News Feature | December 17, 2015

U.S. House Agrees To Suspend Med Device Tax For Two Years

By Jof Enriquez,
Follow me on Twitter @jofenriq


Bipartisan members of the U.S. House of Representatives agreed to pass a $1.1 trillion spending package that includes a provision to suspend the 2.3 percent medical device excise tax for two years, or until December 31, 2017. Medtech industry stakeholders lauded the legislative action that many said was unlikely, despite intense lobbying from the sector.

Speaker Paul Ryan (R-Wis.) announced Tuesday that Republican and Democrat representatives had reached an agreement on the omnibus bill that includes a raft of tax breaks, postponement of the so-called "Cadillac tax" on expensive healthcare plans, and a two-year moratorium on the medical device tax. The two taxes are critical sources of revenue for ObamaCare, according to The Hill.

Some Democrats from states with thriving medtech companies bucked the party line and agreed with their Republican counterparts in supporting the spending bill, which will be put to a vote this Friday, according to the New York Times.

Implemented in January 2013, the device tax was projected to gather approximately $20 billion in revenue from 2013 to 2019. But a 2014 report indicated that the Internal Revenue Service (IRS) had only collected about 75 percent of the estimated total revenue expected to be generated by the tax.

Bipartisan leaders in October were hammering a fast-track bill to repeal key provisions of the Affordable Care Act (ACA) amid intense lobbying from medtech industry representatives, who describe the tax as a jobs and innovation killer. They clinched the deal late Tuesday following concessions from both sides. 

"This is pretty miraculous," Shaye Mandle, CEO of LifeScience Alley, Minnesota's medtech trade group, said in response to the device tax suspension, reports the Star Tribune. "It's unusual to see a tax that's being collected taken away. Certainly we want this to become permanent."

Medtech trade associations criticized the device tax for inflicting negative impact on jobs, R&D, investments, and world-leading U.S. medtech innovation. AdvaMed, the Medical Imaging & Technology Alliance (MITA), and the Medical Device Manufacturers Association (MDMA) issued a joint statement praising Tuesday's announcement giving medtech companies a two-year reprieve from the tax.

"Suspending the tax will be an important step in addressing the harmful effect it is having on research and development and continued medical progress," said AdvaMed Board Chairman Vincent A. Forlenza. "On behalf of America's medical technology companies, our employees and the patients we serve, we urge Congress to act swiftly on this legislation."

MITA Board Chairman Nelson Mendes said, "The tax has been a drain on the economy and has halted investment in research and development for advanced imaging and other life-saving technologies. We appreciate the bipartisan efforts of Congress in taking this step to protect U.S. jobs and innovation, and we urge them to support the legislation.”

“MDMA applauds the bipartisan agreement to suspend the medical device tax as a part of the tax extenders package, which if signed into law would boost innovation, job creation and patient care,” added MDMA Board Chairman Scott Huennekens, president and CEO of Verb Surgical.