Medical device tax repeal bill gains some ground

Makers of medical devices are gaining some momentum in a vigorous campaign to persuade Congress to scrap a tax imposed on their industry by the 2010 health-care law.

A bill to void the tax sponsored by Rep. Erik Paulsen (R-Minn.) will be marked up in the House Ways and Means Committee Thursday. Republican House leaders say a floor vote could be scheduled as soon as next week.

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Congress already has scotched other segments of the law through bipartisan votes — including a provision that would have expanded the range of purchases that businesses must report to the Internal Revenue Service and a “glitch” that would have allowed up to three million middle-class Americans to enroll in Medicaid.

It is still unclear if the medical device tax will prove the next example. Republicans have seized on the issue as a political weapon, pointing to it as the latest evidence that President Obama’s signature health-care initiative is a jobs killer. But the repeal bill’s 239 co-sponsors include 11 Democrats. Also expressing support are the two Democratic senators from Minnesota, one of at least eight states where the industry is strong.

Whether the bill ultimately succeeds could depend on how House Republicans choose to pay for it.

Congressional budget scorers estimate the tax — which takes effect Jan. 1 and was intended to help pay for the health-care law — will raise nearly $30 billion in revenue from 2013 through 2022.

The method Republicans choose to replace those funds, which must be announced before the House vote, could make the difference between passing the bill largely along party lines, or with a level of bipartisan support that could give the proposal a boost in the Democratic-majority Senate.

(The issue could also be moot if the health-care law does not survive Supreme Court review. A decision from the court is expected late next month.)

The provision will impose a 2.3 percent excise tax on gross sales receipts in excess of $5 million for manufacturers and importers of medical devices ranging from artificial hips, to MRI scanners, to cardiac defibrillators.

Representatives of the roughly $140 billion industry say that is a particularly heavy burden for a sector where innovation is often driven by start-ups.

“This is a highly competitive industry with fairly thin margins,” said Wanda Moebius, spokeswoman for the Advanced Medical Technology Association, or AdvaMed, the main industry trade group. “This is a tax that can’t simply be absorbed without consequence.”

Some companies will be forced to raise prices on customers such as hospitals and physicians, she predicted. Others, for whom boosting prices is not an option, will have to cut back on research and development and eliminate some of the industry’s roughly 400,000 jobs.

At least three firms have already announced layoffs in anticipation of the tax, including Michigan-based Stryker Corp, a maker of hip and knee replacements that said it will cut its work force by 5 percent, losing 1,000 jobs.

“This tax is a ticking time bomb that we need to dismantle before it’s too late,” said Paulsen, the repeal bill’s sponsor.