In an early Christmas (or a late Hanukkah) for the medical device industry, lawmakers last week enacted a two-year freeze on the device tax.
The $1.8 trillion federal spending and tax package that Congress passed Dec. 18 included a moratorium on the 2.3 percent tax on the revenues of medical device companies for certain products. The tax, which was passed as part of the Affordable Care Act, has seen years of vocal and insistent opposition from medical device companies, lobbyists, and both Republican and Democrat congressional leaders.
The Congressional Budget Office estimates that suspending the tax for 2016 and 2017 sales will save manufacturers $3.4 billion in tax payments.
Many of the associations supporting the medtech industry applauded the move. AdvaMed’s chair, Vincent Forlenza, said in a statement that the group appreciates “the broad bipartisan effort to suspend the medical device tax. This critical relief would not be possible without the tireless efforts by a large group of champions in Congress as well as among the patient, provider and research communities. Congress and the administration have demonstrated that they recognize the negative effects of this tax.”
The Medical Imaging & Technology Alliance’s board chair, Nelson Mendes, expressed gratitude that, “Congress was able to come together to preserve U.S. jobs and medical innovation by delaying the device tax for two years.”
And Medical Device Manufacturers Assn. chairman Scott Huennekens expressed his thanks, but also noted “while suspension of the medical device tax is a positive step, we will remain focused on repealing a policy that only serves to punish a vital sector of America’s innovation ecosystem.”
Some see the Republican backing of a repeal of the device tax as a way to chip away Obamacare. The spending bill also delayed the so-called Cadillac Tax for high-cost employers health plans. And it is important to note that the estimated $30 billion that the device tax would bring to fund the healthcare system has not been replaced. But perhaps these were a needed concession in order to preserve the substance of Obamacare. Medical device companies can begin to make the case for a repeal of the device tax, and might be less interested in a full repeal of the Affordable Care Act in 2017.
