The U.S. House of Representatives on Tuesday passed a bill that – pending Senate approval – permanently repeals the medical device tax, a move industry leaders have been advocating for since the tax began more than five years ago.
The 2.3 percent excise tax on an American manufacturer’s sales of medical devices made and shipped in the U.S. began Jan. 1, 2013, as part of the Patient Protection and Affordable Care Act of 2010. The federal government put the medical device tax in place to help pay for the Affordable Care Act.
Then in 2015, companies got temporary relief with a suspension of the tax, followed by another two-year suspension, implemented earlier this year.
Now, with the passage of House Bill 184: The Protect Medical Innovation Act of 2017, members of the industry are hopeful it will pass in the U.S. Senate as well.
“It’s really unclear whether or not the Senate will take it up,” said Christopher Molineaux, president and CEO of Pennsylvania Life Sciences, a statewide trade association based in Wayne. Molineaux said repeal of the medical device tax has been his organization’s top federal policy priority since the implementation of the tax in 2013.
Since the tax began, it’s estimated that the tax cost the industry about 29,000 jobs nationwide, based on the invoices for those products the manufacturers were selling, Molineaux said.
“Eighty percent of medical device companies in the U.S. have not made a profit yet,” Molineaux said. “What that tax really led to is the reduction or complete elimination of jobs or investing in research and development.”
With the tax in its second, two-year suspension, many medical device companies have uncertainty on how to plan.
However, passage of the bill by the House adds a certain degree of optimism, Molineaux said.
“At least it’s an encouraging step forward for the development of these technologies, jobs that are created and, ultimately, on the patients that benefit from these life-saving technologies.”
In Pennsylvania, the medical device industry employs about 22,000 and contributes about $13 billion to the state economy.
DELAYED PROJECTS, HIRING
Not knowing if the tax would return creates uncertainty for companies, said Jeff Tyber, founder, president and CEO of Tyber Medical Inc., a medical device manufacturer in Hanover Township, Northampton County.
The tax caused the company to delay projects, hiring people and expansions, Tyber said.
However, he’s hopeful the Senate will approve the permanent repeal.
“I think there’s a pretty good level of bipartisan support for it,” Tyber said. “So far, what I’ve read, it seems more favorable.”
MONEY FOR R&D
Olympus Corp. of the Americas, a medical device manufacturer based in Upper Saucon Township, issued a statement describing the passage of the House bill as an important milestone in the permanent repeal of the tax.
“We are hopeful that the Senate will advance this important legislation,” said Stephanie Sherry, executive director of public affairs for Olympus, in a statement. “Full repeal of this onerous tax will allow our company to continue to focus on innovations in the medical device space.”
The availability of these financial resources will ensure that Olympus can continue to use about 10 percent of its annual global budget on research and development focused on pioneering technologies that advance the identification and minimally invasive treatment of disease, Sherry said.
Under the current medical device tax suspension, Olympus had the ability to fund new projects such as the recent grand opening of a second national service center in Tennessee, resulting in more than 280 new jobs, she said.
B. Braun Medical Inc. of Bethlehem also provided a statement regarding the bill.
“The recent House vote is an encouraging step toward seeing that this ill-conceived medical device tax is fully repealed,” said Jason Ford, manager of corporate communications at B. Braun. “The permanent repeal of this tax would allow B. Braun to continue to invest our resources into advancing and improving patient care. The impact of the tax has touched all areas of B. Braun including clinical trials, research and development, capital investment and product line expansion and staffing.”