* 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
(Adds analyst comments, details from conference call, byline)
By Susan Kelly
CHICAGO, Oct 20 Boston Scientific Corp (BSX.N)
warned on Tuesday 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
"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 $1.73 or 17 percent
at $8.43 in afternoon trading on the New York Stock Exchange.
Late Monday after the NYSE closed, the company reported
third-quarter earnings that missed expectations and cut its
"There are heightened fears right now thanks to health care
reform, because we don't know where that's going to end up yet.
Any bit of bad news can cause folks to pull out," said
Morningstar analyst Debbie Wang.
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," Wang said. "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
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
Natick, Massachusetts-based Boston Scientific cited
decelerating growth in the market for devices that manage
irregular heart rhythms in reducing its full-year profit
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)