Under the latest version of the Democratic plan to extend health insurance to more Americans, medical device sales will be hit with a 2.5 percent excise tax, projected to cost $20 billion over the next decade.

The heads of three local medical device companies say it's counterproductive, because the tax will penalize innovative products to improve health care.

"Any tax takes away from the profitability of producing (the devices), so why would you want a tax?" said Donovan B. Yeates, CEO of San Marcos-based Kaer Biotherapeutics. Kaer is developing an inhaler to deliver protein-based drugs.

"It's Obama's Robin Hood attitude," Yeates said. "You can't keep taxing people every time you think you need money."

Advocates of the tax have said expanding health care will increase sales of medical devices.

San Diego's medical device industry includes such major companies as DJO Inc. in Vista; Volcano Corp. in Carmel Valley; and Gen-Probe Inc. in Sorrento Mesa.

The tax "has the potential to curb innovation; to limit the ability for companies to bring new technologies that could be beneficial to U.S. citizens into the country," said James Joyce, CEO of Aethlon Medical Inc. of San Diego.

Aethlon is testing a device in India called the Hemopurifier to rid blood of infectious organisms such as viruses and cancer cells.

Joyce said if taxes rise in the United States, medical device companies may decide they're better off selling into the European Union market and foregoing American sales. Aethlon plans to commercialize its Hemopurifier overseas, Joyce said.

"We'll be closely analyzing the new tax as we prepare to initiate both U.S. medical programs and analyzing the opportunities to initiate programs in the EU as well," Joyce said.

Asked if government reimbursement for the devices could help offset that burden, Joyce said it could, to an extent.

"I think it's a huge problem," said Alex Lukianov, chairman and CEO of San Diego-based NuVasive, interviewed Oct. 19 on Fox Business News.

"Having to tax medical devices to bring down health care (costs) just doesn't work, because all you're doing is taking away from innovation," Lukianov said.

Call staff writer Bradley J. Fikes at 760-739-6641. Read his blogs at bizblogs.nctimes.com.