Healthcare Business News
AdvaMed President and CEO Stephen Ubl

Industry rips device tax as regs arrive

By Jaimy Lee
Posted: December 5, 2012 - 3:00 pm ET

The Internal Revenue Service issued its final regulations on the medical device excise tax (PDF), prompting renewed calls by manufacturers to repeal or delay implementation of the tax.

A provision of the Patient Protection and Affordable Care Act mandates manufacturers pay a 2.3% tax on the sales of certain medical devices starting next month. The tax is considered the industry's contribution to financing the 2010 healthcare law.

Providers and group purchasing organizations have previously raised concerns that manufacturers will pass through the cost of the tax to purchasers of medical devices, while trade groups representing device manufacturers have said the tax will lead to job losses and more broadly will have a negative impact on innovation in the medical technology sector.

In a statement today, the Advanced Medical Technology Association again called for a repeal of the excise tax.

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“AdvaMed is carefully reviewing the regulations released today by the IRS,” AdvaMed President and CEO Stephen Ubl said in the statement. “But regardless, Congress should act to address this $30 billion tax before it takes effect on January 1.”

The Medical Imaging and Technology Alliance, another group that has publicly opposed the tax, urged lawmakers to pass legislation that would delay implementation of the excise tax.

“MITA strongly urges Congress to enact legislation immediately to delay implementation of the medical device tax,” Gail Rodriguez, MITA's executive director, said in a statement. “Ultimately, Congress should repeal this job-killing tax.”

The IRS did not adopt many of the recommendations it received.

However, the final regulations say that the tax does not apply to procedure kits assembled and used by the same provider. The kits include at least two or more medical products packaged in a single bag, tray, or box and are often assembled by hospitals or other providers. Provider groups were concerned that the IRS would view hospitals as manufacturers of the kits, which would make the kits subject to the tax.

“With hospitals already contributing $155 billion to the expansion of health coverage, adding this additional tax on providers would have been unacceptable,” Blair Childs, senior vice president of public affairs for the Premier healthcare alliance, said in a statement.

The IRS said it plans to issue separate interim guidance relating to kits.

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