PhillyInc: Wireless ultrasound will launch amid new taxes

The Acuson Freestyle system begins shipping from Plymouth Meeting soon - with a 2.3 percent excise tax on each.
The Acuson Freestyle system begins shipping from Plymouth Meeting soon - with a 2.3 percent excise tax on each.
Posted: May 01, 2013

One year ago, Penrith Corp. was a small maker of medical devices in Plymouth Meeting trying to get its wireless ultrasound system through the regulatory approval process after six years in development.

Today, now part of the giant Siemens Healthcare, the operation is preparing to launch what is called the Acuson Freestyle from a 12,000-square-foot facility in a commercial office park near I-476.

Siemens Healthcare CEO Gregory Sorensen, a former professor of radiology at Harvard Medical School, said a wireless handheld device should appeal to doctors who use systems in which the transducer is connected by a cord and can be "cumbersome and difficult to use."

But Sorensen emphasized that when the first Acuson Freestyle units are shipped from Plymouth Meeting shortly, Siemens will pay a 2.3 percent excise tax on each, thanks to regulations that took effect related to the Affordable Care Act of 2010.

The medical device industry has lobbied hard for the repeal of the tax, which is projected to generate $30 billion over 10 years. In March, the U.S. Senate voted, 79-20, on a nonbinding resolution to repeal the tax. The Medical Device Manufacturers Association has warned that the tax will mean the loss of U.S. jobs and is a disincentive to innovation.

"Any kind of relief we could get, as soon as we could get it, would be fabulous," Sorensen said.

There has been pushback from the medical community and consumer advocates. An op-ed last week in the New England Journal of Medicine by two Harvard Medical School doctors argues that the benefits of health reform outweigh the costs of the tax.

The Washington-based Consumers Union contends that the excise tax "simply requires the device industry to pay its fair share for legislation that will ultimately benefit device manufacturers."

That is a reference to predictions of a windfall for insurers, drug companies, and device makers once 40 million more Americans are covered by health insurance.

Sorensen, who wrote an op-ed of his own in the Wall Street Journal two weeks ago, is skeptical that any health-reform windfall is awaiting device makers like his. He cited a survey of nine companies that reported declines in sales in Massachusetts since 2006 under the universal coverage plan known as Romneycare.

U.S Rep. Pat Meehan (R., Pa.), who toured the Siemens ultrasound systems facility Monday, said he thinks the best chance for repealing the medical device tax would be as part of overall tax reform legislation that the Ways and Means Committee should produce this summer.

Still, the excise tax did not prevent Siemens from acquiring Penrith for an undisclosed amount last September. "Medical devices are still our business," Sorensen said. "Whether they're taxed a little or a lot, our business has to be to try to grow and to meet unmet medical needs."

Coincidentally, the Siemens ultrasound factory is located in the same building as a portable cardiac ultrasound system that was closed down in 2005 under different Siemens management, said Mike Cannon, who then founded Penrith in 2006 and leads 20 engineers and manufacturing specialists.

Now Cannon and his team are back in the Siemens fold in what all called a "natural fit." Excise tax or no excise tax.


Contact Mike Armstrong at 215-854-2980 or marmstrong@phillynews.com, or @PhillyInc on Twitter. Read his blog, "PhillyInc," at www.phillyinc.biz.

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