Medical device players urge repeal of $20B excise tax

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More than 400 organizations, companies and venture capital firms pressed leaders of Congress to repeal a recently enacted $20 billion medical device excise tax. In a July 18 letter, they claim the 2.3 percent tax will adversely impact patient care and innovation, as well as increase the costs of healthcare.

Though the slated date for implementation of the tax—which was part of the Patient Protection & Affordable Care Act—is set for 2013, the signers of the letter claimed it is already having an adverse impact on research and design, investment and job creation, therefore jeopardizing the U.S. global leadership position in medical device innovation.

“If this tax is not repealed, it will continue to force affected companies to consider cutting manufacturing operations, research and development, and employment levels to recoup the lost earnings due to the tax,” officials wrote. “It will also adversely impact patient access to new and innovative medical technologies.”

The coalition noted three primary reasons to repeal the tax:

  • It will stifle innovation and cost thousands of high paying jobs, reduce financial resources for research and design, as well as clinical trials and investments in manufacturing. The impact will be greater for smaller companies, the authors noted.
  • The tax will increase healthcare costs, they claimed, citing an April 2010 Office of the Actuary at the Centers for Medicare and Medicaid Services report. In some cases, the 2.3 percent tax will be passed on to consumers, leading to higher healthcare costs, authors wrote.
  • Additionally, the tax will not be offset by increased demand for medical devices, according to the authors. “It is important to note that there is no evidence suggesting a device industry ‘windfall’ from healthcare reform.”

The 2.3 percent tax on revenues is designed to raise $20 billion over 10 years. Sen. Orrin Hatch (R-Utah) drafted a bill last January to repeal it, with the lengthy title “A bill to repeal the job-killing tax on medical devices to ensure continued access to life-saving medical devices for patients and maintain the standing of the United States as the world leader in medical device innovation.”