Ding Dong the Device Tax is (Almost) Dead

GOP healthcare bill would permanently do away with the 2.3% medical device tax. AdvaMed and other industry trade groups have been strongly pushing for a permanent repeal of the device tax for months.

Amanda Pedersen

Republican lawmakers this week unveiled a plan that would dismantle key aspects of Obamacare and, so far, the bill has drawn wildly mixed reactions. In short, President Donald Trump loves it, conservatives and democrats hate it (albeit for very different reasons), and opinions among moderate republicans range from skeptical to cautiously optimistic.

But here in the medical device industry, there is at least one aspect of the proposed American Health Care Act that is largely considered a win: the bill would permanently kill the 2.3% tax on U.S. medical device revenue. Medical device trade associations like AdvaMed have been strongly pushing for a permanent repeal of the device tax, which Congress already chose to suspend in December 2015 as part of a spending and tax breaks deal hammered out with President Barack Obama.

The strongest argument the industry has lodged against the device tax is that it's a jobs killer, as data from the U.S. Commerce Department showed that the medical technology industry experienced a decline of nearly 29,000 U.S. jobs while the tax was in effect. The American Action Forum, a center-right policy institute, claims that permanent repeal of the device tax could result in more than 53,000 additional industry jobs, compared to what would occur if the tax remains in effect.

The tax hit some companies harder than others. Analysts at S&P Global Ratings, for example, said the device tax often represented only about 1% of revenues for global medtech companies because it only applies to U.S. sales.

Nonetheless, Advamed has been vehemently opposed to the tax from the get go, and welcomed the possibility of seeing it gone for good. "Repealing the tax will provide medical technology innovators with the long-term certainty necessary to support future job growth and sustainable, cutting-edge R&D that will ultimately lead to the next generation of breakthroughs in patient care and treatment," said Scott Whitaker, president and CEO of AdvaMed.

As companies reported quarterly earnings over the past month, several medtech executives fielded questions related to potential policy changes, including "replace and repeal" of the Affordable Care Act, and how such efforts might impact business. Several of their responses can be found here.

"I think we are excited to see the potential permanent repeal of the medical device tax," said Michael Minogue, CEO, president, and chairman of Abiomed, during the company's Jan. 26 earnings call. "That was tax policy, not really around healthcare policy."

Minogue also said he does not expect the healthcare industry's emphasis on value-based care to change, even if the Affordable Care Act is repealed. "The focus on aligning with improving outcomes in the hospital, reduction of length of stay, reduction of time in the ICU, reduction of readmissions, and improvement in quality of life . . ." will continue, he said.

Device Makers Win, but at What Cost?

While the American Health Care Act would clearly be a win for the medical device industry, the country's elderly and low-income populations would get the short end of the stick.

According to S&P Global Ratings, about 2 million to 4 million people would lose coverage in the individual market in 2020, the year that most of the proposed changes would take effect, and another 4 million to 6 million would be booted off Medicaid.

Conservative groups like the Club for Growth slammed the bill for not going far enough to dismantle Obamacare. In less than 24 hours of being unveiled, the proposal had been called everything from "Obamacare Lite" to a "warmed-over substitute for government-run healthcare."

Amanda Pedersen is Qmed's news editor. Contact her at [email protected].

[Image courtesy of Pixabay]