This article has been updated with comments from the Medical Alley Association and the Massachusetts Medical Device Industry Council (MassMEDIC).
Both houses of Congress have now passed the 2020 federal spending package, which includes a provision to permanently repeal the 2.3% medical device excise tax.
The package of eight spending bills awaits the signature of President Trump, who is expected to sign it into law by the midnight Friday deadline, according to published reports.
The repeal would be a most welcome holiday gift to the medtech industry. The tax went into effect in 2013 and has been suspended twice. One two-year pause ended in January 2018 and the second moratorium is due to expire at the end of this month. The tax on the sale of most medical technologies was enacted as part of the Affordable Care Act and applies to medtech companies’ revenues, not profits. In 2018, the U.S. House of Representatives passed a bill to repeal the tax 283-132, but the Senate failed to act.
Two major medtech trade groups hailed the Congressional action. Mark Leahey, president & CEO of the Medical Device Manufacturers Association (MDMA), said that organization had been working with members of Congress for more than a decade on stopping the tax.
“Today marks the culmination of this important work,” Leahey said in a statement. “MDMA thanks Majority Leader McConnell, Minority Leader Schumer, Speaker Pelosi and Minority Leader McCarthy for their bipartisan work to put an end to this tax on innovation. Now that both chambers of Congress have passed a repeal of the device tax, we look forward to the president’s signature so that America’s innovators can continue to lead the world in developing the cures and therapies of tomorrow.”
AdvaMed president & CEO Scott Whitaker also thanked senators for their action today. The House of Representatives passed the bill on Wednesday.
“Without the leadership of Majority Leader Mitch McConnell and Minority Leader Chuck Schumer, as well as that of Sen. Pat Toomey and all the cosponsors of the device tax repeal legislation, the industry would be facing massive job losses and cuts to the very research and development we need to save and improve patients’ lives,” Whitaker said in a statement. “Patients are the real winners here today. We look forward to the president signing this legislation into law.”
Repeal would be a huge win for the industry. The global medical devices market size was valued at $425.5 billion in 2018 and is expected to reach $612.7 billion by 2025, according to a report released last month by Fortune Business Insights. The medtech industry directly accounts for well over 300,000 jobs in the United States, according to the U.S. Department of Commerce. More than 80% of medical device companies in the United States consist of fewer than 50 employees.
The Tax Foundation recently estimated that if the tax were to go back into effect, it would lead to a loss of 21,390 full-time equivalent jobs and a reduction in of $1.7 billion in the gross domestic product. The tax does not lower healthcare costs for consumers but increases costs and burdens on the healthcare industry, the foundation said.
Regional medtech groups also hailed what appears to be the impending repeal.
“We’re glad to see Congress take the sensible step of fully repealing the medical device tax instead of opting for another suspension,” said Shaye Mandle, president & CEO of the Medical Alley Association in Minnesota. “Device innovators now have the certainty they need to take bold steps, make bigger R&D investments over the long haul, and pursue the next generation of devices that will make patients’ lives better, longer.”
“Over the last 10 years, the medical device tax has been a cloud looming over the fortunes of a truly great American industry,” added Brian Johnson, president of MassMEDIC. “The tax not only cost this industry billions of dollars, it cost good, hard-working people their jobs. It was a mistake to implement this tax 10 years ago and it would have been a colossal mistake to continue to double down on bad policy by letting it come back.
“Fortunately, today a group of bipartisan lawmakers corrected that mistake and repealed the medical device for good,” Johnson said in an email to MassDevice. “I want to thank them for their foresight and their willingness to step up for patients and medtech innovators everywhere. This is a great day for our industry.”