device makers beginning in 2010 to pay
for health care reform. The device industry is fighting to
remove or reduce the fees.

"Part of what's still not clear is the whole issue of the
tax," said Morningstar analyst Debbie Wang. "The odds are it's
going to be whittled down to something; we just don't know what
it's going to be yet. They are going to get hit, but how big
the hit will be is just not clear."

In addition to direct fees on device makers, the industry
faces a double tax because hospitals, which have agreed to
accept $155 billion in cuts in government payments over 10
years, will pass on part of that burden to device makers, said
Elliott.

Late Monday after the NYSE closed, Boston Scientific
reported third-quarter earnings that missed expectations and
cut its full-year forecast.

The company said the overall cardiac rhythm management
device market is growing at about 4 percent, with U.S. growth
at 2 percent. That's below the company's prior expectations for
market growth of 5 percent to 6 percent, and U.S. defibrillator
growth of 3 percent, Elliott said.

The U.S. drug-eluting stent market, in which Boston
Scientific also participates, is stable, with U.S. procedures
up about 1 percent, Elliott said.
(Reporting by Susan Kelly, editing by Gerald E. McCormick)