News Feature | December 22, 2015

Industry Celebrates Medical Device Tax Suspension, Looks Forward To Repeal

By Suzanne Hodsden

President Obama has signed a $1.8 trillion spending bill that includes a provision to suspend the hotly contested 2.3 percent medical device tax for two years. Industry groups applauded the temporary tax relief and expressed their hope that the suspension would become permanent in the coming years.

Since its implementation in 2013 as part of the Affordable Care Act (ACA), the medical device tax has been subject to debate and intense lobbying by industry groups, who called it an unfair burden that stifles funding for research and development. After many failed attempts at pushing a repeal through the House and Senate, lawmakers recently attached it to a budget reconciliation bill — a symbolic gesture that the president was expected to veto.

Many anticipated that the repeal would be put on hold until another administration took over the White House in 2017, but lawmakers included a two-year suspension of the tax in the 2016 federal budget as part of $622 million in tax breaks. Fox Business reported that the budget passed 65-33 in the Senate and 316-113 in the House, and was signed by President Obama last Friday, avoiding a looming December 23 government shutdown.

Medtech trade associations — including Advanced Medical Technology Association (AdvaMed), the Medical Imaging & Technology Alliance (MITA), and the Medical Device Manufacturers (MDMA) —released a joint statement, praising lobbyists and members of Congress for their “important milestone.”

“America’s medical technology companies, including our nearly 2 million employees and the countless patients we serve, appreciated the broad bipartisan effort to suspend the medical device tax,” said Advamed board chairman Vincent Forlenza. “Congress and the administration have demonstrated that they recognize the negative effects of this tax. We urge policymakers to continue their work to eliminate the device tax and address other factors that are threatening the health care innovation ecosystem.”

Nelson Mendes, MITA board chairman, stated that he was grateful that Congress “was able to come together to preserve U.S. jobs and medical innovation.”

The loss of high-tech jobs has been the cornerstone of the industry’s argument against the medical device tax, but many of the claims — AdvaMed, for instance, claimed 30,000 jobs had been lost — have been questioned. Last week, the Star Tribune cited the Washington Post, Bloomberg Government, and a bipartisan Congressional Research Service report as stating the job loss claims were “seriously flawed.”

Regardless, many small medical device companies welcomed the relief. OrthoPediatrics, an Indiana-based manufacturer of orthopedic medical devices for children, employs 80 people. CFO Fred Hite told a local news outlet that the tax had slowed the development of new products and that the suspension will allow his company to funnel more funds back towards R&D.

“We’ll be able to go back and review that and remove the expense and cash that we had put into the budget for the medical device tax and instead replace that with incremental programs developing new projects,” said Hite.

Image credit: “Capitol Building” by Zoe Rudisill. Licensed under CC BY 2.0 via Flickr.