Innovators Reach Out to DC on the Impact of the Medical Device Tax

Arizonans Join Leaders From Across the Country to Weigh In On The Reasons For a Medical Device Tax Repeal as the U.S. House of Representatives Prepares to take it to a vote.

Here in Arizona, our medical device industry is a key part of our fastest growing economic and innovative business sector and our medical device companies have been the engine to drive that growth in both new business starts and jobs.

Across the country over 700 leaders from organizations large and small have come together to share information on the impact the 2.3% medical device tax will have on the growth of life saving and life sustaining innovations, healthcare costs, and patient care.

Unlike the most common business taxes that are applied based on a company’s bottom line (profits), the Medical Device Tax is an excise tax that must be paid directly by the company based on the top line sale.    This can result in the diversion of key resources from R&D, business expansion, and hiring of key personnel needed for both the development and business operations.

At a time when life science investment dollars are in short supply, this tax becomes yet another reason for concern as small emerging companies could be put in a position there the taxes they will be obligated to pay could easily exceed the profits they generate as they begin the growth path.

AZBio and AZBio Members have worked with leaders from across the nation to raise awareness on this issue with face to face meetings  in Washington, D.C. and in communications from home to our elected leaders so that they have the information they need to make good decisions.

This is a national issue with important local implications. Supporting medical device innovation and business growth needs to continue to be a national  imperative if we are to lead in innovation. control healthcare costs and grow our jobs base.  To view an interactive 50-state map with information on the number of medical technology jobs, sales, average salaries and more here.

Broad Coalition Urges House of Representatives to Repeal Medical Device Tax

WASHINGTON, DC — A broad coalition of medical technology companies and leading associations wrote to Congressional leaders today urging them to repeal the onerous medical device tax which will destroy jobs and harm innovation.  The letter had more than 700 signatories, including the Medical Device Manufacturers Association (MDMA), the Advanced Medical Technology Association (AdvaMed), the Medical Imaging & Technology Alliance (MITA), the U.S. Chamber of Commerce, the National Association of Manufacturers (NAM), the National Federation of Independent Business (NFIB), the National Venture Capital Association and others.

“We continue to believe that implementation of what was to be a $20 billion excise tax – and is now estimated to collect over $30 billion in taxes – will adversely impact patient care and innovation, and will substantially increase the costs of health care,” the letter states.

The 2.3% medical device tax was passed as a part of the health care reform legislation in 2010, and the repeal bill is scheduled for a vote in the U.S. House of Representatives this week.

The letter went on to note that, “At a time when the federal government is working to promote investment in U.S. industries of the future, it is inconsistent that a tax of this magnitude would be considered on the medical device industry.  We must do all we can to encourage and promote research, development, investment and innovation.”

“Members of Congress are asking America’s innovators and manufacturers to help revive our economy, and repealing the job-crushing medical device tax would be a huge boost to these efforts,” said Mark Leahey, President and CEO of MDMA.  “This bipartisan legislation supports a proud American success story, and removes a serious barrier to creating jobs and improving patient care.   The small and innovative businesses that comprise the medical device community are counting on Congress to put an end to this misguided policy.”

“Repealing the device tax is critical to saving jobs across the U.S. Study after study has shown that if this tax is implemented in January, tens of thousands of good-paying jobs will be at risk,” said Stephen J. Ubl, president and CEO of AdvaMed. “Congress should take a stand now to protect jobs, encourage competitiveness and preserve the research and development needed to find tomorrow’s treatments and cures.”

“MITA members continue to oppose the medical device tax because it creates strong headwinds against an important sector of the U.S. economy in difficult economic times,” said Gail Rodriguez, Executive Director of MITA. “Repeal of the tax is critical to bolstering the economy as it will preserve thousands of jobs and ensure that manufacturers can continue developing innovative medical technologies that benefit patients.”

“Allowing this tax to take effect prevents medical device companies from competing on a level playing field,” said Bruce Josten, executive vice president for Government Affairs at the U.S. Chamber of Commerce. “It will put U.S. medical device companies at a competitive disadvantage to global competitors. Jobs, economic output, and medical innovations will be lost.  H.R. 436, the ‘Protect Medical Innovation Act,’ would repeal the medical device tax, preserve Americans’ quality of life, protect American jobs, and defend American innovation.”

“As the world’s leader in innovative life-saving and life-enhancing treatments and equipment, medical device manufacturers and their employees are critical to our nation’s health and prosperity,” said Aric Newhouse, Senior Vice President for Policy and Government Relations for NAM.  “A punitive tax on these manufacturers will only serve to stifle innovation and cause devastating job losses. With slow economic growth and weak jobs numbers, it is essential that we repeal this ill-advised tax on job creators and innovators.”

The $30 billion device tax would affect many companies that would owe more in taxes than they generate in profits, as the tax is applied to revenue.  This would result in the elimination of jobs, cuts to research and development budgets, and roadblocks in the development of new therapies.



Posted in Advocacy and Regulations, AZBio News, Government Affairs Blog, Inside the Belt Way.