House Votes to Repeal Medical Device Tax

August 1, 2018

On July 24, the House passed the Protect Medical Innovation Act of 2018 (H.R. 184) by a vote of 283-182, with 57 Democrats joining all voting Republicans, to permanently eliminate a tax on medical devices under the Affordable Care Act (ACA).

The 2.3 percent excise tax is levied on all types of medical devices sold by medical manufacturers, from heart stents and pacemakers to MRIs and ultrasounds. The tax created under the ACA originally sought to help finance the health care expansion. The tax was collected from 2013 to 2015 but is currently suspended through 2019, following lawmaker’s inclusion of its postponement in a deal to end the government shutdown in January. The Congressional Budget Office (CBO) had estimated that a total of $3.27 billion would have been collected from device makers this year and in 2019, if the tax was in effect.

The tax already had an adverse impact on research and development, investment and job creation, jeopardizing the U.S. position as a global leader in medical device innovation. If this tax is not fully repealed, it will eventually force affected companies to cut manufacturing operations, reduce their research and development spending, and will cost American jobs in order to recoup the lost earnings due to the tax. It will also adversely impact patient access to new and innovative medical technologies.

Eighty percent of medical device companies have less than 50 employees, and 93 percent have less than 500 employees. Because the tax is on revenue–not profit–a small company that is not yet profitable would bear the biggest burden. This tax has hit these medical device companies especially hard in states that are leading the way in medical innovation; states such as: Pennsylvania, Minnesota, California, New York, and Massachusetts.

NSBA and members of both parties have long sought to fully repeal the tax, arguing that its enactment would lead to higher prices for consumers as well as the loss of tens of thousands of manufacturing jobs. This bill will correct the misguided effort of raising revenue by taxing medical device manufacturers, which only serves to deter innovation and further investment in new medical device technology that could eventually decrease health care costs.

The measure’s chief sponsor, Rep. Erik Paulsen (R-Minn.), a Ways and Means Committee member, has said that ending the tax is imperative for the industry, stating “This bill reverses a harmful tax that is hurting job growth and innovation across the country.” The legislation now heads to the Senate where some Senators, including Sen. Joe Donnelly (D-Ind.) have issued statements urging quick Senate passage, however, no time frame has been set for Senate floor consideration.

NSBA supports innovation and jobs and continues to advocate for ensuring that the next great medical breakthrough is developed here in the U.S., not imported from abroad, and the repeal of the medical device tax is crucial to ensuring this happens.