New Medical Device Excise Tax Could Devastate Industry

We all hate taxes. But not all of us have the clout of the more than 400 companies who, in a letter Monday, pleaded with Congress to repeal a $20 billion medical-device tax that will take effect in 2013, saying it will cost jobs and raise costs.

According to a story by Kristina Peterson, of Dow Jones Newswires, as posted at nasdaq.com, more than “400 health-care companies, venture capital firms and other associated organizations pushed for the repeal of a 2.3 percent excise tax on medical-device manufacturers, which is designed to help offset the cost of the health-care overhaul Congress passed in 2010”.

“We believe that implementation of this $20 billion excise tax will adversely impact patient care and innovation, and will substantially increase the costs of health care,” the coalition wrote Monday in identical letters sent to the top lawmakers in both the House and Senate, Peterson reported in her story.

The medical device tax was planned to help pay for the expansion of medical coverage that was part of the healthcare reform act, according to the story. The tax requires manufacturers to pay a whopping 2.3 percent of a product's gross sale price, and Congress hopes it will raise $20 billion over 10 years, Peterson writes.

The consortium of companies was able to slash in half an earlier suggested tax to raise $40 billion over 10 years, she says in her story.

“If this tax is implemented in 2013, it will undermine our industry's ability to create and maintain good jobs in the U.S., and worse, will lead to higher costs for patients, undercutting one of the primary goals of health care reform,” Advanced Medical Technology Association’s president and chief executive, Stephen J. Ubl, said in a statement Monday. The Advanced Medical Technology Association (AdvaMed) is the main trade organization for the medical-device industry, according to Peterson, and it is claiming that the fee will cut into companies’ research and development and raise healthcare costs.

Tom Grasson writes at onlinetmd.com that, according to a Princeton, NJ-based research firm, “the healthcare reform law and its excise tax on medical device sales is already driving companies to seek lower-cost areas to set up operations.

The medical device industry is walking a tightrope between keeping research and development near larger U.S. cities and academic areas, which costs more, and watching it move to lower-cost areas, according to the research firm’s principal John Boyd Jr., as reported by Grasson.

“It will also adversely impact patient access to new and innovative medical technologies,” says a story posted at thompson.com, quoting AdvaMed.

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