Proposed rules issued on device excise tax

The IRS issued proposed regulations to implement the 2.3% medical device excise tax (PDF) created by the 2010 federal healthcare overhaul.

The tax will apply beginning Jan. 1, 2013 to all medical devices listed in about 1,700 FDA categories for 16 medical specialties, according to the proposed regulations.

The regulations specified that the tax will apply to devices generally bought by providers and not to medical equipment bought directly by the public, such as eyeglasses.

Political and industry critics highlighted the expected negative financial effects of the coming tax.

“Studies have shown the tax will cost jobs—as many as 43,000 are at risk—at a time when the American economy is struggling and U.S. medical technology leadership in the world market is threatened by competitor nations who have grown their industries through more favorable tax and regulatory policies,” Stephen Ubl, president and CEO of the Advanced Medical Technology Association, said in a written statement. “The anticipated tax has already forced companies to lay off workers and to reduce critical R&D that will help drive the next wave of treatments and cures.”

Sen. Orrin Hatch (R-Utah), ranking member of the Finance Committee, criticized the coming tax as a new burden on “job creators” and patients.

“Hitting medical device manufacturers—an innovative engine of our economy—with a job-killing $28.5 billion tax hike is exactly the wrong thing under a weak economy,” hatch said in a written statement. “This is a tax on innovation and job creation that will ultimately stifle the development of life-saving medical devices with costs that will be passed on to consumers.”