FDA User Fee Reauthorization Passes Senate and House; Medical Device Tax Repeal Gains Momentum

FDA User Fee Reauthorization Passes Senate and House; Medical Device Tax Repeal Gains Momentum

Medical devices have become the hot topic Capitol Hill. With talk of user fees and the medical device tax repeal swirling in the halls of Congress, the Medical Device Manufacturers Association (MDMA) annual meeting, held May 30-June 1, in Washington, D.C., couldn’t have come at a more fortuitous time for the industry.

On May 30, the U.S. House of Representatives overwhelmingly passed legislation to reauthorize and expand the U.S. Food and Drug Administration’s (FDA) user-fee programs. The measure passed by a 387-5 vote. The program allows the agency to collect fees from the drug and medical device sectors in exchange for meeting certain performance goals related to timely consideration of their product marketing applications. Federal law requires reauthorization of the user-fee program every five years. Medical device user fees cover about 20 percent of the FDA’s device review expenses.

The Senate passed its version of the FDA user-fee reauthorization on May 24 by an equally impressive margin of 96-1. The two chambers now must reconcile differences and pass common legislation. The goal is to seek President Obama’s signature before July 4.

And lest we forget the efforts to repeal the medical device excise tax looming in 2013, there has been positive progress toward its repeal. The House Committee on Ways and Means voted 23-11 during a mark-up session on May 31 to approve H.R. 436 “Protect Medical Innovation Act of 2011,” legislation that would repeal the tax. The bill now goes to a floor vote in the House. A vote is expected soon after press time.

There was an attempt to tack the tax repeal legislation onto the FDA user fee as an amendment to guarantee its passage. However, as Rep. Jason Altmire (D-Pa.) explained at the MDMA meeting, legislators wanted the FDA user fee bill to pass with little controversy and as much support as possible—which it did.

Rep. Erik Paulsen (R-Minn.), also speaking at the MDMA event, called the device tax repeal the “next opportunity” for the industry to make its voice heard. Both he and Altmire enthusiastically described the road they have been down gaining co-sponsors for the tax repeal bill. Every day they have been gaining more supporters (240 at the time of Paulsen’s address) indicating that when the bill is voted on in the House it should be successful. The tax was an “ill conceived idea,” said Paulsen, “an anchor that will bring the industry down.” He noted that the tax would be one of the highest industry taxes in the world, despite U.S. medical industry taxes already being pretty high.

Being from Minnesota, a major global medtech hub, it’s not surprising that Paulsen is advocating for the interests of the medical device industry and the repeal of the device tax.

“I try very hard to put a human face on your industry,” he told the audience during his address to MDMA. “It’s really about engineers, doctors, entrepreneurs, trying to help patients. You create outstanding jobs, and are now under threat from our own government. Having a more transparent process is good.”

Altmire followed up with advise on getting the attention of legislators on the Hill, who hear advocates from countless interest groups and industries every day: “The selling point for you in [Washington] D.C. is to bring me a patient. Let me look them in the eye. Let me hear their story. That’s powerful and I won’t forget that—a constituent that I’m elected to represent.”

“There are 2,700 pages in the healthcare bill,” Altmire said. “There are a lot of things we could be talking about, but this has risen to the highest profile. You’ve won the fight on the fairness issue—now we have to win in legislation.”

Though some legislators aggressively opposed to the Affordable Care Act (ACA) want to repeal either the whole thing or none of it, Paulsen said he has been able to convince them of the importance of repealing the device tax, which is, in his view, the most damaging part of the ACA. This view most certainly is bipartisan, one of its most notable supporters being the liberal Democratic candidate for Senate in Massachusetts, Elizabeth Warren. Paulsen commended his colleague Altmire as a “great partner” for this bipartisan cause, and expressed his regret that Altmire would not be returning to office next year.

MDMA President and CEO Mark Leahey praised lawmakers for passing the legislation and said the tax represents a “perfect opportunity” for political bipartisanship.

“Today marks the first step towards repealing the 2.3 percent device tax,” Leahey said. “MDMA has long said that the device tax would hamper job creation and unfairly punish the dynamic American success story that is medical technology innovation. The growing price tag of this onerous tax is further proof that it will lead to more layoffs, larger cuts to R&D and less innovation—a perfect storm of unintended consequences. This issue not only impacts one of the United States’ most innovative industries, but it is a perfect opportunity for Congress to work in a bipartisan manner to support the common goal of renewed job creation. Simply put, the medical device tax will hurt manufacturing, stymie job growth and impede patient care, all at a time when we can least afford it.”

About two weeks before its annual meeting, the MDMA reiterated its position against the medical device tax in a letter sent to the Internal Revenue Service (IRS). The letter stressed the group’s support for a full repeal of the tax. As Leahey stated, the IRS along with the U.S. Department of Treasury, together are 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 deemed 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 said the regulations still “fail to achieve even these fundamental objectives.” Harsh as this admonition may seem, the MDMA made 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.

Leahey urged the Treasury and IRS to delay issuing final regulations until the MDMA’s concerns have been fully and satisfactorily addressed. Leahey also called for a delay in the start date of the tax.

MDMA Panel Discusses Medical Device Industry Strategy
Kevin Madden, chief advisor to Republican presidential candidate Mitt Romney, and Karen Finney, MSNBC political analyst, gave a presentation May 31 on political strategy and the state of the election during the first day of the MDMA Annual Meeting in Washington, D.C. The session could not have been more timely: It was during a moment of rare bipartisanship, seen in the recent passing of the U.S. Food and Drug Administration user fee legislation in the U.S. Senate and House of Representatives with overwhelming majorities. Madden and Finney’s discussion on past partisan politics had a backdrop of hope in light of the passage of the Medical Device User Fee and Modernization Act. One of the most pertinent questions from the audience came from Michael J. Daley, Ph.D., president of tiGenRx LLC, based in New Hope, Pa.

“They don’t trust us,” he said, not only of the consumer base for medical devices, but also of the general public. “We save lives, we make money, but according to surveys, we’re right next to lawyers in terms of perceived trustworthiness. Twenty years ago, we were right at the top. We’re not the cause of excessive healthcare costs, but that is the perception.” Using what he saw as his chance to glean from the expertise of two top political strategists, Daley asked them for their advice on a strategy to gain the public’s trust back in the medtech industry. “What can we do to elevate our image?” he asked.

Madden replied: “Remind customers, who are essentially your ‘base,’ what their investment is and what your value is.

Remind them just what a device is and what goes into a routine healthcare visit, and what the cost would be otherwise.” Madden presented an economic argument, economics being a factor that causes bases to band together.

“Look at best practices from other industries,” he continued. “Big Oil have turned themselves into energy companies. They’re getting beyond just drilling and pulling petroleum out of the ground. They have new technologies, new ways to expand energy exploration. People are more willing to engage with that story.”

Reinvention does not have to be purely material. Rhetoric plays an important part, both Madden and Finney agreed.

“They are personalizing that story,” Finney said of Big Oil. “What does that mean for the people who utilize your products and services? When it isn’t personal, it’s easy to vilify a whole industry.”

It’s true, as one medtech industry worker who deals with Washington, D.C., policy making said during lunch: “Public relations people have job security in the medical device industry.”

Another audience member wanted to hear Madden and Finney’s predictions and opinions on all the legislation surrounding the Obama administration’s Affordable Care Act. “We still have the problem of what to do about health reform. There are people already in the new healthcare system,” Finney pointed out. “With re-legislation, what would happen to them?”

Re-legislation, Finney and Madden agreed, would be harmful to President Obama’s campaign. Besides, they noted, people are tired of it. “Generally, people don’t want to re-litigate it,” Finney said.
Politics aside, MDMA participants were excited about the bipartisanship displayed in the face of issues so important to them.