As the medical device industry creeps ever nearer the launch date for the dreaded medical device, stakeholders and advocates seem to be picking up their efforts to lobby for repeal.
Industry groups this month issued comments on an IRS draft tax code, alternatively calling for repeal and for mercy, while a pair of Pennsylvania legislators spent some time discussing the potential impacts with local device makers.
Rep. Joe Pitts (R-Pa.) and Sen. Pat Toomey (R-Pa.) took a facility tour of a Precision Medical Products facility in Denver, Pa., to talk taxes, regulation and jobs with gathered device makers, according to a press release.
"The new tax on medical device companies will almost certainly lead to lost jobs," Pitts said during an industry roundtable. "This isn’t a tax on profits. It’s a tax that hits even companies that are losing money. In fact, some device manufacturers have already started downsizing to pay the President’s new tax bill."
Pitts was likely referring to Stryker‘s (NYSE:SYK) announcement last November that it would lay off 5% of its workforce in order to offset the impact of the tax and Zimmer‘s (NYSE:ZMH) note citing the tax as part of the motivation for cutting up to 180 jobs before the end of this year.
Congressman Pitts and Senator Toomey on the Precision Medical Products manufacturing floor.
"Over 22,000 Pennsylvanians work for medical device manufacturers with many of these companies located here in the 16th District," Pitts added. "These are good jobs with above average pay and great benefits. It’s a forward looking industry that is creating new life-saving devices."
One company poised to sink into the red in paying the tax, which is a 2.3% levy on every applicable medical device sold in the U.S., is Colorado-based Spectranetics (NSDQ:SPNC). The company hopes to earn between $1.5 million and $3 million this year, and expects its share of the med-tech tax to add up to more than $3 million next year, the Colorado Springs Gazette reported.
"We aren’t going to cut back on product development or clinical research, but as we think about investing in the future we will probably think twice and be able to do less of it," Spectranetics CFO Guy Childs told a gathering of business leaders at the Colorado BioScience Assn. panel late last month. "This tax is another variable that detracts from our ability to invest in innovation because it comes right off the top line of our revenue. It impedes further investment and makes it more difficult."
Industry lobbying groups have taken their concerns directly to the IRS in submitting responses to the federal agency’ draft proposal on implementation of the device tax.
Washington lobby AdvaMed sent a 22-page response to the IRS and U.S. Treasury Dept. asking that legislators “be reasonable” in determining pricing rules and enforcing the various provisions of the law.
"AdvaMed urges treasury to instruct its agents to be reasonable in their audit of this issue and mindful of the data limitations which companies face," the industry council wrote to the Internal Revenue Service and U.S. Treasury Dept. "This acknowledgement should extend to the challenges our industry faces in complying with the complex constructive pricing rules."
The Medical Device Manufacturers Assn. submitted its own 4-page retort, pushing for full repeal of the "ill-conceived" tax.
"MDMA has consistently opposed the new excise tax on medical devices as ill-conceived because it will undoubtedly have a detrimental impact on patient care, health care costs, innovation and job creation," president & CEO Mark Leahey said in prepared remarks. "There is no question this new tax will impose significant burdens on medical technology companies, stifle innovation and growth, unnecessarily drive up the cost of health care for millions of Americans, and will impair patients’ access to potentially life-saving technologies."
