Legislator feathers his own nest: ignores patient harm.

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Minnesota Republican’s Legislation, Stock Portfolio Intersect

By Dan Glaun  6/18/2012

Last week's House passage of H.R. 436, the Health Care Cost Reduction Act, was a victory for Rep. Erik Paulsen, its sponsor. And the Minnesota Republican's political success may provide a boost to his investment portfolio, as well. 

The bill, if passed by the Senate and signed into law, would repeal the excise tax on medical devices included in President Barack Obama's health care law. And among the devices it would apply to would be those sold by two medical device companies that Paulsen owns stock in, according to newly released congressional financial disclosures.

Paulsen, the co-chair of the House medical technology caucus, had between $1,001 and $15,000 invested in both McKesson Corp and Medtronic. McKesson sells medical devices, among other services, while Minnesota-based Medtronic specializes in their manufacture. 

Should the tax not be repealed, a 2.3 percent levy on the sale of medical devices will go into effect January 1, 2013.

Paulsen has called the tax harmful to innovation and the economic health of the industry. 

"[The excise tax] will push research, development and manufacturing abroad and put tens of thousands of American jobs at risk," said Paulsen in a May press release. "Small start-up companies will be hit especially hard because the tax will be levied regardless of profitability."

A study commissioned by the Advanced Medical Technology Association -- a trade group of which Medtronic is a member -- contends that the tax could cost the industry over 43,000 jobs and induce businesses to move operations overseas. A Bloomberg Government analysis of the study, however, found that it was "not credible" and that "its assumptions are flawed." Bloomberg concludes that "Economic evidence supports the notion that the tax will reduce sales of medical devices. Yet the drop is likely to be less than [the study] predicts and could be offset by demand from millions of new customers." 

Repealing the tax would cost about $29 billion in projected government revenues over the next decade, according to the Joint Committee on Taxation.

Paulsen's office did not respond to multiple requests for comment.  

Lawmakers report their holdings in wide ranges. Because of this, Paulsen's investments in medical device firms could represent anywhere from .25 percent to 16.9 percent of his total reported 2011 assets. He has held the stock since at least 2008, according to his 2009 financial statement -- the first one he filed as a congressman.

Craig Holman, government affairs lobbyist for non-profit public interest group Public Citizen, said that Paulsen's sponsorship of a bill that could directly impact his stock portfolio raises questions of conflict of interest -- questions which are not limited to Paulsen.

"Members of Congress have been very active traders on the stock market...and many have invested in industries over which they have oversight," said Holman. "Paulsen would be better off moving his stock investments into a qualified blind trust that would help ease any potential hints of conflict of interest."

While Paulsen's personal finances would benefit from his bill, his political war chest is also a beneficiary of industry money. 

Paulsen has received $69,600 from medical supply industry employees and PACs during the 2012 election cycle, making him the top House recipient of contributions from the industry, according to Center for Responsive Politics research. 

Among the organizations and individuals representing those campaign dollars are two of the medical device companies in which Paulsen held stock in 2011 -- McKesson, whose PAC donated $10,000 to Paulsen, and Medtronic, which donated $5,000 to his commitee through its PAC.

Moreover, several of Paulsen's top contribution sources are medical device firms. Boston Scientific gave Paulsen $10,000 from its PAC; CEO William Kucheman also chipped in $1,000 individually. Employees of hearing aid manufacturer Starkey Laboratories contributed $12,000, including $5,000 from CEO William Austin and $2,000 from President Jerry Ruzicka. 

Several other firms in the industry have supported Paulsen this election cycle via PAC donations; he has received $10,000 from Endo Pharmaceuticals' PAC and $2,000 from 3M's committee.