Medical-device makers appear to be moving toward a win in their battle over a proposed industry tax that would be used to help finance healthcare reform.
Devicemakers smell victory
House, Senate have different ideas on taxes
Under a compromised version of the House’s Affordable Health Care for America Act released last week, devicemakers would be taxed $27 billion over seven years beginning in 2013.
The House’s tax would differ in several ways from a version included in the Senate Finance Committee’s recently revamped bill, which seeks to collect $40 billion over 10 years from devicemakers. The House’s proposed tax would be a 2.5% point-of-sale tax as opposed to an annual assessment based on devicemakers’ overall sales. Unlike the Senate Finance Committee’s version, devicemakers would be able to deduct the House’s tax on their annual corporate tax filings, and bring the net fee to about $20 billion over seven years, said Wanda Moebius, a spokeswoman for the devicemaker lobby group Advanced Medical Technology Association, or AdvaMed.
Stephen Ubl, president and CEO of AdvaMed, praised the House’s action. “AdvaMed appreciates the decision by House leaders to reduce the device tax,” he said in a written statement.
But Richard Umbdenstock, president of the American Hospital Association, said his organization has reservations about the House version of the tax, saying the AHA was “concerned that an additional tax on medical devices could be passed on to hospitals and the patients they serve.”
The House’s lower assessment comes just weeks after the medical-device industry launched an aggressive campaign to roll back the Senate Finance Committee’s proposed tax. Industry representatives simultaneously argued that the tax would force them to raise prices in order to recoup lost revenue, and that it was unfair because they already expected to be pressured to reduce pricing on products as a result of their provider customers receiving lower Medicare reimbursement rates under several reform proposals.
The group’s efforts to remove or reduce the tax have garnered the support of 20 House members and 14 senators whose states are heavily dependent upon the medical device industry.
But, in an industry overview memo last week, Barclays Capital analyst Adam Feinstein warned that wrangling over the assessment is likely not finished. “We note that what is being discussed in the House may not have any impact on the Senate,” Feinstein wrote.
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