Blog Tag: ACA

Medical Device Excise Tax Remains in Limbo

Medical Device Excise Tax Remains in Limbo

President Trump and Paul Ryan (R-Wis) have not yet successfully replaced the Affordable Care Act with the American Health Care Act (“AHCA”).  The medical device industry had been paying particular attention to the proposed reform because the 2.3% excise tax that was suspended for 2016 and 2017 is scheduled to go back into effect on January 1, 2018. The tax, which has already required the payment of billions of dollars by device manufacturers, has an outsized impact because it is assessed on gross sales, not profits.

Scott Whitaker, president & CEO of AdvaMed, told MassDevice.com that:

The fight is far from over for repeal proponents. The trade lobby plans to continue its ‘aggressive’ push to capitalize on the bipartisan support for repealing the tax. We cannot allow this tax to be reimposed on a vibrant and innovative American industry and look forward to working with Congress and the administration to end this tax once and for all.

AdvaMed plans to huddle with longtime Capitol Hill supporters of repealing the tax, including Reps. Erik Paulsen (R-Minn.), Ron Kind (D-Wis.), Sens. Orrin Hatch (R-Utah), and Amy Klobuchar (D-Minn.).

Whitaker believes there are several options to make the excise tax go away permanently, including stand-alone legislation.  The Republican-controlled House has approved repeal of the excise tax four separate times in the past three years, including most recently in January 2017.  The repeal “is probably going to get put into a budget reconciliation that only needs a simple majority vote in the Senate,” said Steve Parente, a professor and director of the Medical Industry Leadership Institute at the University of Minnesota. According to Parente, proponents feel that this time around, the chances of passing such a bill are much better with a Republican controlled House, Senate, and Presidency.

Despite the setbacks, the medical device industry continues to lobby both sides of the aisle to fight the excise tax.  An estimated $158 million was spent on lobbying in Washington since 2012 by medical device manufactures, according to OpenSecrets.org, a nonprofit group that tracks and reports on money’s impact in politics.  According to Opensecrets.org, in 2016 there was a reported $22.3 million spent on lobbying with more than $8 million have been spent on political campaigns.

Regardless of the failure of the AHCA bill, and the previous repeal legislation, news articles note that the medical device industry continues to look for supporters and ways to keep the excise tax suspended with potentially millions more being spent in lobbying this year.

 

 

Potential Repeal of Medical Device Tax

With the upcoming Republican-dominated Presidency and Congress in 2017, the Affordable Care Act, or at least parts of it, look to be on the chopping block.  One of the changes that may be forthcoming is a repeal of the 2.3% medical device excise tax.  While currently being suspended through 2017, under the present law the medical device tax would be reinstated in 2018.

Some producers of medical devices hope that the tax is never reinstated. Mark Throdahl, president and CEO of OrthoPediatrics Corp., a northern Indiana based orthopedic company, has said that the suspension of the tax allowed the company to hire new workers and hopes for a full repeal after the Republican transition.  According to Throdahl, the tax led to a hiring freeze, and suspension of the tax allowed  for them to resume “an aggressive pace of hiring and investment.”  Complaints from companies like OrthoPediatrics, as well as medical device associations like AvaMed, were what led to the initial temporary suspension of the tax.

Immediately after Donald Trump‘s election victory, AvaMed President Scott Whitaker wrote in a letter to Vice President-elect Mike Pence:

The medical device tax has been a significant drag on medical innovation, and resulted in the loss or deferred creation of jobs, reduced research, spending and slowed capital expansion.

According to some lawmakers, lobbyists, and industry executives, Trump and U.S. lawmakers will likely repeal the tax which could help some of the larger medical device manufacturers such as Medtronic, Boston Scientific, St. Jude Medical, and Johnson & Johnson.  Senate Republican Leader Mitch McConnell has stated that repealing the Affordable Care Act will be one of the first order of business starting in January.   Senator John Barrasso (R-Wyoming) has also stated that the medical device tax would likely be repealed.

There are still a number of decisions on how to approach the repeal of the medical device tax, whether in one single bill to repeal the Affordable Care Act or a number of smaller bills removing different parts of the Act.  We should be receiving more clarity once President-elect Donald Trump officially takes office.

Repeal of the tax may remove approximately $2.5 billion of annual federal funding.