Momentum continues to build, both industry-wide and in Washington, for the repeal of the highly unpopular 2.3% tax on medical device revenue. Several bills were recently introduced in the House and Senate, with broad and growing bipartisan support, aimed at repealing the medical device tax.
To underscore the significance of this issue, just a few weeks ago two medical device tax repeal bills were introduced in the 114th Congress. On January 7, Congressmen Erik Paulsen (R-MN) and Ron Kind (D-WI), along with 272 co-sponsors, introduced H.R. 160, “The Protect Medical Innovation Act, and on January 13, Senators Orrin Hatch (R-UT) and Amy Klobuchar (D-MN), along with eight of their Senate colleagues, re-introduced S. 149, the "Medical Device Access and Innovation Protection Act."
With mounting evidence and increasing recognition from both sides of the aisle that the tax hurts the device industry and industry employment, repealing the tax will be a top agenda item for both parties. The legislation is strongly supported by the Medical Device Manufacturers Association (MDMA), the Advanced Medical Technology Association (AdvaMed) and the Medical Imaging & Technology Alliance (MITA). These latest legislative actions, which coincide with the release of surveys from both the MDMA and AdvaMed, clearly demonstrate that the tax hurts innovation and job creation and that its repeal is expected to significantly boost employment and R&D spending in the sector.
The AdvaMed Survey of their members found that the tax has had a substantial negative impact on jobs, R&D and capital investment since it its inception in 2013. More than half of the respondents indicated they had reduced their R&D spend because of the tax and that the tax would lead to 195,000 lost jobs over the next 5 years.
The results of an MDMA Poll of 100 medtech executives, conducted during the last 2 months of 2014, support the job loss findings of the AdvaMed poll but also suggest significant upside potential from repeal of the tax. While a majority of the executives said that their companies had either cut jobs or halted hiring as a result of the tax, repeal would lead to job creation and increased R&D spending. Key findings of the MDMA survey include: