Boston Scientific Dl 01 (TG:BSX)
Historical Stock Chart

From May 2019 to May 2024

Medical-devices companies could be asked to contribute $4 billion per year to help cover the tab for U.S. health-care reform, according to a proposal by Senate Finance Committee Chairman Max Baucus.

A "framework" for discussion on health reform from Baucus, a Montana Democrat, includes the annual fee on device manufacturers allocated by market share starting in 2010. While only a proposal, it suggests device makers aren't off the radar screen during the reform push.

"To the best of our knowledge, this is the first time such a medtech deal has been publicly disclosed in writing by a key government official," Wells Fargo analyst Larry Biegelsen said in a note to investors Tuesday.

This could rattle investors who thought device companies might skate through reform talks without making concessions in the mold of pharmaceutical companies and hospitals. Analysts said this potential device-sector contribution doesn't match some higher numbers that circulated in July, but the figure is still steep enough to outweigh benefits from treating currently uninsured patients.

Major medical-devices companies include Medtronic Inc. (MDT), Boston Scientific Corp. (BSX), Johnson & Johnson (JNJ), Abbott Laboratories (ABT) and Stryker Corp. (SYK). Stocks in this sector were mixed on Tuesday, with two Dow Jones Wilshire indexes edging lower despite an uptick for the broader market.

How device companies might contribute to reform efforts remains to be seen because there isn't a strong direct connection between the industry and government. Instead, device companies are generally paid by hospitals, which often recoup costs for devices through Medicare reimbursement payments tied to patient treatment.

The device industry has highlighted the fact it's already likely to get squeezed in the quest for cost savings when the government clamps down on hospitals.

The Advanced Medical Technology Association, which represents device makers in Washington, didn't have an immediate comment on the Baucus proposal.

-By Jon Kamp, Dow Jones Newswires; 617-654-6728; jon.kamp@dowjones.com