Medical Device Tax Is Back on Ice—For Now

Posted January 24, 2018

The passage of a three-week funding bill to end a federal government shutdown on Monday included one item that should put the medical device industry at ease. The continuing resolution, now signed into law, includes a provision to suspend the medical device tax, which industry has long criticized as a barrier to innovation that increases healthcare costs, for two years.

The 2.3% excise tax on medical device sales was reinstated at the start of this year to the dismay of many in the medical device industry, who balked at impending deposits to the Internal Revenue Service (IRS). The suspension is retroactive to the end of 2017.

In a statement, the medical device trade association AdvaMed applauded the passage of the continuing resolution. But with the medical device tax still officially on books, the group views the suspension as only an “interim step” to a permanent repeal.

“This suspension is good news for American patients and American innovation. Congress' action—just days before medical technology innovators were set to start cutting checks to the IRS—means funds will not be diverted from current investments in jobs, capital improvements, and research into new treatments and cures,” said Scott Whitaker, president and CEO of AdvaMed, in a press release. ”We look forward to continuing to work with the Hill on a bipartisan basis to drive towards permanent relief.”

The medical device tax began with the passage of the Affordable Care Act (ACA) in 2010, where it was intended to raise $26 billion to help fund ACA-related programs. But the tax drew increasingly bipartisan opposition until it was suspended at the end of 2015. AdvaMed previously reported that manufacturers cut more than 28,000 jobs from 2012 to 2016, the last time the tax was in effect. Despite the reported job losses, overall net profits for the 102 largest U.S.-based medical technology companies increased by 19% from 2012 to 2013, the year the tax was implemented, and by 7% the year after that, according to a survey of company data by the Government Accountability Office.