Uncertainty is bad for business, so in some respects the U.S. Supreme Court’s decision to uphold the the healthcare reform law yesterday morning carries a bit of a silver lining, despite the obvious negative that the excise tax on medical device makers will live on.
If you don’t believe me, ask Katherine Owen, Stryker Corp’s VP of strategy and investor relations, who said as much in an investor’s conference last week.
"My biggest fear is that the Supreme Court just pushes off on the whole thing and says, ‘This is a tax, and under law as it is currently constructed, the Supreme Court is not allowed to weigh in on the legality of the tax for a year, so we will revisit this in 2014,’" she said. "That would create just another overhang. For me, that is the worst-case scenario."
That may be cold comfort to the medical device companies, knowing the odds that they’ll have to start forking over 2.3% of sales to the feds starting in January 2013 just jumped dramatically. But in removing this fairly large overhang of uncertainty the nation’s highest court may have handed the med-tech industry the wake up call it needs to start planning in earnest for the tax. After all, tax experts have told MassDevice.com that it will take up to 6 months for companies to prepare for the tax.
This is not to say that repeal efforts don’t have a chance.
First, a Republican win in the presidential election and a possible change of control in the U.S. Senate could kill the Patient Protection & Affordable Care Act altogether. Second, our sources on Capitol Hill say that the recent repeal vote in the U.S. House of Representatives has created enough of a wave that some Democrats in the Senate – namely members in hotly contested races in device-heavy states – might sign on to the repeal effort, but let’s face it, that’s a long shot.
For now, the industry’s allies on The Hill are vowing to stick to their fight.
Sen. Daniel Coats (R-IN) office, in a statment sent to MassDevice said the Hoosier state lawmaker would "redouble efforts to repeal the health care law and replace with step-by-step reforms. Coats remains committed to repealing the devastating tax on the medical device industry as well."
And Sen. Scott Brown also weighed in with a salvo of his own. Telling MassDevice in statement that "The federal health care law may be constitutional, but it is wrong for jobs and the economy.”
But the decision to bring a vote to the floor of the Senate still sits in the lap of majority leader Harry Reid (D-Nev.), and he seems to think today’s SCOTUS decision is definitive.
"Now that this matter is settled, I hope we can work together to create jobs and secure this country’s economic future," he wrote on his Twitter account after the ruling.
Most insiders tell me that Reid is reluctant to go much farther for the industry on this issue, especially after the work he put in cutting the total device tax tab in half during negotiations back in 2009.
This leaves the medical device industry with the proverbial puncher’s chance of killing what it views as an onerous tax. I never say "never," but for what it’s worth, I wouldn’t plan my business on anything resembling those odds.
But if the turmoil in our economy over the past 5 years have showed us anything, it’s that businesses need to minimize uncertainty to thrive, to add jobs and to grow. As Ben Franklin said, "in this world, nothing can be said to be certain, except death and taxes."