Oct 1, 2013/nytimes.com/–Congressional critics of President Obama’s signature health care lawhave described it as a “train wreck” and a “nightmare” so dire that they are willing to shut down the government to stop it.One way to avoid that, some members of the House of Representatives have said, is to repeal a part of the law that amounts to a sales tax on producers of medical devices.The Senate rejected the proposal on Monday, but it could surface again.At issue is a 2.3 percent fee on medical devices sold in the United States, like heart implants and artificial joints. The levy is supposed to generate about $30 billion over the next decade, according to government estimates, to be used to pay for the expansion of health care benefits under the new law.Republicans and some Democrats, particularly from states like Minnesota and Massachusetts where medical device producers are based, have urged repeal of the tax. The dispute dates to 2009, when the legislation was being crafted.
At the time, insurers and drug makers were willing to negotiate price discounts or givebacks aimed at lowering health care costs. The motivation of those industries was not solely altruistic; they recognized that an expansion of health care coverage would increase sales.
Makers of medical devices are also likely to see sales growth. But in 2009, the Advanced Medical Technology Association, a trade organization representing companies, balked at the idea of any givebacks, be it price discounts or surcharges in the form of a sales tax. Stephen J. Ubl, president of the association, said one reason the industry had not offered a cost-savings plan was that hospitals, which had already agreed to cost cuts, would seek price breaks from device producers. A separate tax on device sales would effectively result in “double taxation,” he said.
The industry’s central argument has not changed, although it also contends that the tax is forcing companies to lay off employees and is slowing the pace of new product innovation. In efforts to repeal the tax, device makers have unleashed a torrent of lobbying dollars and stepped up political contributions to sympathetic lawmakers, including Democrats like Senator Amy Klobuchar of Minnesota.
Device makers sell their products to hospitals, which negotiate prices with producers. Hospitals then bill insurers and others for procedures in which such devices are used.
For their part, hospitals have been leery of any attempts by device makers to pass the tax on to them by raising prices.
Some medical devices, like hip replacements, are high-margin products that generate big profits for producers. But some analysts suggest that many patients insured under the new law will be younger and less likely to need implants.
In a note to investors Monday, Lawrence Biegelsen, a device industry analyst at Wells Fargo, estimated that the impact of a tax repeal would result, on average, in a 4 percent increase in earnings per share for device makers. But the impact on individual companies could vary sharply, with Johnson & Johnson seeing a 1.4 percent gain and NuVasive, a maker of spinal products, seeing an 18 percent gain, he estimated.
Medical Device Industry Fears Law’s Tax on Sales
(Visited 7 times, 5 visits today)