WASHINGTON — The medical device industry says its fight to kill a new tax on its products is not over, but public policy experts say chances of winning an outright repeal have all but disappeared.
Hundreds of companies in the medical technology sector became responsible for paying the tax on sales of certain devices Jan. 1 after efforts to delay it as part of the federal fiscal cliff deal failed. First deposits of the 2.3 percent levy are due on Jan. 29.
“The odds are close to zero” that the industry can get rid of the tax completely now that it is in place, predicted Don Kettl, dean of the University of Maryland School of Public Policy.
“Under normal circumstances, it’s harder to stop a tax once it’s enacted,” Kettl said. “You have to reverse the whole legislative process.”
Industry lobbyists claim that the tax will cost medical technology businesses $667 million to implement nationwide and lead to layoffs or reduced hiring. They dispute tax supporters’ rationale that the new health care law will insure more people and increase device makers’ business, offsetting much of the tax.
St. Jude Medical has estimated the cost of the device tax at $50 million to $60 million in 2013. The company has laid off 800 employees since August, and a spokeswoman said that “the medical device tax was one of many factors that contributed to the rationale for the realignment of our business.”
Med-tech giant Medtronic estimates that the new tax will cost $125 million to $175 million annually, said a spokeswoman for the firm in Fridley, Minn. Medtronic set aside an initial $50 million for the tax’s arrival.
“This does take budget away from other investments we could make with that funding,” spokeswoman Cindy Resman said. But “we have accounted for the impact in our planning.”
Annual sales of medical devices made by Massachusetts companies are about $13 billion and medical devices are the top exported commodity out of the state, Sommer said.
Medical device companies employ nearly 24,000 people in Massachusetts, who earn an average salary of $66,787, according to research by the Advanced Medical Technology Association, a national industry group.
(In Massachusetts, sales of medical devices are worth about $13 billion — making them the state’s top export — and theindustry employs 24,000 people, who earn about $67,000 a year on average, according to trade association figures.)
Medical device companies employ nearly 24,000 people in Massachusetts, who earn an average salary of $66,787, according to research by the Advanced Medical Technology Association, a national industry group.
Annual sales of medical devices made by Massachusetts companies are about $13 billion and medical devices are the top exported commodity out of the state, Sommer said.
Medical device companies employ nearly 24,000 people in Massachusetts, who earn an average salary of $66,787, according to research by the Advanced Medical Technology Association, a national industry group.
Annual sales of medical devices made by Massachusetts companies are about $13 billion and medical devices are the top exported commodity out of the state, Sommer said.
Medical device companies employ nearly 24,000 people in Massachusetts, who earn an average salary of $66,787, according to research by the Advanced Medical Technology Association, a national industry group.
Despite implementation of the device tax, the Advanced Medical Technology Association (AdvaMed), a trade association leading the lobbying effort, clings to hope of killing the device tax as part of comprehensive tax reform that is supposed to take place under the umbrella of deficit negotiations later this year.
That’s an extremely optimistic goal, according to Norman Ornstein, a congressional expert with the American Enterprise Institute. Even with comprehensive tax reform to address the deficit, Ornstein said, the goal is to add revenue to the federal budget, not take it away.
No one has yet offered an alternative source of revenue that the House and Senate can agree to.
In any case, the University of Maryland’s Kettl said, the White House and most Democrats “are trying to build a deep moat around anything having to do with funding health care reform,” which President Barack Obama considers the landmark legislation of his first term.
The best way for the device industry to make its case now, Ornstein said, is to prove that its dire predictions of layoffs and shuttered businesses are actually playing out.
“There’s little question that big players can deal with this and continue to thrive,” he said. But if small med tech companies “struggle and fail,” the leverage for reform might exist.
On the other hand, Ornstein warned that federal regulators will be on guard against industry manipulation “to make this look awful.”
“That,” Ornstein said, “is the same as health insurance companies jacking up premiums just before the health reform law takes effect.”
Jim Spencer is a reporter with the Minneapolis Star Tribune. Reach him at jim.spencer@startribune.com.
