GOP Moves to Repeal Medical Device Tax

Companion bills recently were introduced in the U.S. House of Representatives and the Senate to repeal the medical device tax included in the Patient Protection and Affordable Care Act—aka the healthcare reform law—passed last year.

Rep. Erik Paulsen (R-Minn.), who proposed a similar measure last year, introduced the Protect Medical Innovation Act in the House. Sen. Orrin Hatch (R-Utah), introduced the Senate bill. The legislation would repeal the 2.3 percent excise tax on medical device sales, which originally was included in the healthcare legislation as a way to help pay for health reform.

Slated to take effect in 2013, the tax is estimated to raise $20 billion over 10 years. Industry legislators and lobbyists for the medical technology industry were successful last year in cutting the original $40 billion tax proposal in half. The tax would equate to a roughly 3.5 percent tax levied on the total revenues of a company. If the healthcare reform law had been in effect last year, the 10 largest medical device makers would have generated 86 percent of the $1.87 billion in excise taxes last year.

“Taxing the medical technology industry to the tune of $20 billion will only stifle growth, innovation, and access to the life-saving technologies U.S. device companies produce,” Paulsen, who co-chairs the House Medical Technology Caucus, said in a statement. Hatch, who services as the ranking member of the Senate Finance Committee, said the tax would “cripple an important engine of opportunity, job growth and innovation, while hurting the advancement of technologies essential to improving patient care.”

The Washington, D.C.-based Medical Device Manufacturers Association (MDMA), one of the medical deivce industry’s chief advocacy groups, was quick to support the move.

“The United States is the global leader in medical technology and innovation, and the repeal of such an onerous tax will help us maintain our position,” said Mark B. Leahey, MDMA’s president and CEO. “It is crucial that we support entrepreneurs and engineers who continue to create quality jobs and physicians who focus on improving the quality of life for patients, especially in an increasingly competitive global marketplace. “When our nation’s job-creators face a future with additional taxes and an unpredictable regulatory environment, growth and innovation are stifled. Instead, we need policies that provide incentives for hiring employees and investments in research and innovation.”

Leahey also said the tax would “disproportionately harm small businesses that develop the majority of innovative and cutting-edge technologies.”

Many medical device industry leaders have said the tax would send more of the industry’s manufacturing jobs offshore and curtail research and development.