The Senate’s inability to move forward on healthcare reform left behind one key provision that made sense both as sound economic policy and good health policy – namely, repeal of the innovation-crushing and jobs-killing medical device excise tax. On behalf of American patients, their families, and manufacturers, it’s time to pivot and move this forward now.
Originally passed to help fund the Affordable Care Act, the medical device excise tax was imposed on devices such as artificial hips and knees for people suffering from osteoarthritis, radiation therapy machines for those battling cancer, and replacement heart valves and other innovations that give people a new chance at life.
As a matter of policy, repeal of the medical device tax enjoys widespread, bipartisan support. Senators and House members on both sides of the aisle understand that its fate has far-reaching implications for the future of medical innovation and the nearly 2 million American jobs medtech supports. The Milken Institute has found that policies that discourage innovation could cost the U.S. economy $3.4 trillion over the next 25 years.
While Republicans’ years-long effort to reform the U.S healthcare system lingers, this issue is too urgent for us to wait. Time is running out for America’s device manufacturers, and the reality is that thousands of companies across the country will face an enormous tax increase at the end of this year if Congress doesn’t act – to the tune of $20 billion.
The potential for collateral damage in the wake of Congress’s failure to act cannot be overstated. Inaction by Congress would mean a tax increase on the very medical technologies that today are helping people live longer, healthier lives, and that yield savings across our healthcare system by replacing more invasive procedures, reducing hospital stays, and allowing people to return to work more quickly.
The industry saw a negative ripple effect before the tax was temporarily suspended in late 2015. The device tax meant millions less spent on hiring, investment, and research and development. And data from the U.S. Department of Commerce released in January showed that nearly 29,000 U.S. medtech industry jobs were lost during that time. The data also revealed that the industry hasn’t seen job losses of this magnitude since the 2008 recession.
If the tax comes back, it will also hamper the industry’s long-term innovation pipeline. Medical technology companies are making decisions now about what projects to fund eight to ten years from now. The tax would directly harm their ability to fund promising solutions that could yield the next exciting advances in life-saving technologies. The Pacific Research Institute estimates that every year the tax is in effect, it would result in an estimated reduction of $2 billion in R&D investment.
In contrast, the current, temporary suspension of the tax has resulted in reinvestment of the savings in research and innovation, meaningful advances in patient care, and economic growth. But that temporary reprieve will expire at the end of this year unless Congress acts, and medtech companies urgently require certainty to help support decisions on capital investments, R&D projects, and new hires. In fact, a recent study by the American Action Forum showed permanent repeal could result in over 53,000 more jobs for our nation.
No matter what path Congress ultimately takes this year, one thing is for sure – suspending the device tax again is not enough. Permanent repeal must be a priority. Simply put, it’s the right course for continued American leadership in medical innovation.
Scott Whitaker is president and CEO of AdvaMed, the Advanced Medical Technology Association.
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