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Republican control of Senate puts device tax on shaky ground

TAGS: Medical
With a Republican majority in the Senate, the movement to repeal or seriously amend the device tax, part of the Affordable Care Act (ACA; aka Obamacare) has found a new lease on life.

With a Republican majority in the Senate, the movement to repeal or seriously amend the device tax, part of the Affordable Care Act (ACA; aka Obamacare) has found a new lease on life. Indeed, the Washington Post has declared medical device makers among the five big winners of the midterm elections, primarily because a repeal of the device tax now has a very good chance of landing on President Obama's desk. Some pundits suggest that he might even not veto it.

The 2.3% excise tax is reviled by many medical device manufacturers. Even those within industry who support the principle of raising revenue to help low- and middle-income Americans purchase health insurance under the ACA take exception with the fact that the tax is levied on sales, not profits. This can be a significant burden to small startup companies that are years away from turning a profit.

As we reported in September 2014, House Republicans have voted more than 50 times to change the Affordable Care Act to no avail. Now with a majority in the Senate, not to mention the support of a handful of Democrats who represent states with a significant medtech constituency (i.e., Minnesota's Al Franken), repeal of the device tax is "low-hanging fruit," writes Sam Baker in the National Journal. "Because it wouldn't strike at the heart of the law, Obama might even sign it," Baker adds.

Writing in the New Republic, Jonathan Cohn agrees, although he adds a caveat. "The Obama Administration might actually be willing to sign such a bill if—and only if—the sponsors of such a measure find some new source of cuts or revenue to replace the money the tax is supposed to generate. That's $30 billion over 10 years—a significant amount that, in such a tight budget environment, would be hard to find," writes Cohn.

While it may be the most attainable goal for a Republican-led Senate, which would rather engage in a wholesale deconstruction of the ACA, repealing the unpopular medical-device tax will not be easy, writes Joe Carlson in the StarTribune. "Any stand-alone device-tax bill would face a likely veto threat by President Obama, which means repeal is more likely to be a part of a broader bill reforming business taxes or the Affordable Care Act," he writes.

Steve Ubl, Chief Executive of industry association AdvaMed, expressed optimism, however, that this Senate would plant a final stake through the heart of the device tax. "Incoming Senate Majority Leader (Mitch) McConnell (R-Ky.) has been a vocal supporter of the need to repeal the device tax," Ubl said in an emailed statement to the StarTribune. "[McConnell] is joined by Senators across the political spectrum who believe repealing this onerous tax is the right thing to do for job creation, economic growth, and patients everywhere."

Norbert Sparrow

Norbert Sparrow is Senior Editor at PlasticsToday. Follow him on twitter @norbertcsparrow and Google+.

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