Room for daylight on medical device tax repeal? coverage of the medical device tax

Supporters of repealing a 2.3% levy on all U.S. sales of medical devices got a sliver of daylight this week after U.S. treasury secretary Jacob Lew said there might be room to revisit the tax.

"Maybe there’s a way of looking at it differently than the way it was designed," Lew told Sen. Kelly Ayotte (R-N.H.) during testimony before the Senate budget committee April 16.

Ayotte asked the treasury chief if President Barack Obama supported repealing the tax, citing a recent bipartisan but symbolic vote in the upper chamber to repeal the tax.

"There’s not much around here that we get 79 votes for in the Senate," Ayotte said. "I hope [Obama] would commit to working with both sides of the aisle on overturning this tax."

But Lew’s seeming willingness to revisit the tax came with some leavening.

"It’s always a dangerous business to reopen something when it’s a critical funding element in a complicated piece of legislation," he said. "We all agree that having the best technology available for our patients is a very high priority. It’s also important to note the dramatic increase in the cost associated with the reimbursement for these medical devices. … I would only point out that [the medical device industry] has been a very profitable business."

And in order to ditch the tax, a pay-for replacing the lost revenue would have to be found, Lew pointed out.

"It’s something that, if it were to be removed, it would have to be replaced," he said. "The idea was not to target startups. It has a much broader effect than that and many, if not most, of the sales are not [from] startups."

Responding to Lew’s Senate testimony, AdvaMed CEO Stephen Ubl sought to "clarify the facts regarding some of the issues you raised."

"First, it is important to understand that there has been no increase in reimbursement for medical technology relative to other health services. National spending on medical technology has remained essentially constant at 6% of national health expenditures for the last 2 decades. Moreover, because the industry is highly competitive, prices for medical technology have risen during the same period at an average annual rate of only 1% – less than a quarter the rate of other medical goods and services and less than half the rate of the overall CPI," Ubl wrote April 17.

Repealing the tax is "central to tax reform and economic growth," not a health policy issue, Ubl wrote.

"When enacted, the tax was used in a bookkeeping sense to offset some of the costs of the Affordable Care Act. Now, however, the tax is simply a part of general revenues. Repealing it will have no effect on the programs authorized under the Affordable Care Act," he wrote.

And the tax has a "highly uncompetitive impact" because it raises the total amount of federal taxes paid by U.S. medtech firms by 30%, Ubl claimed.

"When combined with the high and uncompetitive corporate tax rate already levied on American-based research & development and manufacturing, it is a profound disincentive against locating these activities in the U.S. – whether the manufacturer is a U.S. company or a U.S. subsidiary of a foreign company. That is directly contrary to the administration and our industry’s shared goal of keeping and growing good jobs in the U.S.," he wrote.

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