Medical device tax: Group purchasers call out 45 “cost-shifting” medtech companies coverage of the medical device tax

Medical device makers Allergan (NYSE:AGN) and Invacare (NYSE:IVC) are among the companies targeted by the Healthcare Supply Chain Assn. for allegedly shifting the cost of a new federal excise tax to their customers.

A new website sponsired by the organization is the latest effort in an ongoing battle between group purchasers and medical device makers over the 2.3% medical device tax that took effect at the start of the year.

Several surveys have shown that many companies plan to raise prices in order to cover the impact of the sales levy, but healthcare purchasing groups have pushed back, accusing some device makers of dodging their obligation to contribute to the cost of healthcare reform.

Allergan and Invacare did not immediately return requests for comment.

Allergan has been quiet about its plans for dealing with the tax, but Invacare has made no secret of its intentions to pass the tax onto customers.

"Based on its interpretation of the regulations, the company expects that the impact from the tax when it first takes effect in 2013 will be less than $1.5 million; and it intends to pass it on to the market," Invacare said in a press release issued late last year.

Medical device makers have been actively fighting for repeal of the tax, but buyers like the Healthcare Supply Chain Assn. have stayed out of the debate over whether the levy itself is appropriate or not.

"HSCA took no position on the medical device excise tax, other than expressing its concern that the device industry not be allowed to pass along the cost of the tax to hospitals – in effect, double-taxing hospitals," HSCA president Curtis Rooney said in prepared remarks posted on the "Medical Device Tax Watch" website. "It is disheartening to find that some medical device companies have chosen to tack the tax right onto their invoices."

Purchasing groups have gone so far as to petition 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.

"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," according to Rooney.  "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."

HSCA, formerly the Health Industry Group Purchasing Assn., represents 15 group purchasing organizations 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.

Last month 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.

The HSCA’s full list of "cost-shifting suppliers" includes:

  • Acuderm
  • Alere
  • Allergan
  • AMX Solutions
  • Anatech Ltd
  • Applied Medical Technology
  • Arthrosurface
  • Beekley Medical
  • Berkeley Advanced Biomaterials
  • Burlington Medical Supplies, Inc.
  • CIRS (Computerized Imaging Reference Systems)
  • Cardica
  • Cerner
  • Encompas
  • EMD Millipore
  • FHC
  • Fine Surgical Instruments
  • Fujirebio
  • General Devices
  • Good Lite
  • Gynex
  • Hans Rudolph
  • Hurricane Medical
  • I.C. Medical , Inc.
  • Integra Life Sciences
  • Inrad, Inc.
  • Invacare
  • Iridix
  • Mastel
  • Misonix
  • New World Medical
  • Ohio Medical
  • Rycor Medical
  • Scanlan
  • Sientra
  • Skeletal Dynamics
  • Spineview
  • Staar Surgical
  • Stradis Healthcare
  • Technical Prospects
  • Tenacore
  • Thompson Surgical Instruments
  • Tosoh Bioscience
  • Unipower
  • Vacumetrics
  • Waters Corp

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