Time has not healed all wounds when it comes to the medical device tax. Nearly 2 years after implementation, the levy has played out according to script, AdvaMed president & CEO Stephen Ubl said this week.
"[It] is playing out exactly as we have feared. It’s cost us high-paying jobs, reduced R&D spending, stifling new innovations. It’s been a nightmare for the IRS to implement and there’s no evidence of a windfall," Ubl told reporters gathered at the AdvaMed 2014 convention in Chicago.
Ubl said there is hope at the lobbying group that a more medtech-friendly environment will descend on Washington after the midterm elections next month. Beltway analysts have widely predicted that the GOP could re-take the Senate and keep the House of Representatives firmly in its grasp.
"It’s clear that policy makers think of repealing the medical device tax as a key policy and jobs issue to be addressed. We’re heartened by the votes in the House and the Senate, and the fact that repeal was included in prominent tax reform proposals, and the fact that the tax continues to be a part of nationwide editorials calling for it to be repealed," Ubl said. "Regardless of what the election brings, we’ll continue to push forward on repeal and we remain hopeful we’ll have a more productive environment in Congress."
Last month, the House passed a jobs package that would repeal the medical device tax and issue refunds for all levies paid since the 2.3% excise tax went into effect last year as part of the "Jobs for America Act."
Ubl also downplayed reports, including a widely cited study from Evaluate’s EP Vantage, that the impact of the tax was less severe than expected.
"I have not looked closely at that study, but my sense is that it is a snapshot in time looking at a small subset of the industry. I don’t think the study looked at the small and mid-sized companies, which are bearing the brunt of the tax," he said.
Covidien (NYSE:COV) CEO Joe Almeida added that although his company didn’t cut its head count as a direct result of the medical device tax, the levy did prompt Covidien to shift more resources overseas.
"We did not stop spending money, we just spent it differently," Almeida said. "We launched 2 R&D centers in China and India and hired staff there to offset the higher costs of developing products."