December 11, 2017
Health Care

Medical device makers sweat tax revival

Photo | Contributed
Photo | Contributed
A catheter made by Smiths Medical, which has a Southington facility.
Greg Crist, Executive Vice President of Public Affairs, AdvaMed
Matt Pilon

Time is winding down for medical device manufacturers that have been lobbying to delay (again) or repeal an Obamacare tax on their sales revenues.

The 2.3 percent medical device tax took effect in 2013, and was expected to generate nearly $24 billion over a decade, one of several new levies meant to help fund premium assistance for income-eligible Obamacare enrollees.

Congress postponed the tax for two years in late 2015, under President Barack Obama. But unless lawmakers act again, it is set to be reinstated.

"We're looking for full repeal," said Greg Crist, executive vice president of public affairs for the medical device industry association AdvaMed.

That may not be in the cards, he admits.

"The trend has been in recent days to where, if left to their own workings, Congress would allow another one- to two-year suspension of the tax," Crist said.

Connecticut has 128 medical device companies, according to AdvaMed. In 2015, those companies employed more than 7,000 people.

According to the state Department of Economic and Community Development, the medical equipment and supplies manufacturing sector had just over $2 billion in sales in 2013. It's unknown what portion of those sales would be affected by the tax, which only applies to domestic sales, not devices sold overseas.

The industry contends that the tax will take a bite out of both jobs and research and development efforts.

Using U.S. Census Bureau data, AdvaMed announced earlier this year that the industry lost nearly 29,000 jobs between 2012 and 2015, when the tax was in effect.

Crist insists that the bulk of those losses can be blamed on the tax, and predicts more losses if the tax returns.

"If past is prologue, it is unfortunately very likely," he said.

However, the industry's financial performance has been mixed. A U.S. Government Accountability Office analysis found that the industry's net sales had continued to rise in 2013 and 2014, despite the tax.

Smiths Medical is among the companies that would be impacted by the tax's return. The British multinational manufacturer has a facility in Southington that makes catheters and tracheostomy tubes.

"The medical device tax hinders our ability to invest in the ongoing research and continued development of these types of life-saving technologies, which ultimately negatively impacts patient care around the world," said Chris Holmes, CEO of Smiths' medical division.

The industry has found some support for its position in Connecticut. U.S. Sen. Richard Blumenthal co-sponsored legislation earlier this year that would repeal the tax.

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