After ACA Upheld, Medical Device Tax Opponents See Repeal Window Closing
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Daniel Riordan-driordan@timesuniononline.com
The Supreme Court’s 5-4 decision to keep what is known as Obamacare intact means the repeal of a medical device tax will have to be achieved through other ways.
Since the Patient Protection and Affordable Care Act was signed into law by President Barack Obama, there has been a push by the medical device industry as well as politicians to get the 2.3 percent tax repealed.
Now the window to get rid of the tax as it is has narrowed.
Benjamin Salisbury, senior vice president, senior energy policy analyst at FBR Capital Markets, told the Times-Union in a phone interview Thursday afternoon, “In the short term this plays into Republican’s hands. They can paint it as an expansion of the federal government. In the long run, you can expect people to view it as they do Medicare, Medicaid.”
So for a repeal to take place, most likely Republicans would have to take control of the Senate and White House this fall.
Salisbury said the ruling would be a boost to Republicans’ fundraising efforts in November.
Before working for the Arlington, Va.- based investment management firm, Salisbury worked as a senior advisor for the Department of Energy.
Mitt Romney was reported to have raised several million dollars Thursday since the Supreme Court decision came down.
The device tax is scheduled to start Jan. 1, 2013, while the rest of the bill goes into effect in 2014.
Several of the bill’s initiatives are already in place.
Salisbury said that the tax could be adjusted once it goes into effect if it is shown to be disproportionately determental to the industry.
Though the tax, Salisbury said, was birthed, at least in part, from the medical device industry’s position when talks that crafted Obamacare were taking place, “It’s largely based on their strategy during negotiation. The device makers’ stance was to oppose the bill rather than play ball.”
Industry analysts noted that the pharmaceutical industry fared much better when the bill was crafted than device makers.
On June 8, the New York Times reported that several e-mails between members of Obama’s administration and pharma lobbyists during the crafting of Obamacare showed concern on the part of pharma.
To avoid measures that would cut medication prices, pharma would throw its support behind the bill in exchange for leaving out language that would require “reimportation of prescription medicines at lower prices.”
While many are talking about the device tax or individual mandate, Salisbury said that “the employer portion is secretly the most controversial part.”
“You could make the argument that one of the unintended consequences it locked in is employer-based insurance,” said Salisbury.
A provision in the bill requires companies that employ 50 or more people to provide health insurance. Those with less than 50 are exempted or can receive tax credits to provide health care.
In terms of the device tax, those against it continued to maintain their opposition to it.
AdvaMed President and CEO Stephen J. Ubl released the following statement Thursday: “AdvaMed supported goals of health care reform consistent with our long-held principles. We have consistently opposed the $29 billion medical device tax because of its damaging effects on economic competitiveness, jobs and the research and development needed to find tomorrow’s treatments and cures. The House has already voted to repeal the device tax, and we are heartened by the number of senators who have said they oppose the tax.”
“The Supreme Court ruling had no impact on the medical device tax, which has always been, and continues to be, our biggest objection to the Affordable Care Act,” said Bill Kolter, corporate vice-president of government affairs, public affairs and corporate communication. “Biomet will continue to work through our industry trade associations and with our legislators to advocate for repeal of the medical device tax. We are grateful for the leadership shown by the Indiana delegation in supporting repeal of this ill-conceived and counter-productive tax.”
While the House of Representatives did vote to repeal the tax this month, that appears to be going nowhere.
On June 7, the house voted 270-146, with 37 Democrats joining the Republicans to pass a repeal bill.
Democratic Senate leaders have said on numerous occasions that it wouldn’t even vote on such a repeal.
It would also be vetoed by Obama even if it passed the Senate floor.
“We will continue to work with policymakers on both sides of the aisle to achieve this goal,” said Ubl.
Medtronic, the world’s largest medical technology company, came out with a statement Thursday once again stating they are preparing for the tax to come into effect.
Previously, Medtronic stated it would lose between $125 to $175 million annually because of the tax.
In a February article from Bloomberg News, the Minnesota-based company estimated paying between $40 and $60 in the tax in 2013.
The Wall Street Journal stated in an article Thursday that the device tax has caused planned layoffs.
They listed Zimmer as a company that had planned layoffs ahead of the device tax.
“We have no planned layoffs,” said a spokesperson for Zimmer. “The actions we took in 2010, 2011 were a result of transition, which were in part of the impact of the tax.”
Mitch Miller, business development and marketing manager for Instru-Med, talked about the impact for companies that sell directly to device companies.
Miller said the Warsaw-based company could see trickle-down effects of the device tax.
"You look at these companies and they don’t get as much for a knee as they used to,” said Miller. “Then this medical tax on gross revenue comes in.”
Instru-Med will receive quotes from companies to build products based on blueprints the company has supplied. Those quotes may flat line or even go down due to those companies’ needs to defray cost that comes from the device tax.
“Certain customers we work with are already more aggressive now than others about setting prices,” said Miller.
Follow staff writer Daniel Riordan on Twitter at @TUNews_Riordan
