Device tax not dead yet

August 09, 2017

Repeal, repair, replaceLast month, I posted an article about what the medtech industry thinks about healthcare reform. The gist of the piece was that the medical technology sector was largely agnostic on Republican “repeal and replace” efforts, except for one thing: Elimination of the medical device tax. On that point, industry stood united. The 2.3% excise tax was suspended by Congress in 2015 and, if nothing changes, will come back into force in January 2018. Given that repeal and replace initiatives have stalled, perhaps permanently, the fate of the device tax is, again, foremost on the minds of the medical device community.

The medical device industry, through its associations and lobbying groups, has tarred the tax as a job killer and obstacle to research and development. In a report published in January 2015, industry association AdvaMed claimed that the tax was responsible for 18,500 job losses and would result in 20,500 fewer employees being hired over the next five years. Its impact on innovation is largely a result of the tax being applied to sales, not profits, thus disproportionately hurting small startup companies, the crucibles of innovation. 

So, now what? AdvaMed CEO Scott Whitaker said it best, when he told Modern Healthcare that the association would “pivot to any moving vehicle” to kill the device tax. “We’re not going to give up,” he added.

Some lawmakers are pinning their hopes on a tax reform bill that could include elimination of the device tax. Given the legislative track record of this Congress, that seems beyond ambitious. Remember that the device tax is set to go back into effect in less than six months.

Or, some zombie form of repeal and replace might resurface and find the necessary votes to pass in Congress. Yeah, that sounded more and more implausible as I was typing it.

Some, like Sen. Pat Toomey (R-Pa.), are combing through pending bills where a repeal of the device tax could be included.

And then there’s the Problem Solvers caucus, a bipartisan group of House lawmakers that have introduced proposals to stabilize the exchanges and fix, rather than dismantle, Obamacare. Their proposals include eliminating the device tax. The caucus is led by U.S. Representatives Tom Reed (R-N.Y.), and Josh Gottheimer, (D-N.J.) and counts 43 members.

Wait a minute—a bipartisan group of House representatives dedicated to fixing real-world problems with practical solutions? Hey, it’s such a crazy idea that it just might work!

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