Opposition to Device Tax Continues as Industry Payments Pass $1 Billion

Twitter icon
Facebook icon
LinkedIn icon
e-mail icon
Google icon

The Medical Imaging & Technology Alliance (MITA), the Advanced Medical Technology Association (AdvaMed) and the Medical Device Manufacturers Association (MDMA) announced Monday that medical device manufacturers have collectively paid over $1 billion to the Internal Revenue Service (IRS) so far under the new 2.3% medical device tax.

The tax is part of the Affordable Care Act and became effective at the start of this year. According to the groups making the announcement, that $1 billion is money that otherwise might have been invested to further research and development (R &D), make capital investments and “support good-paying jobs across America.”

Efforts to enact legislation to remove the tax are continuing. In March, a bipartisan coalition of 79 Senators voted to adopt an amendment to the Fiscal Year 2014 Senate Budget Resolution to repeal the medical device tax. In the House, the “Protect Medical Innovation Act,” has amassed 253 co-sponsors, including 34 Democrats.

However, the Administration supports the device tax as it is a key funding source for the Affordable Care Act’s health care expansion and opposition to replacing the tax with another new tax is fierce. President Obama said in interviews last year that he believes that the impact on the device industry will be offset by increased demand for their products as more Americans acquire health insurance under the Affordable Care Act. He also vowed to veto any device tax repeal passed by Congress.

Yet the tax has been applied ahead of the rollout of the insurance exchanges and tax credits to help more Americans buy insurance, leaving device makers to pay now and hope for a bigger market later.

“The $1 billion threshold is frightening as every dollar spent paying for this medical device tax threatens medical innovation and American jobs,” said Gail Rodriguez, Executive Director of MITA. “MITA is pleased to see bipartisan support for repeal of the tax building in both the House and the Senate, but Congress cannot wait any longer to repeal this burdensome tax and protect jobs and essential R &D funding.”

According to MITA, AdvaMed and MDMA, under the 2.3 percent tax, device manufacturers are required to pay an estimated average of $194 million per month in medical device tax payments (with a payment of approximately $97 million due semimonthly). They estimate that the medical device industry currently helps employ 2 million people in the United States.