Is Device Tax Repeal Really on the Table?

On March 20, The New York Times highlighted a notion that perked up medical device industry advocates across the United States. There may be hope that President Obama could change his mind about the medical device tax, the excise tax levied against medical device companies to help pay for the Affordable Care Act (ACA). Despite many efforts on the part of industry lobbyists and the U.S. Senate and House of Representatives, which passed repeal legislation in June last year (both houses introduced repeal legislation in February as well), the President has said he would veto repeal if it reached his desk. Now, some senators are suggesting he could have a change of heart.

The Massachusetts Medical Device Industry Council (MassMEDIC) scored a big win on March 19 when the commonwealth’s senior U.S. senator, Elizabeth Warren (D), added her name as co-sponsor to a device tax repeal amendment to the Senate’s Budget Resolution. The amendment, put together by Sens. Orrin Hatch (R-Utah) and Amy Klobuchar (D-Minn.), is non-binding and outlines that the tax should be repealed if a budgetary offset can be found—in other words, if the money to fund the ACA can be found elsewhere.

MassMEDIC is an organization of medical device manufacturers, suppliers and associated non-profit groups in Massachusetts and the surrounding region. The association launched a grassroots campaign to get Sen. Warren to co-sponsor the Orrin/Hatch amendment after it became clear she was hesitant.

Although Sen. Warren campaigned on the issue of repealing the device tax, when she was elected, her enthusiasm cooled somewhat. “When she entered office, she began to talk about her concern about an offset,” MassMEDIC President Thomas Sommer told Medical Product Outsourcing. “This was unfortunate—we were very concerned about that.” MassMEDIC’s efforts paid off. Sommer explained that once the senator understood that the amendment, if passed, would be non-binding, and that it called for a budgetary offset to be found, she was satisfied.

Rather than actually repeal the tax, the passage of a non-binding amendment such as this would demonstrate that device tax repeal could actually be achieved. “It doesn’t hold the Senate to anything,” said Sommer. “It simply gives folks a sense of where the senate stands on the medical device tax.”

That’s the key difference between a Senate bill and a resolution: Bills become enforceable law, whereas resolutions are statements of will or belief passed by a body to express a consensus of opinion. They are an indication of what the real outcome would be if a bill were to be voted upon. For an amendment to be considered by the U.S. House of Representatives, it must go through the rules committee. In the U.S. Senate, amendments freely can be brought up during the course of the debate—and that is the game plan for the Orrin/Hatch amendment as the Senate debates its budget priorities for the year, looking at estimates of revenue and expenses.

Medical device tax repeal has consistently received bipartisan support whenever it is voted upon (even the times it hasn’t garnered enough votes to pass), and this time is no different. Last month, Sen. Al Franken (D-Minn.) told PostBulletin.com that he and Sen. Klobuchar brought up the topic to President Obama during a ride they took with him on Air Force One. “I think that there has been some renewed understanding on the president’s part,” Franken said, hopeful that the President may in fact be able to change his mind on the issue. “Most medical devices are used by older people, and those people are already covered by Medicare. So [the President’s] idea that because you’re covering 31 million new people there will be a huge increase in the use of medical devices, therefore justifying the tax, I don’t think that argument washes.”

If the Senate passes the amendment, it could mark a shift in the tax repeal wrestling match. “There’s certainly a lot of concern about the implications of the tax, and if in fact the senate can move on it,” Sommer said. “If they can, there’s a strong possibility that we might see some repeal.”

U.S. government was forced into sequestration on March 1 when it did not reach an agreement on how to cut spending by $1.5 trillion over the next 10 years. As a result, many government programs were automatically trimmed down. The sequester cuts discretionary spending across the board by $109.3 billion a year from 2014-2021 and $85.4 billion in 2013. The U.S. Food and Drug Administration (FDA) was to be cut by $206 million, and part of those cuts limited the agency’s access to user fees paid by medtech companies for device review processes.

However, on March 20, the Senate passed a spending bill that eased the blow to some agencies, including the FDA. The $984 billion Senate package now moves to the House of Representatives, which on March 6 approved its own spending plan of roughly the same amount. The two chambers would need to reach an agreement on 2013 funding by March 27, when the current continuing budget resolution expires, in order to avert a government shutdown.
President of the Advanced Medical Technology Association (Advamed) Steve Ubl was grateful to the Senate for “approving a new continuing resolution (CR) that preserves House-passed language correcting an anomaly in the current CR that would have barred FDA from spending $40 million of the fees it is collecting from device and diagnostics companies.

“Last year, Congress passed with bipartisan support legislation to codify a groundbreaking new medical device user fee agreement that included a number of reforms and performance goals intended to improve FDA’s regulatory efficiency and predictability, in exchange for increased fee levels that have been paid since last October,” Ubl continued. “These improvements serve the interests of patients, industry and FDA. But the current CR that funds the government through the end of this month allowed the agency to access and spend only those device user fee amounts authorized for FY 2012. Passage of the new CR allows FDA to access and spend the increased fee levels while continuing to implement needed reforms.”