New bill would halt device tax for five years

  • June 25, 2019

The House Ways and Means Committee unveiled 10 DEC 2018 the untitled bill for tax relief that includes disaster relief and reforms to the Internal Revenue Service (IRS).  However, it also takes aim at a number of tax considerations related to health care.  Among these is a delay in the implementation of so-called Cadillac health plans through the end of 2022, and another suspension of the annual fee imposed on health insurance carriers.

The delay of the 2.3 percent tax on medical devices is again achieved simply by the change of the date on which the moratorium of the tax expires, which would be 31 DEC 2024.  The issue of the tax has been particularly topical of late, thanks in part to a 05 DEC 2018 letter from a number of trade associations and physician groups urging Congress to fully repeal it.  The signers reiterated the U.S. Department of Commerce estimate that the tax had cost the jobs of more than 28,000 employees of device makers and pointed to significant changes in outcomes related to devices, such as the 60 percent reduction in mortality for stroke and heart disease. (See BioWorld MedTech, 10 DEC 2018)

Both the letter to Congress and the Ways and Means bill are particularly timely, given that the current suspension was set to expire 31 DEC 2018, but Rep. Kevin Brady (R-Texas), chairman of the Ways and Means Committee, lent a special urgency to passage.  Brady noted that the bill includes nearly 250 technical corrections to the tax reform legislation signed by President Donald Trump in December 2017, but also said “it’s irresponsible to wait until next year to deliver crucial tax relief” to those affected by the series of fires, hurricanes and floods that occurred this year.

Brady noted that the bill “delivers bipartisan relief from some of Obamacare’s most egregious taxes, including ones that stifle innovation, reduce jobs and increase the cost of families’ health insurance.”  While industry would undoubtedly prefer an outright elimination of the tax, Scott Whitaker, President and CEO of the Advanced Medical Technology Association (Advamed), said the five-year suspension would give industry “greater confidence in planning long-term R&D,” a key cog in the machinery of innovation.

Whitaker said the device tax “is bad health policy and bad economic policy,” a statement with which he said “no one disagrees.”  Whitaker thanked several members of Congress for their support in efforts to suspend and repeal the tax, including Minnesota Republican Erik Paulsen, who lost his bid for re-election.  However, both senators from Minnesota, Democrats Amy Klobuchar and Tina Smith, have voiced their support for the suspension and repeal of the tax.  That suggests that even if the Brady tax bill does not pass this calendar year, any effort to advance a bill in 2019 would find significant bipartisan support in the Senate as well as the House.

Whitaker said a five-year moratorium on the tax “will help unleash new, life-changing technologies, heightened job creation, and economic growth.”  He did not specifically call out the 21st Century Cures Act, which compels the FDA and other federal agencies to eliminate needless delays to medical device premarket reviews.  However, Whitaker said the five-year hiatus “will help usher in the next leap forward in patient care.”  He concluded that Advamed “stand[s] ready to work with our congressional champions on both sides of the aisle and in the House and Senate to help ensure that this language becomes law.”

Mark Leahey, president and CEO of the Medical Device Manufacturers Association (MDMA), said device makers “need predictability to fully deliver on the promise of a healthier tomorrow,” and that the five-year suspension “would provide the environment they need” to do so.

Leahey added, “one of the most tragic results of the device tax . . . was the shifting of resources away from research and development,” although he said innovators have managed to reverse some of that shift, thanks to the latest suspension of the tax.  Leahey said MDMA “will continue to work with the historic bipartisan support in both the House and Senate to secure additional relief from the medical device tax in 2018.”

REFERENCE:  BioWorld MedTech; 12 DEC 2018; Mark McCarty

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