GPOs cry foul when device makers shift tax burden

MassDevice.com coverage of the medical device tax

More medical device purchasing groups are protesting what they see as some small medical device makers’ attempt to directly shift the burden of a new tax onto healthcare providers.

The Healthcare Supply Chain Assn. last week issued a sternly worded press release chiding some medical device makers for "shifting the burden of the medical device excise tax directly to American hospitals and other healthcare providers."

Manufacturers who attempt to pass the buck could face a boycott of sorts, the group warned.

"HSCA and its group purchasing organization members will continue to monitor the device marketplace for evidence of cost-shifting onto hospitals, and encourage our hospital partners not to enter into contracts that bill them for the device excise tax," president Curtis Rooney said in prepared remarks. "We urge all manufacturers to immediately stop passing the medical device tax on to American hospitals, and ultimately to patients and taxpayers."

HSCA, formerly the Health Industry Group Purchasing Assn., represents 15 GPOs with a mission of advocacy, education, sales and utilization of goods and services within the health industry. Medtech buying titans Premier health alliance and Novation are both member organizations.

HSCA wasn’t alone in refusing to accept the burden of the medical device tax, a 2.3% levy which took effect at the start of the year despite industry objections.

Last week group purchasing organization Novation issued a “firm stance” of its own, accusing unnamed device makers of shifting their tax burdens onto an already stressed healthcare system.

""While most device manufacturers are taking responsibility for this tax, there are some manufacturers attempting to pass their obligation on to hospitals," Novation president & CEO Jody Hatcher said in prepared remarks. "This tax should be the responsibility of the manufacturers, and Novation is dedicated to ensuring that member hospitals are impacted by it as little as possible."

Both groups painted the medical device tax as the industry’s fair share of the cost of healthcare reform, a financial burden that was also passed on to healthcare providers and the pharmaceutical industry.

The tax was designed to ensure that medical device makers help cover the cost of the Affordable Care Act. Healthcare providers committed $155 billion over 10 years and the pharmaceutical industry committed to $80 billion, Novation noted.

"Medical device manufacturers, however, refused to voluntarily contribute," according to the Novation statement. "As a result, the government imposed the Medical Device Tax to cover their portion.  This Tax was specifically intended to be a tax on the manufacturer.  Even then, by comparison, the Tax is anticipated to amount to roughly $20 billion over 10 years."

HSCA reiterated those sentiments, adding that the group would work with GPOs to ensure that the tax doesn’t end taking an undue toll on hospitals.

"American hospitals have already lived up to their shared financial responsibility for national healthcare reform, and now face mounting budgetary strain as they continue to deliver affordable and effective patient care with fewer dollars," Rooney said.  "As hospitals, long-term care facilities and other healthcare providers continue to stretch their budget dollars, they will continue to rely on their GPO partners to reduce healthcare costs and deliver the best medical products and services at the best value."

GPOs have been wary of tax-related price hikes long before the tax took effect at the start of this year. In May 2012 GPO Premier urged the IRS to protect hospitals from price hikes by requiring device makers to promise that their tax burden isn’t baked into their prices.

The effort is not in vain, as a handful of industry surveys have already found that medical device companies are looking for various ways to offset the cost of the medical device tax, including by raising prices for their products. A GPO protest, however, packs quite a punch. About 96%-98% of hospitals use some form of group purchasing and ¾ of hospital purchases are made through GPOs, according to HSCA.

RSS From Medical Design & Outsourcing

  • Herrmann Ultrasonics, Inc. announces its 25 Year Anniversary
    In 1990, Thomas Herrmann, the son of Walter Herrmann, who founded Herrmann Ultraschalltechnik GmbH in 1961, established Herrmann Ultrasonics Inc. in the Chicago area. Hermann Ultrasonics, Inc. is proud to recognize a milestone year in observance of their 25th anniversary. Herrmann Ultrasonics has been focused on providing ultrasonic welding technology for various markets such as […]
  • Consumer Health Applications receive the most attention today, but the future is elsewhere
    Wearables for health fall into a wide range of technologies, functions, use cases and over-arching regulatory frameworks that developers and prospective entrants have to understand in order to effectively compete. Using an underlying taxonomy for human health, we establish a health-focused wearables taxonomy around three major categories—applications, use cases, and form factors—the three areas critical […]
  • Paralyzed men move legs with new non-invasive spinal cord stimulation
    Five men with complete motor paralysis were able to voluntarily generate step-like movements thanks to a new strategy that non-invasively delivers electrical stimulation to their spinal cords, according to a new study funded in part by the National Institutes of Health. The strategy, called transcutaneous stimulation, delivers electrical current to the spinal cord by way […]
  • SCHURTER’s new power entry module offers IP 54 protection with V-Lock cord sets
    SCHURTER is pleased to announce, that its power entry module, series 5707, now offers IP 54 protection with V-Lock cord sets at the power input, in addition to IP 65 protection to the equipment. The sealed module is ideal for use in medical equipment exposed to leaks, drips and spills, as well as equipment subject […]
  • GlobTek presents its latest level VI AC/DC adapter and connverter
    T-43086-WWVV-X.X-Q Model is an addition to GlobTek’s Level VI compliant GT-43086 family and represents GlobTek’s 6 Watt wall plug-in series of AC/DC adapters (power supplies and chargers) with International Interchangeable blades. GlobTek’s changeable input blade system with individual field replaceable input plugs, including: North America and Japan NEMA 1-15P, Australian, UK BS 1363, European CEE […]
  • Sanmina’s familiarity with FDA gets skin treatment product to market fast
    The medical market for cosmetic devices is booming. However, quickly launching new products to meet demand is becoming more challenging because device manufactures face increased regulatory scrutiny. To help meet regulatory requirements, aesthetic and other medical-device OEMs are partnering with electronics manufacturing services (EMS) companies that also offer expertise with the FDA filings necessary to […]
  • Fluid connectors and quick disconnects for IVD equipment from CPC
    Colder Products Company (CPC) offers thousands of tubing connectors, quick disconnects and fittings for smart fluid handling in IVD and analytical equipment. Non-spill connectors speed testing throughput by eliminating drips, preventing air inclusion and increasing operator safety. Panel mount connectors can be added to existing equipment or bottle caps to provide secure, leak-free connections. Puncture […]
  • 310 Watt desktop medical power supply meets efficiency level VI requirements
    Power Partners releases a new 310 Watt medical grade desktop power supply from their PEAMD Series of AC and DC adapters. The 310 Watt unit is packed for ideal performance inside a compact case measuring 7.8 x 4 x 2 in. with a weight of only 3 lbs. The PEAMD310 Series is approved to the latest […]
  • Saelig introduces Multiple Instrument System MIS4 universal test system
    Saelig Company has introduced the ABI Electronics’ Multiple Instrument Station MIS4, an all-in-one testing tool that provides all commonly required test instruments in one compact programmable hardware module, mounted in a compact case or installed in a PC-drive bay. Controlled by ABI’s sophisticated SYSTEM 8 Ultimate PC software with a simple yet programmable operator interface, […]
  • AssurX announces document management software update for small to mid-size companies in FDA regulated industries
    AssurX, an enterprise quality management, risk and regulatory compliance solution provider, announces the release of the latest update to their AssurX document management software. The document management solution provides a cost-effective solution for small to medium sized companies faced with streamlined operations and is fully compliant for FDA regulated industries. Ideal solution for small to […]
  • Saelig presents new Amplicon Impact-R 1100F series computer
    Saelig Company announces the Amplicon Impact-R 1100F series, a fanless system powered by the Intel ATOM D2550 processor. Configured with a high performance 2.5 in. MLC Solid State Drive (SSD), the Impact-R 1100F series is a silent controller system. With options for multiple serial communication ports, the Impact-R 1100F can offer up seven DB9 connections […]

Leave a Reply