Once Again, Medical Technology Industry Pushes To Derail The Device Tax

Yet again, the medical technology industry is pushing for a permanent end to a medical device tax they’ve worked with Congress to shelve for almost five years now.

The 2.3% tax on medical device sales that is part of the Affordable Care Act has already been on temporary hiatus since the beginning of 2016 but is scheduled to return at the end of this year.

“(The device tax) has now been off the books longer than it’s been on the books,” Scott Whitaker CEO of The Advanced Medical Technology Association (AdvaMed) said Monday afternoon at the annual medical technology meeting in Boston. AdvaMed represents hundreds of medical device makers, including Abbott Laboratories, Johnson & Johnson, Medtronic and Stryker.

Before the device tax was put on hiatus, the IRS collected between $1 billion and $2 billion a year in 2013, 2014 and 2015. But Congress continues to provide the industry with a temporary fix, usually as budgets or spending packages are being negotiated at the end of the year or near the end of a Congressional session.

Now the medical device industry is escalating its push to see the tax permanently repealed and said there are 247 co-sponsors in the U.S. House of Representatives to do that and 34 members of the U.S. Senate including 10 Democrats.

The Joint Committee on Taxation has said repealing the medical device tax would cost the U.S. Treasury about $20 billion over a decade. Yet the industry has successfully convinced members of Congress over time at the harm the tax could do to employment and innovation.

Just last week, medical device makers earned a key ally in the U.S. Senate when Republican Sen. Rick Scott of Florida agreed to co-sponsor the Protect Medical Innovation Act, which would permanently repeal the device tax. AdvaMed said eliminating the tax will boost medtech businesses that account for almost 21,000 jobs in Florida and nearly 2 million jobs in the U.S.

Though a permanent repeal gains momentum, medical device makers are realistic in how Congress operates. “The likelihood of full repeal is fairly low,” Stryker chairman and CEO Kevin Lobo, who is chair of AdvaMed’s board, said Monday, adding that he is hoping for a multi-year suspension of the device tax.

Whitaker said an end-of-the year fix is more likely as Congress votes on major legislation and packages of legislation. “It’s not the way it should work but that’s the reality and how Congress works,” Whitaker said.

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