Medical device makers decry cost of new tax

By Julian Pecquet - 03/26/12 02:15 PM ET

A $3 billion hit on the medical device industry — roughly the effect of the healthcare reform law's industry tax — would cost nearly 39,000 jobs and more than $8 billion in economic output, according to a new report released Monday by the Advanced Medical Technology Association (AdvaMed).

The Battelle report aims to put pressure on lawmakers to repeal a medical device tax that is slated to go into effect next year. The tax, one of several new healthcare sector fees created by President Obama's reform law, would raise $20 billion over 10 years to help pay for the law's insurance subsidies and Medicaid expansion.

Defenders of the tax say its effect would be minimal because devices are usually covered by insurance, which doesn't respond much to price changes. In addition, the healthcare reform law would add millions more people to the insurance rolls, potentially drumming up business for the industry.

The Battelle report modeled different scenarios that would have a $3 billion impact on U.S. medical device industry, such as increasing foreign competition, changes in healthcare reimbursement policies or changes in the business climate from such sources as pricing, demand or taxes. The report concludes that the medical device sector is among "a select group of ideal industries" because of its focus on high-tech research and development and its high-wage jobs — the sector is credited with generating almost 1.9 million U.S. jobs and $382 billion in economic output a year — but is vulnerable to changes in the business climate.

"For advanced medical technology companies to create the jobs needed to help power America's economic future, we need to operate in a business environment that will lead to tomorrow's treatments and cures after investment in research and development," AdvaMed President and CEO Stephen Ubl said in a statement announcing the report. "The new tax on medical innovation takes our industry and our economy in exactly the wrong direction. It is time to repeal this anti-competitive, counterproductive, job-killing tax."

AdvaMed hopes to repeal the law as part of negotiations over the renewal of the Food and Drug Administration's medical device user fees, which expire Sept. 1. Repeal bill sponsor Rep. Erik Paulsen (R-Minn.) has said the House is expected to take up his legislation, which has 229 co-sponsors, in the spring.