Everything You Never Wanted To Know About The Medical Device Excise Tax

As the January 1st 2013 start-date approaches, the medical device excise tax is back in the news. Here’s the latest:

On Jan 25th Minn Representative Eric Paulsen and 225 cosponsors introduced H.R. 436: Protect Medical Innovation Act of 2011, which aims to repeal the tax. Despite congressional support, Minnesota Public Radio states that the bill is unlikely to make it through the Democrat-controlled US Senate.

On Feb 3, the US IRS released its proposed rules for the new tax. A brief article from the law firm Hogan Lovells explains the new rules here.

On Feb 3, three US Senators responded to the IRS release by calling for tax repeal, here, here and here.

On Feb 7, industry organization Advamed called for medical device tax repeal as part of broader tax reform.

On Feb 10, the regulatory consultancy Emergo Group released a new survey concluding that “Smaller Medical Device Firms Plan to Increase Prices and Lower Costs to Offset US Excise Tax.”  The report states, “When asked which changes they plan to implement at their firms before the excise tax goes into effect, nearly 53% of survey participants stated they would pass along some or all of any increased costs associated with the tax to their customers. Roughly 37% of participants also plan to lower production costs without reducing staffing, according to survey results.”

Meanwhile industry group MassMEDIC is in the midst of updating its own 2010 survey on the tax.

Want to learn more about the tax and its effects?

In December 2011, KPMG published its FAQ about the tax, here.

Last month, a Bloomberg opinion piece, “Tongue-Depressor Tax Will Harm Jobs, Innovation” nicely summarized the expected job impact of the tax, here.

The best study of the tax’s job impact was published in September 2001 from CHI-California Healthcare Institute. The report states “Under reasonable assumptions, the tax could result in job losses in excess of 43,000 and employment compensation losses in excess of $3.5 billion.” Read the full report here.

The best study of the tax’s impact on healthcare costs was published in April 2010 from Medicare, which forecast that medical device taxes would be passed on to health consumers.  The report states, “We anticipate that these fees and the excise tax would generally be passed through to health consumers in the form of higher drug and device prices and higher insurance premiums, with an associated increase in overall national health expenditures ranging from $2.1 billion in 2011 to $18.2 billion in 2018 and $17.8 billion in 2019.” Read the full report here.

Trade organizations continue to speak out against the tax.

AdvaMed, the North Carolina Biosciences Organization (NCBIO) and 400+ device makers sent an anti-tax letter to congress in July 2011, here.  MDMA continues to strongly oppose the device tax. Trade news organization MassDevice produced an analysis of disparate impact of tax on smaller, revenue-producing companies, here.

Repeal still seems unlikely.  Stay tuned for more news as the year progresses.