By Paul Briand
Last year, Novocure, a startup medical device company, paid $580,000 in a tax designed to help fund the Affordable Care Act. This year, it expects to pay $1.2 million.
U.S. Sen. Kelly Ayotte, R-N.H., said in a tour Tuesday of the Novocure facility at 150 Commerce Way that the 2.3 percent excise tax on medical device companies "is a disincentive to startups."
Ayotte sat down with Novocure officials, toured the facility and met some of its 70 employees as part of her effort to hear from New Hampshire medical device companies on how the tax affects their businesses.
She is co-sponsoring legislation - the Medical Device Access and Innovation Protection Act (S. 232) - to repeal what she calls "this onerous tax."
Novocure has developed a treatment for cancer that uses electric impulses to disrupt cancerous cells. The therapy prevents cancer cells from dividing. According to the company, that structural disruption leads to a breakdown of the cancer cells.
The treatment received U.S. Food and Drug Administration approval in April 2011. Its trials to date have focused on brain and pancreatic cancer cells; future trials will include ovarian and lung cancers.
Chief Operating Officer Mike Ambrogi, in a presentation for the senator, said in trials the treatment has increased the survivability of some cancers by several years. He described it as an augmentation to, not a replacement of, more traditional cancer therapies of surgery, radiation and chemotherapy.
"In the war on cancer," said Ambrogi, "this is one of the weapons."
Gabe Leung, vice chairman of the company's board of directors, said, "The way we look at it, we're rewriting the history of cancer treatment."
For a small company, according to Chief Finance Officer Wilco Groenhuysen, a $1.2 million tax "is a negative incentive."
The excise tax on medical device company profits was included in federal legislation as a way to help pay for the Affordable Care Act. According to Ayotte, efforts to repeal it have become bipartisan, even among some lawmakers who initially approved of the tax.
The senator said a recent nonbinding vote that was part of a budget resolution had a 79-20 vote to repeal the tax. She expects the legislation that she is sponsoring to come up for a floor vote soon.
In addition to the medical device tax, company officials discussed the issue of Medicare approval and reimbursement for their device.
Justin Kelly, senior director of health policy and payment, explained that the Centers for Medicaid and Medicare Services, which approves devices for reimbursement, has a very lengthy appeal process. In one case cited by Kelly, a patient died while awaiting word on reimbursement.
About a third of cancer patients who would use the Novocure therapy are Medicaid eligible, according to the company.
"You can't have a process where the appeal process outlives the patient," said Ayotte.
Novocure's Portsmouth outfit has grown to 70 employees "from a standing start two years ago," said Ambrogi. Worldwide, the company employs about 210 people. Novocure is a privately held company based in Portsmouth and Haifa, Israel, where the NovoTTF device was invented.
Pharmaceutical giants Pfizer Inc. and Johnson & Johnson are among the investors in the company.
According to the company, the components for the device are manufactured in locales worldwide. They are then sent to Portsmouth for packaging and shipping.
In a meeting with employees, Ayotte noted that her grandmother died from ovarian cancer.
"What you're doing is going to make a difference," she said.