Medical device-tax opponents see window for repeal in lame-duck session

WASHINGTON – Medical device makers plan a full-court press in the next few weeks to lobby the U.S. Senate to permanently repeal a sales tax on medical devices that has bedeviled the industry since 2010.

In July, the House voted overwhelmingly for a bill led by Republican Rep. Erik Paulsen of Minnesota that killed the tax. That legislation was placed on the Senate legislative calendar in July. But the Senate's Republican leadership delayed action in the run-up to the midterm elections.

Now, said Scott Whitaker, CEO of the Advanced Medical Technology Association (AdvaMed), a window of opportunity exists to bury the 2.3 percent levy on gross sales of devices that is designed to support the Affordable Care Act.

Device makers, including those in Minnesota, have spent years and millions of dollars trying to overturn the tax since its passage. They will push especially hard against it in the next three to four weeks, Whitaker said.

The tax, which was collected from 2013 to 2015, has been suspended since the beginning of 2016. It is not slated to take effect again until 2020. But so far Congress has not ended it, leaving a nagging source of frustration for AdvaMed, a powerful trade group whose members include dozens of Minnesota companies.

Opponents' leading objection to the tax is that it is applied to gross revenue, not profits, a fact that hurts midsize businesses and startups.

Supporters said the tax is small in comparison to charges borne by the pharmaceutical and insurance industries to help pay for health care reform. They point to a Congressional Research Service report that concluded the tax's impact on the medical device industry, jobs and the cost of health care would be less dramatic than critics claim.

Shaye Mandle, who leads Medical Alley, Minnesota's medical-technology trade group, has member companies who are also AdvaMed members. Many of them are making calls to members of Congress, Mandle said.

"We've got a fully educated group [in the current Senate]," Mandle said. "It is our clearest pathway to full repeal."

Explaining concerns about the tax has taken time. At this point, Whitaker said, few people in Congress question "that the tax should go away," Whitaker told reporters in a call last week. "It's a process. [But] often times, the process gets in the way of progress."

So, too, may the midterm elections, which flipped control of the House to a substantial Democratic majority with many new members elected on the issue of protecting access to health care.

Whitaker conceded that the chances of a Democrat-controlled House killing the tax if the current Senate takes no action are not as great as they were in 2018 when Republicans controlled both chambers of Congress. Despite the bipartisan support, repeal may not be a priority for the new House, he said.

While Paulsen lost, Minnesota gained a congresswoman with extensive knowledge of the medical device industry when Democrat Angie Craig, a former executive at St. Jude Medical, was elected.

For now, though, the device industry sees its best chance to rid itself of the device tax in the current Senate's bipartisan opposition to the tax. Among those leading the charge could be Democratic Sen. Amy Klobuchar of Minnesota. Klobuchar joined Republican Sen. Orrin Hatch as a cosponsor of a Senate bill to kill the device tax.

"I will continue to work to permanently repeal it," Klobuchar said of the tax in a statement to the Star Tribune. "This is an additional tax on manufacturing, innovation and research at a time when we need manufacturing to be strong."

Klobuchar and eight other current Democrats have joined 14 Republicans to cosponsor the Senate repeal measure. Among them is Minnesota's junior senator, Democrat Tina Smith.

"The medical device industry's innovations help people around the world [and] employ tens of thousands of Minnesotans," Smith said in a statement. "And I support getting the medical device-tax repeal across the finish line."

That leaves opponents of the tax searching for must-pass legislation to which medical device-tax repeal can be attached. That process that was tried — and failed — with earlier repeal legislation.