A growing bipartisan cadre of Congressional lawmakers is behind an effort to repeal a component of the Affordable Care Act they say will adversely impact manufacturers of heart valves, cardiac defibrillators, knee implants and other medical devices.
Lawmakers say that under the medical device act, which levies a 2.3 percent tax on the medical device industry, manufacturers will have to lay off workers and scale back on growth and innovation in order to meet millions of dollars in rising costs.
The tax, which went into effect in January, is levied on revenues, not profits, and has become the latest target on the so-called Obamacare. After months of bitter partisan debate, President Obama signed the legislation in May 2010.
“If you were looking for a textbook example of a blundering government enacting a law that raises health care costs, destroys jobs, curtails innovation and hurts patient care — you’d come up with the medical device tax,” said U.S. Rep. Charlie Dent, of the 15th congressional district.
Dent was among the growing number of Washington lawmakers who have introduced legislation to repeal the act.
U.S. Rep. Jim Gerlach, of the 6th congressional district, as well as Sen. Pat Toomey (R-Pa.) and Sen. Bob Casey (D-Pa.) also are supporting efforts to repeal it. Sen. Kirsten Gillibrand and Sen. Chuck Schumer, both Democrats from New York, in December asked Senate Majority Leader Harry Reid to delay the tax.
“I have talked to small businesses and manufacturers throughout Pennsylvania that have been unfairly burdened by medical device tax,” Casey said. “We have tens of thousands of jobs connected to the medical device industry. This is a common sense measure to improve current law and ensure we are doing everything we can to encourage innovation and job creation.”
According to Policy and Medicine, the primary justification for the tax appears to be the expected increase in demand from newly insured patients.
“Nevertheless, industry has not received guidance on how the tax will be implemented or collected. The primary justification for the tax appears to be the expectation for an increase in volume of newly insured patients for medical device companies,” the association reported on its website in November.
According to the the Advanced Medical Technology Association, the excise tax hike, which would raise $30 billion over 10 years, would jeopardize 43,000 U.S. jobs.
In addition to industry innovation and jobs, the tax would hinder the quality of patient care. The tax is expected to cost device manufacturers roughly $194 million per month, according to the association.
All sales of medical devices posted after January 2013 will be subject to the tax, even though coverage for the newly insured begins January 2014.
Toomey said the medical device tax will cost the Pennsylvania economy $100 million a year.
“The tax is discouraging companies both in Pennsylvania and across the United States from growing and planning for their futures,” Toomey said. “I am pleased to join Senator Hatch in co-sponsoring his legislation in the Senate to repeal it. This job-killing tax is yet another example of how President Obama’s healthcare bill is hurting American jobs and undermining our economy.”
Pennsylvania is home to several medical device firms, including Aesculap, Boas Surgical, Biomed, B. Braun, Olympus, Orasure and Precision Medical Instruments. The Patriot-News was unable to reach representatives at some of these firms in time for publication of this report.
Massachusetts-based Boston Scientific last week announced it would cut between 900 and 1,000 jobs, partly as a result of the tax.
In an email to The Patriot-News, a Boston Scientific representative wrote: “Healthcare reform, which includes the U.S. Medical Device Tax, is one of several reasons for the expansion of our 2011 Restructuring Program. Other reasons include changing customer purchasing dynamics, growing worldwide regulatory uncertainty and declines in our largest end markets.”
The financial impact of the device tax to Boston Scientific is estimated between $60 million and $75 million this year.