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June 28, 2012

Medical Device Companies Still Expected to Pay Excise Tax as Supreme Court Upholds Obamacare

The Supreme Court has weighed in and apparently upheld the most sweeping healthcare law in the history of the United States.

The effect of the ruling on Obamacare – which was released on Thursday – appears to be that individuals can be required to purchase health insurance while the Affordable Care Act (ACA) remains in place. It is considered a "tax" in the five to four ruling by the justices.

The ruling will have implications for the upcoming presidential elections, with Democrats largely supporting the court’s decision – upholding Obamacare – and Republicans joining with many business leaders in seeking to have the law drastically reformed or somehow eventually withdrawn.

The medical device industry was believed to be watching the U.S. Supreme Court decision carefully.

One reason is the excise tax that it appears they must soon pay. Under the health insurance reform, medical device makers must pay an excise tax of 2.3 percent from 2013, according to a recent report from Zacks. If the act were rejected, the tax would have been eliminated. Either way, observers of the medical device market believe manufacturers are basically confident about their future – with or without the ACA.

One major device maker, Medtronic, e-mailed a statement to TMC shortly after the Supreme Court ruling was released.

It read, “We began planning for implementation of the measures in the Affordable Care Act (ACA) long ago.  We have been engaged in payment and delivery system reform changes that started before passage of the ACA in the private sector and that will continue.  We remain committed to executing on our key strategies which will allow us to succeed in any environment.”

In addition, AdvaMed president and CEO, Stephen J. Ubl released a statement on Thursday which said, “AdvaMed supported goals of health care reform consistent with our long-held principles.”

“We have consistently opposed the $29 billion medical device tax because of its damaging effects on economic competitiveness, jobs and the research and development needed to find tomorrow’s treatments and cures,” he added. “The House has already voted to repeal the device tax, and we are heartened by the number of senators who have said they oppose the tax.”

“We will continue to work with policymakers on both sides of the aisle to achieve this goal,” Ubl said.

To view the Supreme Court decision, please click here.

In its report, Zacks also said that the act required health care providers to switch to electronic health records if they were keeping paper records. Zacks believes the move would likely take place even without the act. Companies in this sector include: athenahealth, Cerner Corporation and Allscripts Healthcare Solutions.

Meanwhile, many corporate leaders appear skeptical about the health reform act as it now stands.

U.S. Chamber of Commerce president and CEO, Thomas J. Donohue stated on Thursday, “While we respect the Court's decision, today’s Supreme Court ruling does not change the reality that the health care law is fundamentally flawed. Left unchanged, it will cost many Americans their employer-based health insurance, undermine job creation, and raise health care costs for all.”

“It is imperative that policymakers and the business community now work together to develop and support genuine reforms that control costs, improve access, ensure quality, and promote wellness,” he adds. “Given the Court's decision, the need for action has never been greater.”

President Obama praised the court's decision, saying he backed the bill because he believed "it was good for the country."

"It's time for us to move forward," Obama added. "The highest court in the land has now spoken."

He said some improvements to the Act are possible but warned against re-fighting past political battles.

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Edited by Brooke Neuman
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