Medical device tax: Sen. Hagan still searching for a pay-for to foster repeal

Senator Kay Hagan (D-N.C.)

Senator Kay Hagan (D-N.C.) is looking for a "fiscally responsible" way to repeal the medical device tax and spare her state’s medtech companies, aiming for a viable pay-for to make up for the $30 billion the 2.3% tax is expected to raise over 10 years.

In an email interview with MassDevice.com, Hagan told us that she’s having conversations with business leaders in her state to brainstorm ideas on how to replace the funding for healthcare reform in a manner that leaves medtech resources intact.

"My number one priority is getting North Carolina back to work, and I believe that increasing the number of these good-paying jobs will be essential to our state’s economic security," Sen. Hagan told us.

Hagan opposed the medtech tax from its inception, joining Senate colleagues in warning Senate Majority Leader harry Reid that the fee "could have significant ramifications for an industry."

"The medical device fee is expected to raise a significant amount of revenue, and delaying or repealing it will cost the federal government billions in foregone revenue," Sen. Hagan told MassDevice.com this week. "Given the impact that this fee will have on North Carolina companies, I am open to exploring a variety of legislative options that relieve our state of its burden."

Read the full text of the exchange below:

MassDevice: There’s a great deal of fear in the medical device space that the excise tax will lead to US job losses and to more companies sending operations offshore. Are you hearing similar concerns from the NC medtech community?

Sen. Kay Hagan: The medical device industry is critical to North Carolina’s dynamic bioscience economy, and I meet regularly with business leaders in the state. I understand and share their concerns that the medical device tax will harm job growth in North Carolina. When the tax was first proposed, I opposed its adoption and joined several of my Senate colleagues in writing to Senate Majority Leader Harry Reid that the fee could have serious ramifications for the medical device industry. As a result, changes were made to cut the fee in half – from $40 billion in revenue collected over 10 years to $20 billion.

MassDevice: What’s the potential impact for your state, which enjoys a burgeoning medtech scene?

KH: The medical technology industry employs more than 8,000 North Carolinians and supports an additional 16,000 jobs in the state. My number one priority is getting North Carolina back to work, and I believe that increasing the number of these good-paying jobs will be essential to our state’s economic security. I want to ensure that the medtech industry has the support it needs to remain a key driver in creating the innovative jobs of the future.

MassDevice: There’s clearly the will to repeal the tax on the part of Republicans, but Democrats who’ve expressed sympathy for repeal (such as yourself) are also concerned about replacing the lost revenue. What’s your proposal for a "pay-for" to replace the estimated $30 billion shortfall cutting the tax would create?

KH: First, I think that Senators on both sides of the aisle, Democrats and Republicans, should be concerned about making sure we deal with the tax in a fiscally responsible manner. As we all know, our national debt is among the most important economic issues facing our country today. The medical device fee is expected to raise a significant amount of revenue, and delaying or repealing it will cost the federal government billions in foregone revenue. Given the impact that this fee will have on North Carolina companies, I am open to exploring a variety of legislative options that relieve our state of its burden. I have had and will continue to have conversations with business leaders in my state to get their ideas and suggestions on how to offset the foregone revenue without adding to our deficit or harming economic growth.

MassDevice: A little-discussed aspect of the tax is the administrative burden it would impose. Most excise taxes are paid every 2 weeks, meaning medical device companies will have to implement considerable back-office operations to deal with the paperwork. Have any of your medtech constituents raised this as a concern?

KH: The burdens of this tax are not simply financial, but also administrative. For the companies implementing it, it means taking resources away from innovation, and that’s not what’s going to help North Carolina companies grow right now. 

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