Proposed Amendment Seeks to Alter Device Tax

An amendment to the healthcare reform bill being debated in the Senate would delay a planned tax on medical device manufacturers and exempt companies with less than $100 million in annual sales. The Senate bill calls for a $20 billion tax on medical device companies to help pay for healthcare reform, down from the $40 billion originally proposed in the bill. The tax would take effect in 2013 rather than 2010.

The amendment was introduced on Dec. 14 by U.S. Sens. Amy Klobuchar (D-Minn) and Evan Bayh (D-Ind.). The bill’s other sponsors include John Kerry (D-Mass.), Al Franken (D.-Minn.), Herb Kohl (D.-Wis.), Debbie Stabenow (D.-Mich.) and Kirsten Gillibrand (D-N.Y.).

Under the proposed amendment, companies reporting less than $100 million in annual revenues would be exempt from the tax. Companies with between $100 million and $150 million in yearly revenue would pay an excise tax on 50 percent of their revenues. Companies with more than $150 million in annual sales would pay an excise tax on 100 percent of their revenues. If approved, the amendment would also make the excise tax tax-deductible.

“At least it’s at a level that it’s workable for [device companies],” Klobuchar said in an interview with Minnesota Public Radio. “They know that if this works right, they will get more customers because of the new people coming onto insurance.”

This amendment would bring the Senate’s version in line with a similar measure approved last month by the U.S. House of Representatives.

Steven Ubl, CEO of the Washington, D.C.-based Advanced Medical Technology Association said the move would “help protect small companies who are often drivers of both innovation and employment.” During the recent LifeScience Alley annual meeting in Minneapolis, Minn., Ubl told attendees that if the healthcare reform bill passes, the industry certainly would be impacted by the proposed tax, but not nearly as much as some lawmakers originally had proposed.

He said a later start date would give companies time to prepare for the tax, avoid putting an additional burden on the industry during difficult economic times, and make the timing of the tax more consistent with the timing of expanded coverage.