An editorial published earlier this year in the prestigious New England Journal of Medicine contained "factual errors that could lead to critical policy blunders," according to Dr. Gregory Sorensen, CEO of Siemens Healthcare (NYSE:SI).
In a letter to the editors of NEJM published last week, Sorensen disputed the conclusions of a pair of Harvard Medical School physicians in an editorial the journal ran last May.
Drs. Daniel Kramer and Aaron Kesselheim argued that the medical device tax, a 2.3% levy on U.S. medtech sales, should not be repealed because it’s an important bulwark of the Affordable Care Act.
The doctors said the arguments for repealing the tax – that it will drive medtech investment offshore, cost American jobs and stifle innovation – are largely without merit. And even if some of those arguments prove valid, Kramer and Kesselheim argued, the benefits of healthcare reform far outweigh any damage from the tax.
Sorensen said the claim that "purchases by government agencies and nonprofit institutions" are exempt from the tax is wrong, citing device tax provisions that exclude exemptions for sales to governmental and nonprofit agencies. Kramer’s and Kesselheim’s claim that the ACA will boost sales for medical device companies is also mistaken, the CEO wrote.
"The opposite is true: added coverage should enable more primary and preventive care, leading to reductions in utilization of imaging," Sorensen wrote, citing the decline in medical imaging device sales in Massachusetts following the Bay State’s pioneering healthcare reform law in 2007.
"Sales of medical-imaging equipment in that state have dropped more than they have in the rest of the country and have not recovered. Medical device manufacturers will already be paying dearly for the Affordable Care Act (ACA) through reduced sales, even without the tax," he wrote.
And the doctors were flat-out wrong in asserting that the medical device industry won’t have to cut jobs because of the tax, Sorensen said.
"As an executive responsible for such decisions, I can assure readers that this tax has led to a decrease of hundreds of research-and-development jobs at my company. I have already been forced to lay off workers as a result of the tax," he wrote. "Furthermore, the math that is laid out by the authors belies their assertion: If 7 to 8% of sales are spent on research and development, as the article states, then the 2.3% tax on sales represents more than a quarter of research-and-development budgets."
Kramer and Kesselheim also claimed that repealing the tax would damage healthcare reform. Sorensen, citing the repeal of another ACA provision earlier this year, said that conclusion is also wrong.
"The added revenue merely helped offset the cost of the bill, very much as occurred with the Community Living Assistance Services and Supports (CLASS) Act, an original provision of the ACA that was repealed earlier this year after it was determined to be unworkable. Repeal of the device tax would not impede the ACA, and 79 senators, including staunch supporters of the ACA, recently voted for repeal," he said.
Taxing medical devices will harm, not help, patients, Sorensen concluded.
"And finally, recent data highlight that diagnostic errors are the most common, most deadly, and most costly of medical errors. Yet, the tax discourages accurate diagnosis. In some ways, taxing the very devices that can facilitate discovery is similar to establishing a tax on supercomputers while attempting to sequence the human genome. Policies should be aimed at encouraging, not discouraging, society to put resources into improved diagnosis," he wrote.
Kramer and Kesselheim, whose disclosure forms reveal grants from the FDA’s Center for Devices & Radiological Health, The Robert Wood Johnson Foundation, the the Agency for Healthcare Research and Quality, the Pew Charitable Trusts and the Harvard Catalyst Clinical & Translational Science Center, responded by acknowledging their mistake regarding government programs and non-profits being exempt from the tax but stuck to their guns otherwise.
"Sorensen’s points regarding the use of imaging in Massachusetts do not support his conclusions," they wrote. "First, imaging is only 1 component of the entire medical device sector. Second, other changes in the healthcare market in Massachusetts and elsewhere during recent years may have influenced the utilization of imaging, including payment reform and uptake of strict conflict-of-interest policies at Massachusetts academic medical centers, which insulate physicians from industry-related marketing of services, both of which are unrelated either to excise taxes or insurance coverage. Third, regional differences in health care utilization in general and in utilization of high-cost elements in particular challenge extrapolations from Massachusetts alone.
"Sorensen’s prediction about the effects of the ACA is also undermined by evidence from an ongoing randomized natural experiment in Oregon, which showed that expanding insurance coverage led to enhanced utilization of at least one type of imaging, since the use of mammography in women who were 50 years of age or older increased by nearly 30%," the doctors wrote.
