Political roadblocks aren’t dampening the spirits of medtech industry advocates pushing for repeal of the looming medical device tax, despite the fact that the levy’s slated to take effect in less than 3 weeks.
Even President Barack Obama’s on-camera refusal to support a delay for the medical device tax last night hasn’t curbed the enthusiasm.
"Make no mistake – repeal is the goal," AdvaMed spokeswoman Wanda Moebius told MassDevice.com in a phone interview, adding that the lobbying group remains "cautiously optimistic" that a win is on the horizon.
A group of medtech industry lobbying groups – the Medical Device Manufacturers Assn., the Medical Imaging & Technology Alliance and AdvaMed. – have organized D.C. fly-ins, showered the Beltway with ads and cultivated Democratic support for the cause, resulting in "tremendous progress" toward repeal, Moebius told us.
Among the trio’s most recent triumphs was the letter a group of 18 Democratic and independent senators sent this month to Senate majority leader Harry Reid (D-Nev.) asking for a delay to the levy, which will take a 2.3% cut from every applicable medical device sale in the U.S. The measure aims to raise about $30 billion over 10 years to support healthcare reform.
"MDMA has always been and continues to remain very confident that as more and more members of Congress learn about the devastating impact the medical device tax will have on jobs, innovation and patient care, they will work together on a bipartisan basis to repeal this bad policy," MDMA president & CEO Mark Leahy told MassDevice.com in an emailed statement.
A Presidential snub
Obama last night told reporters that he’s unwilling to delay the medical device tax, saying healthcare reform is "going to be great for business," noting that the Affordable Care Act will add 30 million people to the health insurance rolls.
"In no way is a $30 billion tax over the next 10 years helpful for medical device companies," MITA executive director Gail Rodriguez shot back in a prepared statement this morning. "This tax threatens jobs, investment in research & development and patient access to innovative technologies."
Industry advocate Rep. Erik Paulsen (R-Minn.) also issued a statement this morning, calling out the president on the implication that the tax will represent a windfall for device makers.
"This ‘windfall’ to the industry is a convenient myth for the president and Obamacare supporters," Paulsen said in a prepared statement. "The president has spoken time and time again of the need for more American manufacturing. It’s time for his actions to match rhetoric. It’s time to repeal this disastrous new tax."
Last night’s on-air rejection wasn’t the 1st time the Obama administration shot down challenges to the medical device tax. In June White House senior advisors promised to veto a House Bill repealing the tax, regarding it as efforts to undermine the spirit of the Affordable Care Act.
The (un)likelihood of repeal
Although cries for repeal seem to be gaining momentum, some voices in the crowd remain skeptical that current efforts will result in repeal before the end of the year – or at all.
Although some analysts don’t see device tax repeal happening this year, many remain confident that it may yet be altered or delayed to lessen the impact on the industry.
Abbott Medical Optics president and former AdvaMed chairman James Mazzo told MassDevice.com this week that the levy represents a "political nightmare" and that lawmakers are unlikely to spike the tax entirely after having already cut it in half from its original $60 billion mark.
"They’re seeing it as a group that was $60 billion and we negotiated $30 billion," Mazzo told us following a panel presentation at MassDevice’s Big 100 Roundtable West event in Newport Beach, Calif., this week. "The next question is, who’s going to supplant it? They’re going to sit there and say, ‘If we lose $30 billion, we still have an issue,’ and then you’ll have other organizations say ‘Why did the device people get off?’
"Could [regulators] start to interpret that smaller companies are going to be more impacted than larger companies? Could there be a modification of the tax? Possibly," he added. "That’s why delay gives us the chance to have that interaction and that discussion."
Earlier this year, Morgan Stanley analysts wrote that the odds of repealing the medical device tax were slim since the measure was unlikely to pass muster with a Democrat-led Senate, but noted that, "Even if the repeal of the medical device tax fails, which we see as the most likely scenario, the possibility to remove or lessen the tax is not over."
Final regulations are not the final word
The U.S. Treasury Department just earlier this month released the long-awaited final regulations on how it plans to implement the device tax.
The IRS mostly "stayed the course" on provisions that it had set out in the tax proposal released earlier this year, while also reversing key measures that would have resulted in double-taxation for device kits, a set of 2 or more medical devices bundled together and sold to an end user.
The new tax guidelines also excludes certain devices from the 2.3% sales tax, providing a "retail exemption" for devices purchased by the general public for individual use.
Release of the final regulations proved no deterrence for advocates of repeal, and stakeholders have discussed tying tax discussions to the fiscal cliff negotiations underway in Congress. Pushing the tax past its January 1 start date would give medtech stakeholders and industry advocates more time to either prepare for the hit or tie their concerns to a larger discussion about tax reform.
"While Washington talks about a fiscal cliff, this tax could push us off an innovation cliff, costing as many as 43,000 jobs and hurting the ability of medical technology companies to find tomorrow’s treatments and cures," AdvaMed president Steven Ubl said after the IRS regulations were released. "It should be repealed. Already, medical technology companies are laying off workers or cutting back on research and development or other expansions."
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