MDMA battles Congress over medical device tax

Last month the entire Congressional delegation of Minnesota, one of the leading U.S. states for medical device production, sent a letter to the FDA over concerns that delays in review of medical devices "are hindering, delaying patient access to new therapies, and undermining the U.S. medical industry's global leadership." Both Senators and the eight Minnesota members of the House of Representatives signed the letter.

Those legislators are not alone in their concern. According to a release from the Medical Device Manufacturers Association (MDMA) the delegation highlighted concerns over the Investigational Device Exemption (IDE) review process, and the decline over the years in approvals by the FDA's Office of Device Evaluations (ODE). "A review of ODEs annual reports over the last decade show a clear pattern of decline in the percentage of IDEs approved on the first IDE review cycle, dropping from 76% in FY 2000 to 56% in FY 2009," stated the letter. "Despite a decrease in the number of original IDEs submitted and increased funding through user fees, companies are still facing hurdles in IDE first approvals. Most alarming are the FY 2010 figures, released by ODE per the MDUFMA III negotiations, which show only 32% of IDEs are approved on the first review cycle."

Last week, the MDMA along with the U.S. Chamber of Commerce, the National Association of Manufacturers (NAM), the National Federation of Independent Business (NFIB), and the National Venture Capital Association among others, wrote to Congressional leaders urging them to repeal the medical device tax. The groups believe that the tax will harm both innovation and patient care.

"If this tax is not repealed, it will continue to force affected companies to consider cutting manufacturing operations, research and development, and employment levels to recoup the lost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

The 2.3% medical device tax was passed as a part of the Affordable Care Act last year, and is scheduled for implementation in 2013. The letter also noted that, "We must do all we can to encourage and promote research, development, investment and innovation. Instead, increased taxes, such as this one on the medical device industry, coupled with the increased regulatory uncertainty the industry also faces, will lead to further job losses, hinder the development of breakthrough treatments and delay patient access to medical technology."

Mark Leahey, president and CEO of MDMA, said, "MDMA and its members have long argued that the medical device tax will harm patient care and thwart innovation and job creation at a time when we can least afford it. Repealing this onerous provision of the health care law continues to build bipartisan support, and this broad coalition shows that medical technology innovators across the country are committed to providing an environment where innovation can thrive. Repealing the medical tax is an important step in that direction."

While NAM's vice president for tax and domestic energy policy, Dorothy Coleman, said that the groups support efforts to reduce healthcare costs and improve the efficiency of the current system, "increasing taxes on medical devices is a counterintuitive approach that will only contribute to rising costs and jeopardize research and innovation that goes into developing new, life-saving devices." The MDMA claims the device tax would cause some companies to owe more in taxes than they generate in profits, as the tax is applied to revenue.

Ed.: If you mold and assemble medical devices or otherwise serve medical device OEMs, do you believe the medical device tax will crimp your company's earnings? Or is there an upside to the tax that the MDMA is not considering? We welcome your comments below.

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