Obama firm on medical device tax

New business will defray cost of new taxes, president says

President Barack Obama rejected the idea of delaying the implementation of a 2.3 percent medical device tax slated to go into effect on Jan. 1, 2013 as part of the Affordable Care Act. The president said medical device companies would make up for the lost revenue because the ACA will bring more healthcare consumers into the marketplace.

In an interview last week 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."

[See also: FCC gives green light to wireless medical devices.]

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.

[See also: PwC: Medical device industry sees waning venture capital.]

Yair Holtzman, director and Global Life Sciences practice leader at WTP Advisors, contends the tax will 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.”

[See also: FDA proposes unique ID system for medical devices.]