MDMA Letter to IRS Restates Position on Device Tax

The Medical Device Manufacturers Association (MDMA) has reiterated its position against the medical device tax in a letter sent to the Internal Revenue Service (IRS). Submitted by MDMA president and CEO Mark B. Leahey, the letter stresses its support for a full repeal of the 2.3 percent device excise tax set to begin in 2013. As Leahey states, the IRS along with the U.S. Department of Treasury are together responsible for developing administrative guidance for the Health Care and Education Reconciliation Act of 2010, the bill under which the tax resides.

“MDMA has consistently opposed the new excise tax on medical devices as ill-conceived because it will undoubtedly have a detrimental impact on patient care, healthcare costs, innovation and job creation,” wrote Leahey. “There is no question this new tax will impose significant burdens on medical technology companies, stifle innovation and growth, unnecessarily drive up the cost of healthcare for millions of Americans, and will impair patients’ access to potentially life-saving technologies.”

The letter expressed disappointment with what Leahey sees as a failure on the Treasury and IRS’s part to address concerns the MDMA raised in March of 2011. The association had cautioned that “ambiguous, incomplete or ill-fitting rules would only ensure that the tax cannot be readily applied by affected manufacturers or effectively administered by the [IRS].” Leahey goes on to say that the regulations still “fail to achieve even these fundamental objectives.” Harsh as this admonition may seem, the MDMA makes its case by explaining how:

• The proposed regulations are overbroad in scope;
• They imposed additional and costly administrative burdens on the majority of medical technology companies, especially smaller companies and start-ups;
• They implement a double tax on products that improve quality of life;
• They apply unmanageable constructive sales price rules to the medical device industry; and
• They fail to take into account the unique nature and use of many medical device technologies.

To close, Leahey urged the Treasury and IRS to delay issuing the final regulations until the concerns raised by the MDMA have been fully and satisfactorily addressed. Leahey also called for a delay in the date of effect of the tax.

MDMA is a national trade association based in Washington, D.C.