INTERVIEW - Medical device group seeks cap on reform tax

CHICAGO (Reuters) - Medical device makers will pay their fair share to help fund health reform but seek a tax structure that ensures the industry's total contribution does not exceed $20 billion, the new chairman of the industry's largest trade group said.

Device makers have agreed to an industrywide tax of $20 billion over 10 years, half the amount lawmakers originally proposed, as part of President Barack Obama's plan for a massive overhaul of the U.S. healthcare system.

However, the plan's latest version changed the taxing structure for device makers to an excise tax from a graduated fee. It also pushed out the start date for the tax to 2013 from 2011, a win for device makers.

The Advanced Medical Technology Association (AdvaMed) is concerned the new structure could effectively increase the industry's tax contribution and wants to see a mechanism put in place that would cap the total at the $20 billion the industry has pledged, new AdvaMed Chairman James Mazzo said.

"We understand we're obligated for our $20 billion, but no more than that," said Mazzo, who is president of Abbott Medical Optics, a laser eye surgery and lens business that was acquired by Abbott Laboratories last year.

"We want to be part of helping move reform forward," he said. "I want to be very clear that we're saying $20 billion."

The shift to an excise tax also could put smaller medical device companies at greater risk, according to analysts.

Mazzo said AdvaMed, whose members include top device makers like Medtronic Inc and Boston Scientific Corp, is pushing for tax exemptions for small companies, which comprise 70 percent of its membership.

As AdvaMed's new leader, Mazzo said one of his priorities will be to make sure the $123 billion medical device industry doesn't lose its edge as a technology innovator and growth engine for the U.S. economy. The industry employs more than 350,000 U.S. workers whose wages are 30 percent higher on average, he said.

"We want to keep our patient focus. We don't ever want to lose that innovation lead that we have," Mazzo said.

Obama has sharply criticized health insurers in his final push for a health reform package designed to rein in costs, regulate insurers and expand coverage to tens of millions of Americans.

The administration has accused insurers of putting profits before patients and has asked top companies such as Aetna Inc and Wellpoint Inc to justify rate increases by making public information about costs and other details.

Insurers have in turn criticized device makers, saying higher medical technology costs along with hospital and drug costs are the reason insurers are raising their premiums as much as 40 percent for some consumers.

Mazzo said medical device cost trends have actually been deflationary, increasing at less than half the rate of the consumer price index and one-quarter of the rate of the medical consumer price index.

(Reporting by Susan Kelly; Additional reporting by Susan Heavey in Washington; Editing by Richard Chang)