I guess we can rest a little easier. In testimony before the U.S. Food and Drug administration (FDA), Republican lawmakers on the House Energy and Commerce Investigations subcommittee were assured that contrary to popular belief, and a furor that erupted in the past few says, the agency had no plans to subject smartphones and tablets to the extremely controversial Medical Device Tax that is part of President Obama’s healthcare law. Whew!
Christy Foreman, director of FDA’s Office of Device Evaluation, Center for Devices and Radiological Health assured the subcommittee members that, “They would not be regulated as medical devices, therefore not subject to the medical device tax.”
For those unfamiliar with the tax, you might wish to peruse the FAQs on the subject that has been prepared by the U.S. Internal Revenue Service. The tax, which became effective on December 31, 2012, is a 2.3 percent on the sale of what the law defines as a medical device. Consumers need not have worried to begin with since the tax is on the device manufacturers. However, all of this is a bit murky since it remains unsettled as to whether the apps that run on those devices and hence turn them in theory or reality into medical devices might ultimately lead to a change in thinking.
In fact, Foreman did say that it is under the FDA’s jurisdiction to regulate certain smartphone applications, but added such applications are a very tiny fraction of the estimated 40,000 medical apps now available to users of the iOS and Android devices. The applications where FDA jurisdiction applies would include those with ultrasound technology capabilities or those used to diagnose health problems. Forman also articulated the view that any app that could pose a health risk to users if not properly used could be regulated. She added that calorie counters or pedometers do not meet that test. Rep. Henry Waxman (D-Calif.), the full committee’s top Democrat, took on his Republican colleagues saying the entire matter was a “non-issue.” He castigated them by saying, “There are too many pressing issues before us for the committee and this Congress to get bogged down for three days in what amounts to an inaccurate talking point about FDA overregulation and a nonexistent iPhone tax.” He also explained that even if the agency listed popular personal devices as medical devices, they could still avoid the medical device tax under an exemption in the law for retail products.
While much of this unfortunately reflects the politicization of virtually anything these days in Washington, D.C., reality is the fuss raised questions which down the road might not be deemed trivial.
The speed at which personal devices are acquiring scanning and monitoring capabilities— through cameras, facial, voice and gesture recognition, etc.—and will be used as instruments of choice for a variety of telemedicine diagnostics is incredible. Where policy makers draw the line as to when a mass market device that is purchased for its primary use as for remote patient care, thereby intrinsically stops being exempt from the tax, is going to be tricky to say the least. Indeed, the now omnipresent use of tablets and smartphones in hospitals speaks to what is to come regarding remote care. This is a very slippery slope.
Without going into the efficacy or politics of taxing medical devices as a way to offset growing medical costs, if nothing else, it creates an interesting opportunity for tax avoidance. At least for the moment, we don’t have to worry that the price of your favorite fitness app is going to increase as developers of such apps will not be passing along the tax to us. However, when that iPhone you have becomes seen as a threat to your health if it malfunctions when it is monitoring your glucose levels or the functioning of various vital organs (think about pace makers for example which can be remotely monitored now) this could change literally in a heartbeat. This is certainly something to keep an eye on.
Edited by
Jamie Epstein
