Taxing an American success story, the medical device industry | Business Roundtable


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Taxing an American success story, the medical device industry

Feb 4, 2012

The Internal Revenue Service today released its plans for implementing the 2.3 percent excise tax on a wide range of medical devices imposed in the Affordable Care Act. It's mystifying that policymakers would punish one of America's great success stories, the medical device industry, in the process hurting consumers and health-care quality and innovation. Better to repeal the tax before it gets closer to reality.

In response to the IRS's notice of propose rulemaking, the industry's trade association, the Advanced Medical Technology Association, released a statement by its president and CEO, Stephen J. Ubl. From "Release of Proposed IRS Regs to Implement Medical Device Tax Underscores Need for Swift Repeal":

The release today of proposed regulations to implement the $20 billion medical device tax scheduled to go into effect next year highlights the need for prompt action by Congress and the Administration to repeal this anti-competitive, job-killing tax.

Studies have shown the tax will cost jobs – as many as 43,000 are at risk -- at a time when the American economy is struggling and U.S. medical technology leadership in the world market is threatened by competitor nations who have grown their industries through more favorable tax and regulatory policies.

Rep. Erik Paulsen (R-MN), sponsor of legislation to repeal the tax, also issued a statement, denouncing "this jobs-crushing tax on innovation," adding, "Today’s move by the Obama Administration is further proof that the medical innovation tax will increase healthcare costs while putting thousands of jobs on the line.”

Sen. Orrin Hatch  (R-UT) also decried the pending tax in a statement: "Hitting medical device manufacturers — an innovative engine of our economy — with a job-killing $28.5 billion tax hike is exactly the wrong thing under a weak economy. This is a tax on innovation and job creation that will ultimately stifle the development of life-saving medical devices with costs that will be passed on to consumers."

Business Roundtable has identified the medical device tax as one of the major new costs under the Affordable Care Act that will inevitably produce increases in health care premiums. (See BRT statement, June 2, 2011, "Business Roundtable Statement on House Energy and Commerce Committee Hearing on PPACA’s Effect on Health Coverage and Jobs."

See also this column in Mass Device by Kem Hawkins, president of Cook Medical. He comments:

Companies, in order to pay a new tax bill, will have no choice but to slash research and development spending and that, in turn, will inevitably mean fewer medical advances. While companies will get a new and much larger tax bill, even before they show profits or pay an employee, patients and their loved ones will pay the steepest price. How many cures and treatments will go undeveloped? How much suffering will be prolonged? How much hope will fade?