Opponents of medical device tax trying to slow its effects

The medical device excise tax will return on Jan. 1, after being suspended for the last two years. It was originally passed in 2013.
The medical device excise tax will return on Jan. 1, after being suspended for the last two years. It was originally passed in 2013.

WASHINGTON — For the first time in years, the medical device tax will take effect Jan. 1, after Congress left town without delivering on a long-promised delay or repeal. But opponents of the tax, both in industry and on Capitol Hill, aren’t giving up yet: They’re scrambling to find another solution that could offer some relief at the start of the new year.

Already they’ve secured commitments from congressional leaders that they will delay or repeal the 2.3 percent excise tax early in 2018. And now some lobbyists and lawmakers are working with the Treasury Department in hopes that the Trump administration will waive the penalties associated with problematic compliance in the early weeks of the year, before Congress might make good on its effort to address the tax. That will help companies whose accounting and reporting systems might not be ready for the Jan. 1 start date, an industry official said.

Whether or not they secure the change at Treasury, the looming tax is a blow to the medical device industry, which has for years fixated on its repeal, forgoing lobbying on almost any other issue. Medical device groups, for example — unlike nearly every other health care industry group, including hospitals, doctors, and insurers — supported the GOP’s failed attempts to repeal the ACA largely because the measures included a repeal of the excise tax.


The tax, passed as part of Obamacare, took effect in 2013. Congress later suspended it for two years, beginning in 2016, but that suspension ends in less than two weeks.

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Lawmakers “have failed to address a punitive tax that singles out the American medical technology industry, threatening jobs in the U.S. and future innovations for patients, and washing away the benefits of tax reform for our companies,” AdvaMed CEO Scott Whitaker wrote in a letter to President Trump this week.

Representative Erik Paulsen, Republican of Minnesota, a longtime opponent of the tax, said Thursday he had gotten a commitment from leadership to include the tax delay on some other legislative effort in January, suggesting it might be paired with the reauthorization of certain Medicare programs or a deal to lift caps on domestic and foreign spending.

“The reality is, this issue is so bipartisan, I can’t see it not happening. I feel optimistic, I just wish we’d have it done before the first of the year, but we’re doing whatever we can,” he told STAT late Thursday.

A spokesman for Senate Finance Committee chairman Orrin Hatch of Utah, whose panel has jurisdiction over the tax in that chamber, said Hatch “will continue to work with members to find a viable path forward and mitigate the adverse impact of these erroneous taxes taking effect in the New Year.” Neither House Speaker Paul Ryan of Wisconsin nor Senate Majority Leader Mitch McConnell of Kentucky commented on their commitment to delaying the tax in 2018.


Now, the industry’s lobbyists in Washington are hoping to mitigate the impact of the tax taking effect. They’re warning that companies aren’t ready to comply with the bimonthly payments they have to make, starting mid-January, in many cases because their accounting or reporting systems aren’t yet up to date. AdvaMed suggested in its letter to Trump that compliance could cost companies millions.

Paulsen also said his staff is working with the Treasury Department to encourage them to waive the penalties for companies that don’t perfectly comply, at least for the first nine months of the year. Treasury did something similar when the tax first went into effect in 2013 to give companies more time to get up to date.

“We’re trying to work with Treasury to give more flexibility wherever possible,” he said. “They’ve got the ability to one, waive penalties. We want to make sure that the companies don’t have to go through the collections process.”

Paulsen is also pushing Treasury to potentially go further to limit the taxes companies would have to set aside at the start of the year, in hopes Congress could act to delay the tax retroactively, he said. One lobbyist suggested a handful of other lawmakers had had similar conversations with Treasury.

Already the tax, which was originally passed as a way to offset the costs of Obamacare, has been delayed once with bipartisan support. Several votes to repeal the tax permanently have earned bipartisan and majority support, too.


Medical device companies say the tax is a job killer. Suspending the tax, they say, will let companies increase hiring and spur more research.

“Medical technology innovators have already made difficult decisions to address its possible return,” the Medical Device Manufacturers Association wrote in a summary document this year. “The damage this destructive policy caused is clear, with the Department of Commerce noting that the industry lost 28,000 jobs during the time that the medical device tax was in place.”