Medical device industry mounts renewed push to repeal tax

Brian Concannon.Globe Staff/File 2010/Boston Globe

The medical device industry is mounting a renewed push to repeal a 2.3 percent excise tax on US sales, betting its prospects for scrapping the two-year-old levy have improved since Republicans took control of both houses of Congress last year.

A repeal bill passed in the House on Thursday with the support of 234 Republicans and 46 Democrats, including US Representatives Katherine Clark, Bill Keating, Stephen Lynch, and Seth Moulton of Massachusetts.

But it's far from clear whether backers can prevail in the Senate and gain enough votes to override an expected presidential veto.

While device makers in Massachusetts and elsewhere complain the tax is onerous, eroding their ability to create jobs and expand research, the measure provides financial support for President Obama's health care overhaul. Even some Bay State lawmakers who favor repeal are unlikely to support a bill that doesn't include some other way to help fund the health care law.

"It's our hope that, given the bipartisan support this [House] bill received, there would be an opportunity for this repeal to be enacted," said Thomas J. Sommer, president of the Massachusetts Medical Device Industry Council, an industry trade group. "We're saying this is a punitive tax for a growing and vibrant industry in our state."

Revenue from the tax implemented in 2013 makes up only a small fraction of the funds needed to support the health care law, known as the Affordable Care Act. The tax collected $1.3 billion nationally in its first year, far short of revenue projections of $2.3 billion. Sommer estimates that about 480 medical device companies in Massachusetts, which employ about 23,000 people, have paid more than $100 million annually since the tax took effect.

Haemonetics Corp., a Braintree maker of devices that collect and process blood for hospitals and other customers, has paid about $4 million a year in the excise tax, according to chief executive Brian Concannon. At a time when Haemonetics plans to expand its research labs, that revenue would enable him to hire 40 engineers, he said.

"When the tax went into play, my shareholders still expect me to produce the same returns as we produced before," Concannon said. "If that tax goes away, I could spend millions of dollars more on research and development without batting an eye."

While repealing the tax wouldn't by itself unravel the US health care overhaul, it could create a potentially disturbing precedent for the hospital, insurance, and drug industries, said Paul Van de Water, senior fellow at the Center on Budget and Policy Priorities, who opposes repeal.

"If the medical device industry is able to get this tax repealed, then other industries may come back and try to get their funding contributions repealed," Van de Water said. "And that could start increasing the deficit by even larger amounts."

While the members of the Massachusetts delegation have been vocal in their support for repealing the medical device tax, most say they would only sign onto legislation that includes a revenue "offset" for the tax because they do not want to damage the health care law.

A spokeswoman for Senator Elizabeth Warren, a Massachusetts Democrat, said she would not support the Senate version of the device tax repeal bill as it's currently written because it has not identified such an offset.

The Senate bill, sponsored by Orrin Hatch, a Utah Republican, and Amy Klobuchar, a Minnesota Democrat, has 36 cosponsors. Four others are Democrats, including Senator Jeanne Shaheen of New Hampshire.

Senator Edward Markey has proposed different legislation that would repeal the tax and replace the lost revenue by ending more than $29 billion in tax breaks and subsidies for the oil and gas industry over the next decade. His bill has drawn no cosponsors.

"I support repeal of the medical device tax, provided that it does not come at the expense of increasing health care costs for lower-income families and does not increase the deficit," Markey said in a written statement Friday.