Medical device excise tax would reduce R&D spending, report says

Monday, December 9, 2019

Source: MassDevice

The medical device excise tax will reduce research and development spending and impede innovation if reinstated in 2020, according to a report from Minnesota trade group Medical Alley Association.

In the report, Medical Alley surveyed its members that will be affected by the return of the tax on Jan. 1, 2020. About 83% of survey respondents said they would be reducing research and development spending if the medical device tax is reinstated. Another 67% said they would be delaying or forgoing planned hiring and 47% said they would suspend plans to physically expand the business.

“These results confirm what we’ve heard in private meetings: the medical device tax actively chills innovation and disproportionately hurts small businesses. There is bipartisan support for repealing the tax and we urge Congress to act before the end of the year,” president and CEO of the Medical Alley Associate Shaye Mandle said.

The medical device tax was enacted as part of the Affordable Care Act in 2010 and reduced innovation and research and development in the industry when it was in effect. It was suspended in 2016 until the end of 2017 until Congress extended the moratorium for 2018 and 2019. There has been little movement to extend the moratorium again for 2020.

As previously reported, the medical device tax could result in a loss of 21,390 full-time jobs and a GDP reduction of $1.7 billion. The 2.3% excise tax on the value of taxable medical devices is projected to raise about $25 billion over the next 10 years.

Devices affected by the tax include X-ray machines, hospital beds, MRI machines and other medical devices listed as devices with the FDA under Section 510(j) of the Federal Food, Drug and Cosmetic Act and 21 CFR part 807.

There has been little action in the U.S. House of Representatives and the U.S. Senate on the bill introduced to repeal the tax. The bill, known as the Protect Medical Innovation Act of 2019, has drawn bipartisan support in the House and Senate. So far, 26 republicans and 10 democrats have backed the bill in the Senate and 189 republicans, 66 democrats and one independent have backed the bill in the House.

If the tax goes into effect, the tax is slated to delay innovation for patients, who will wait longer for innovations to reach their bedside, according to the report.

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