The Medical Device Manufacturers Association (MDMA), the Advanced Medical Technology Association (AdvaMed) and the Medical Imaging & Technology Alliance (MITA) are all expressing delight over bipartisan backing for adoption of an amendment to the Fiscal Year 2014 Senate Budget Resolution. A Senate vote expressed strong support for repeal of a 2.3 percent medical device excise tax that was introduced to help fund the Affordable Care Act (ACA) of 2010 — AKA Obamacare.
The amendment, introduced by Senators Orrin Hatch (R-UT) and Amy Klobuchar (D-MN), with co-sponsorship from twenty-one Senators, passed by a comfortable margin of 79-20 votes, with 33 of 53 Senate Democrats joining their Republican colleagues in voting in favor of repealing the tax, which is projected to boost Federal tax revenue by $29 billion in aid of financing medical care coverage for uninsured Americans.
The medical devices industry had condemned the tax, which was first levied on January 1, as a jobs-killer that if left in place would dampen investment in and expansion of the medical devices industry, leading to layoffs and terminations, and with increased costs ultimately borne by consumer end-users. Walt Humann, President and CEO of Addison, Texas-based OsteoMed and board member of the Medical Device Manufacturers Association, “We have already made the difficult decision to lay off employees, forego future hiring, and cut off R&D spending,” as a result of the proposed Obamacare medical devices tax.
It should be well noted, however, that the Senate vote is nonbinding, and actual repeal of the tax is still far from being a done deal. However, the strong bipartisan support expressed for repeal gives the industry, and consumers of the devices they manufacture, cause for optimism.
“Today’s overwhelming support of the amendment shows that clear majorities in the Senate and the House of Representatives recognize that the medical device tax needs to be repealed so that America’s medical technology community can spur growth and create the great jobs that come along with it,” says Mark Leahey, President and CEO of MDMA in a release. “Every day innovators in this dynamic industry are looking at how to improve the quality of life for patients, and the medical device tax is standing in the way of progress and threatening America’s leadership position. While we have more work to do, MDMA applauds this important step towards ensuring that the United States remains the global leader in medical technology innovation.”
A study prepared on behalf of the Advanced Medical Technology Association (AdvaMed) notes that companies affected also pay other Federal taxes, such as payroll taxes (employer share) and unemployment insurance taxes, and investors may pay individual income taxes on company dividends and realized capital gains. If included, these additional taxes would add to the Federal tax liability of the industry. The tax would also be levied on sales without regard to profitability of the company paying the taxes.
Excluded from the levy are eyeglasses, hearing aids, and contact lenses, and proposed regulations exempt medical devices that are both available through retail sales outlets and are not primarily intended for use in medical facilities.
“Bipartisan majorities in both the House and Senate have now voted to repeal the device tax. The reasons behind mounting support to repeal the tax are clear: Across the country, this tax is cutting high-quality jobs and investments in tomorrow’s treatments and cures at companies large and small. We encourage leaders in Congress and the Administration to seize on this momentum and act to repeal this harmful tax,” Stephen J. Ubl, President and CEO of AdvaMed comments in the release.
Don’t expect the Obama administration to allow the medical devices excise tax to be repealed without a fight. The Examiner’s Mike Delrio cites White House spokesman Brad Carroll saying on Friday: “Last night’s purely symbolic vote has no bearing on the future of the Affordable Care Act and its implementation,” and contending that the industry will actually stand to benefit from “millions of newly insured customers as a result of the law., and arguing that it should contribute in tandem with hospitals, drug companies and health insurance plans that are also subject to cuts or paying higher taxes as a consequence of Obamacare.
MITA Executive Director Gail Rodriguez observes that “Momentum is clearly growing in Congress to repeal the medical device tax as Senators continue to hear from their constituents that the impact is real — the tax is slowing economic growth and costing thousands of jobs. MITA encourages Congress to prevent further job loss and protect essential research and development by promptly repealing this harmful tax.”
Mr. Delrio notes industry protest that the majority of their customers are already insured and no substantial increase in revenue from the ACA is anticipated. The MDMA says it has been against the medical device tax from the beginning, and continues to work for a full repeal, noting that The overwhelming majority of innovation from the medical device industry comes from smaller manufacturers who work closely with clinicians and engineers to develop new therapies and treatments, ans that if not repealed, the tax will stifle innovation, harm patient care and weaken the position of the United States as the global leader in medical device innovation.
The MDMA claims that America’s medical technology industry (much of which is located in Texas) is responsible for and supports nearly two million jobs, has created a growing trade surplus, and that developing the technology essential to advancing patient care in the United States and around the world. They contend that, with the implementation of the medical device tax, manufacturers have paid an estimated $388,000,000 to the Internal Revenue Service (IRS) so far this year, a reallocation of funds that could otherwise be directed towards investment in job creation and research and development.