A survey of CEOs and board members at the Medical Imaging & Technology Alliance showed that the 2-year suspension of the medical device tax is resulting in increased hiring and more spending on research and development.
President Barack Obama in December 2015 signed into law an omnibus tax and spending bill that pauses the medical device tax for 2 years, hours after the U.S. Senate approved the $1.8 trillion measure on a 65-33 vote. The pause on the tax, a 2.3% levy on all U.S. sales of medical devices, is estimated to cost $3.4 billion, according to the Joint Committee on Taxation. The law also enshrined a research & development tax credit worth$113 billion over 10 years.
The MITA survey, of 13 executives representing more than 60% of U.S. medical imaging companies, showed that 69% of respondents are likely to increase their workforces and 77% are likely to spend more on R&D.
The survey also indicates that 77% of respondents are likely to speed up the development of new products and expand their clinical programs. Some 69% said they would invest in new infrastructure as a result of the tax suspension.
“These survey findings confirm that suspension of the medical device tax has already helped boost investment in R&D and ignite medical technology innovation in just a few months,” MITA chairman Nelson Mendes, president & CEO of Ziehm Imaging, said in prepared remarks. “Full repeal of this burdensome tax will turn yesterday’s economic headwinds into tomorrow’s tailwinds, spurring sustained growth and protecting patient care. We appreciate the bipartisan efforts of Congress to address this tax and urge them to vote for full repeal when the time comes.”
“As a result of the suspension of the tax, our members are anticipating that they will increase the number of U.S. employees,” added MITA executive director Patrick Hope. “They’ll also have a specific focus on increasing R&D that will allow them to invest in the development of new innovative medical device products for the healthcare industry.”
The medical device industry fought tooth-and-nail against the tax since it was 1st floated as a way to fund the Affordable Care Act. Since then, numerous bills to permanently do away with it have circulated on Capitol Hill, including the “Protect Medical Innovation Act of 2015,” sponsored by Rep. Erik Paulsen (R-Minn.), that the CBO evaluated last summer. In June, 46 Democrats joined the vote to approve the Paulsen measure; in August, the Senate said it would take up a companion measure before the end of the year, although those plans might be obviated if the omnibus spending package goes through.
Estimates of the impact of the medical device tax have varied wildly since its 1st airing in 2009; 4 years of political deadlock, which included a federal government shutdown over the issue, have done little to add clarity. Federal government officials have projected that the tax will raise about$30 billion over 10 years. Back in July 2013 a report released by a coalition of medical device lobbying groups estimated that the tax had cost the industry $1 billion during the 1st 6 months of that year.
In July 2014, MassDevice.com learned via a Freedom of Information Act request to the Internal Revenue Service that the tax bureau collected only $1.4 billion from the medical device tax in 2013, far short of all predictions. An audit by a U.S. Treasury inspector general revealed that the IRS collected a little more than $913 million during the 1st half of 2013, well shy of the $1.2 billion it expected the tax to bring in.
