President Barack Obama is slated next month to make a visit to one of the medical device industry’s primary hubs in Minnesota, and medtech advocates are hoping to use the occasion to emphasize efforts to repeal a 2.3% sales tax that hit the industry last year.
Rep. Erik Paulsen (R-Minn.) issued an open letter ahead of the trip, urging President Obama to spend some time with the state’s device makers and consider their cries for relief from the medical device tax, which applies equally to multi-billion dollar conglomerates and pre-profit startups selling products in the U.S.
"The Medical Device Tax hits smaller companies hardest," Paulsen said in his letter. "Because of the heavy investment in research and development and the long regulatory and approval process required to develop a life-saving device, it takes many companies close to a decade to become profitable, yet they are required to pay this excise tax on their gross revenue, not profit."
Paulsen cited a study released last week by industry lobbying group AdvaMed which stated that the excise tax, which took effect at the start of 2013, had already been directly responsible for the loss of some 33,000 jobs. He also mentioned that his bill to repeal the tax has 270 co-sponsors in the House, including more than 40 Democrats.
"This industry is an American success story, but it is being hit especially hard by the Medical Device Tax that passed as part of the Affordable Care Act," Paulsen wrote. "With your support, we can repeal this onerous tax and protect jobs, expand high-tech manufacturing here at home, and create and provide more life-saving and life-changing technology to American patients."
President Obama has in the past voiced staunch opposition to repealing the tax, telling reporters that he’s unwilling to consider delaying the medical device tax because healthcare reform is "going to be great for business." The tax is designed to raise around $30 billion over 10 years to help support various facets of healthcare reform, which defenders of the tax have claimed will bring more patients to the medical device industry to off-set the cost of paying the levy.
Industry groups maintain that the tax, which will take a cut from every applicable medical device sold in the U.S., hurts innovation and jobs, but President Obama hadn’t been at all receptive until late last year when Senate Republicans emerging from a White House budget meeting said that President Obama was willing to consider changes to the levy.
President Obama ceded that the tax was "not part of the core program" of the Affordable Care Act, long-time device tax repeal advocate Sen. Orrin Hatch (R-Utah) told reporters in October. The president may consider changes to the medical device tax after federal budget negotiations had been resolved, meeting members added.
The Obama administration has on several occasions said that medical device tax repeal is a non-starter, maintaining that the levy represents the medtech industry’s fair burden in helping to fund healthcare reforms that will bring them more customers. The so-called "windfall" rhetoric has been a staple of the battle over the medical device tax, with proponents of the tax arguing that medtech companies will offset much of their costs through their new customers and the industry insisting that the newly insured aren’t the kind that end up needing medical devices.
