The Taxing Problem of Health Care Reform

Julie Kirst, Editor

In the wake of the president’s signing of the new health care reform bill, news agencies and public and private organizations have wasted no time in putting their own spin on what this will mean to us individually and to the country as a whole. While some praise this as an “historic” event, others claim it is the end to certain freedoms. States have said they will challenge the constitutionality of the health care bill, lawsuits have been filed, and organizations in the health care arena are mobilizing their resources to send their protests to congress. One thing we know is that the furor over this will not end soon. The regulations that will come from the bill have yet to be written, and until they are, most pronouncements are speculative.

One area generating interest in the medical device sector is “Section 9009; Imposition of Annual Fee on Medical Device Manufacturers and Importers.” While no one knows what the exact details will be when the 2.3% excise tax begins in 2013, it has placed device companies on guard.

G. Wayne Moore, BSc, MBA, FASE, president, advanced development group, and chief strategy officer of Unisyn Medical Technologies, agrees with other news items I read that said that businesses will simply pass the increase on to their customers. In addition, Moore said the new tax will create other burdens for device companies.

“The new 2.3% tax will put additional pressure on innovation, as the base cost to bring new novel medical products to market will increase,” Moore said. “Some companies, such as Medtronic, have already indicated that the new tax will cause them to lay off some employees as well as throttle back on advanced research and development initiatives.”

Moore added that as part of the Medical Imaging Technology Alliance, the medical segment of the National Electrical Manufacturers Association, Unisyn Medical Technologies and other alliance members fought the inclusion of this tax to no avail. He added that what is not known about how this will play out is more than what is known at this time.

The Medical Device Manufacturers Association (MDMA) also expressed concern on its Web site about “the impact a $20 billion device tax will have on patient care, innovation, and small businesses.”

A national trade association based in Washington, DC, MDMA provides educational and advocacy assistance to innovative and entrepreneurial medical technology companies. MDMA officials said that if the tax cannot be eliminated, then it is essential to form it in such a way that it will provide relief for smaller companies.

AdvaMed, whose member companies produce medical devices, diagnostic products, and health information systems, also responded to the tax, saying on its site that, “While we remain concerned about the effects of the medical technology tax, we applaud expanded insurance coverage for millions of American families.” It also recommends that when it comes to implementing this reform, that congress consider the “potential impact of policy changes on future innovation and medical progress.”

What will this tax mean to smaller device companies? What will it do to the cost of new devices that already hold a high price tag? And, how will it impact hospitals and patient care and safety? It’s unclear at this time, but we welcome your input and hope you’ll blog about it with us at www.24x7mag.com/blog.

Julie Kirst