The Affordable Care Act is aimed at bringing health insurance coverage to 30 million new Americans, giving new patients access to medical devices and other therapies.
But to pay for the legislation, the makers of those medical devices must pay a tax on each sale, a notion that's met with heavy resistance from the industry.
Device-makers say they will spend the next five months fighting for its repeal.
"Our medical technology companies have significant concerns about the impact this tax will have on patients and innovation," said Douglas Berger, a spokesman for the HealthCare Institute of New Jersey.
The excise tax, which would be paid by device-makers beginning Jan. 1, is expected to generate $29.3 billion over the first 10 years; it amounts to 2.3 percent on the sale of medical devices. And while the ACA in theory would create coverage for the uninsured, meaning improved access to devices, J.C. Scott, senior executive vice president for government affairs at the Advanced Medical Technology Association, said it won't help.
"Frankly, we have seen no evidence that expanded coverage is going to result in any measurable or proportionate increase for the device industry," he said.
According to Scott, universal coverage in Massachusetts didn't result in a boost in sales there. Part of the problem, he said, is that patients undergoing device-intensive procedures — such as hip or knee replacement — tend to be elderly, and thus already eligible for Medicare.
Scott said the tax will affect medical device firms in a different way than sales taxes in other sectors, as "we think it's very unlikely that companies are going to be able to pass on the bulk, or even a significant portion, of the tax on to their consumers," since the companies will be required to collect the tax, not hospitals. That could lead to cuts in other areas, Scott said: "That has a negative impact on the industry and on the development, frankly, of new treatments and cures for patients."
The tax is already causing some high-profile device-makers to announce layoffs in anticipation of the tax. Stryker Corp., which has facilities in Allendale and Mahwah, has announced plans to cut 5 percent of its global work force, or about 1,000 positions, as a result of the tax.
The company may owe up to $150 million in the first year, "equating to roughly one-third of our annual R&D investments," said Curt R. Hartman, interim CEO. "This is real money we would rather put toward jobs, innovation and priorities that will create value-added medical technology for patients, while helping us partner with hospitals to deliver cost-effective solutions."
In a statement, Franklin Lakes-based BD said it will "potentially eliminate existing programs in research and development and manufacturing." BD also said it will have to assess the size of its U.S.-based work force.
obbyists have been pushing for a repeal of the tax even before the Supreme Court's decision to uphold the health care reform law last month. The Supreme Court decision has made the issue more urgent, however, since it closed the door on the chances that the entire law would be thrown out.
The Republican-controlled House of Representatives already has voted to repeal the tax. The key battleground for repeal proponents is in the Democrat-controlled Senate, where two repeal bills have been introduced. One bill, sponsored by Utah Republican Sen. Orrin Hatch, had 33 co-sponsors as of July 19. All of those sponsors are Republicans, though it's believed Democrats in states with high medical device industry employment — such as Minnesota and North Carolina — could be persuaded to vote for repeal.
The matter became the subject of a spat last week between state Sen. Joseph Kyrillos and the man he's challenging in the U.S. Senate race, Robert Menendez (D-Hoboken).
Kyrillos (R-Middletown) said the device tax would force device-makers to raise prices and cut R&D spending, while Paul Brubaker, a Menendez campaign spokesman, said the law, while imperfect, is preferable to Kyrillos' approach, which he defined as the "unsustainable status quo."
Scott said even if the votes aren't there for a straightforward repeal, there may be other ways to include the repeal as part of a deal on wider legislation.
"I'm not sure … whether this is the kind of thing that would move as a standalone bill, or as part of a larger package," he said.
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