The Senate Finance committee left intact provisions in its proposed healthcare reform legislation to tax medical device manufacturers based on their relative market share.
An amendment seeking to strike language in the bill establishing the $4 billion-a-year tax was voted down by the committee late Thursday. All 13 Democrats on the panel voted against the amendment proposed by Sen. Jon Kyl (R-Ariz.), who was joined by nine other Republicans seeking to strike the tax.
A final vote by the committee on the full bill is possible as early as next week.
Despite the setback, industry proponents vowed to continue pressing lawmakers to drop the tax proposal.
Thomas Sommer, president of the Mass. Medical Device Industry Council (MassMEDIC), told MassDevice that the industry’s fight against the tax is far from over.
“It’s not the end of the road by any means,” Sommer told us. “There’s still time for negotiations. The full Senate will take up this bill the week of Oct. 12, which is the week of the AdvaMed 2009 conference. So there will be 4,000 delegates in Washington to lobby against the medical device tax.”
“We’re still going to fight this tooth and nail,” added Thomas Novelli, director of federal affairs for the Medical Device Manufacturers Assn., a Washington, D.C.-based trade group. “There’s a long, long way to go before final passage.”
Novelli said several Democrats on the Finance committee, including Massachusetts Democrat Sen. John Kerry, indicated after the vote they were at least open to considering alternatives to taxing device companies.
Finance Committee members wrapped up the so-called mark-up process for the bill in the wee hours Friday morning, designed to extend coverage to millions of Americans currently lacking healthcare insurance. The new device tax, hotly opposed by the industry, was introduced to help offset a portion of the $900 billion price tag for the reform efforts expected over the next 10 years.
As proposed by committee chairman Max Baucus, a Montana Democrat, the tax would apply to any manufacturer of medical devices sold in the United States, including both domestic and foreign device-makers as well as importers. It does not set a specific rate for companies but instead calls for the U.S. Treasury to instead levy fees totaling $4 billion each year from individual firms based on their U.S. sales during the prior year.
Whitney Smith, a spokeswoman in Kerry’s Washington, D.C., office, said Friday the senator was planning to “still be working on this issue as we merge the two bills,” referring to the Senate Finance measure and companion legislation in the House.
Novelli said other committee members such as Washington Democrat Sen. Maria Cantwell and Sen. Deborah Stebenow, (D-Mich.) — who, like Kerry, have sizable concentrations of device companies in their home states — likewise seem ready to dump the device tax if another revenue source could be found.
The amendment put forward by Kyl Thursday night before the Finance committee called for substituting a higher levy on “bronze plans” — lower cost, higher deductable discount policies targeting younger, healthier adults — for the device tax.
“We’ve contacted all of the members on the committee urging them to strike this language,” Novelli said. “A tax on medical devices is simply unfair, especially for the smaller companies that are the majority of this industry.”
The legislation exempts companies with less than $5 million a year in revenues while effectively offering firms with between $5 million to $25 million in annual sales a 50-percent cut in the tax assessed larger firms.
Class I devices also are exempted under the bill in its current form. The fees would be assessed starting with the federal government’s fiscal year that began on Thursday.
None of the proposed healthcare reform bills adopted in other Senate committees would tax device companies. A bill passed in the U.S. House of Representatives also does not call for a device tax.