UPDATE: Device makers react to healthcare reform bill's excise tax

March 23, 2010 by MassDevice staff

The U.S. House of Representatives passes landmark healthcare reform legislation and a companion bill, sending the measures to the Senate for final approval; bills would impose a 2.3 percent excise tax on sales of most medical devices.

Healthcare reform

The U.S. House of Representatives narrowly passed landmark healthcare reform legislation that would impose a 2.3 percent excise tax on sales of most medical devices.

No House Republicans voted for the Senate's healthcare bill and 34 House Democrats voted against it, but the measure still squeaked through on a 219-212 vote. A last-minute pledge from President Barack Obama to issue an executive order banning the use of any funds from the $940 billion bill to pay for abortions won over some last-minute holdouts. The bill's passage also depended on a companion bill, which passed on a 220-211 vote, that made changes to the Senate bill to make it more palatable to House members. The two bills are slated to be voted on within days in the Senate; if approved, Obama could sign them into law by week's end.

The medical device excise tax would apply to products ranging from surgical instruments to bedpans starting in 2013, according to news reports. The provision is expected to raise $20 billion over 10 years to help pay for healthcare reform.

Reaction from the industry was mixed, at best. Tom Sommer, president of the Massachusetts Medical Device Industry Council, blasted the tax, saying it would stifle growth and put innovation in peril.

"You're certainly going to see an impact on growth and expansion by medical device companies in this country that are going to be faced by a higher tax bill. In addition to job cuts and rollbacks on expansion plans, you're going to see a reduction in R&D spending. Innovation in this industry is definitely in jeapardy, which is shameful," Sommer told MassDevice. "Obviously we're disappointed in the final outcome. The device tax does not take effect until 2013 and we're hopeful that between now and the implementation date we'll be able to scale back, and certainly we'll be supportive of any effort to remove that tax from the law."

Wanda Moebius, vice president of policy communications for the Advanced Medical Technology Assn. (AdvaMed), told us that the tax is at least an improvement over prior proposals.