Delay unlikely for medical device excise tax due to take effect Jan. 1


The White House has clearly indicated no intention of allowing delay of a 2.3 percent medical device tax slated to go into effect on Jan. 1, 2013 as part of the Affordable Care Act (ACA). President Barack Obama's message is that device companies will benefit monetarily from an influx of new healthcare consumers through provisions of the ACA.

In an interview on Friday with Frank Vascellaro of Minnesota-based CBS news affiliate WCCO, Obama said, “The healthcare bill is going to provide those healthcare companies 30 million new customers. It’s going to be great for business and they’re doing really well right now and they’re going to get 30 million more customers as a consequence, so this additional tax essentially comes back to them as new customers…The idea is that when you have 30 million more people coming in, you’re going to make money, you can do a little more to help facilitate and make sure people are getting the healthcare they need."

Last week, 18 Democratic senators and senators-elect sent a letter to Senate Majority Leader Harry Reid (D-Nev.) requesting a delay in the implementation of the tax, citing economic concerns. 

“The medical technology industry directly employs over 400,000 people in the United States and is responsible for a total of two million high-skilled manufacturing jobs…Additionally, this industry is also one of the few that enjoys a net trade surplus, significantly boosting U.S. exports around the globe," the lawmakers wrote in their letter.

The medical device industry has long been vocal in their opposition to the tax.

In an interview with Healthcare Finance News in September, Yair Holtzman, director and Global Life Sciences practice leader at WTP Advisors, said the tax would make it harder for U.S. companies to compete with countries such as China and India.

“The medical device excise tax could put more strain on the U.S. innovation ecosystem for medical technology and affect the willingness of investors to back start-up companies seeking to commercialize new technologies,” said Holtzman.

But not all industry analysts believe the outlook is so bleak.

“The new excise tax is not helpful, and we do think it comes out of R&D that many device companies increased in 2011,” Bruce Carlson, publisher of healthcare market research firm Kalorama Information, told Healthcare Finance News in September. “The tax will reduce operating profit, which will hurt companies when they go to expand. That being said, I don’t think any significant American device company would close because of it.”