OPINION: The Senate Should Repeal The Medical Device Tax

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Scott Whitaker CEO, AdvaMed
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It’s no question that opioid addiction is a national public health emergency. President Trump’s own commission on opioids returned with a 126-page list of recommendations to combat the crisis and highlighted a variety of medical technologies as a key means to opioid-free pain relief — including wearables that sense respiratory depression, in-home vital monitors with transmission capability, and a range of pain reduction devices, like subcutaneous field stimulators and implantable infusion pumps.

This week, the U.S. Senate passed legislation that will make parts of the commission’s proposal a reality. For devices specifically, the legislation contains provisions that call for clear and efficient approval pathways for new devices that can serve as alternative treatment solutions to opioids and encourage the education of providers on these new technologies so that these treatment solutions make it to the patient.

These provisions are helpful for devices that are already in the pipeline for FDA approval, but they don’t address the elephant in the room: the medical technology industry is suffering from an enormous tax on revenue. This tax creates a downward spiral that significantly stymies further investment in research and development of new devices.

Put simply, Congress is allowing a punitive, specific tax on medical technologies that are critically needed to address the opioids crisis. Not only does the tax defer investment; it singles out the very technologies that help patients in pain and applies a tax to them.

As a result, the industry finds itself in the crosshairs of a troubling dichotomy. Congress recognizes the value of medical technology innovation and wants more of it, but at the same time discourages it, allowing a harsh excise tax on medical devices to loom in the background.  

Fortunately, the Senate has the power to reverse this precarious situation. In July, the House passed a bill that would repeal the medical device tax, once and for all, and now that same bill lies with the Senate. The Senate must vote to permanently repeal the medical device tax, so patients — especially those struggling with opioid addiction — can receive the care they need.

During the two years the medical device tax was in effect, small business startups, which serve as a hotbed for innovation, suffered the brunt of the blow. For them, the tax poses a double penalty, since it’s imposed on the first dollar of revenue earned rather than on total profit.

These startups are no small part of the MedTech landscape, considering more than 80 percent of MedTech companies have fewer than 50 employees. Almost one-third of new companies in the medical technology industry were forced to reduce R&D spending, meaning new and emerging discoveries were shelved. It’s safe to assume that many businesses were shuttered altogether or worse, never actualized.

Larger, established MedTech companies struggled with restrictions in acquisition budgets that could have helped rescue these emerging industry players bringing new ideas for innovative treatments and cures to the table.  To put the exact impact into perspective, in 2013 alone, the first year the tax was in effect, industry research and development spending was slashed by $34 million.

Full circle, the entire MedTech industry suffered and we will never be able to quantify the indirect impact to public health or the number of new devices that were deferred or terminated as a result.

If reinstated, the tax would result in an additional loss of $2 billion in investments per year. This means that as long as the device tax is around, the medical technology industry and its ability to create life-changing and potentially life-saving treatments will be stifled.  

It’s clear why an overwhelming bipartisan majority in the House voted to repeal the medical device tax. In fact, the latest vote on H.R. 184 was among the largest bipartisan votes this session, despite the pressure of a hyper-politicized election cycle.

Now, the U.S. Senate must carry the momentum forward and finish the job. While the 60-vote threshold poses a challenge, there are strong indications from both parties that the votes are there.

Already, the Senate companion bill (S. 108) has strong bipartisan support from a diverse group of lawmakers. When an issue is important enough, both parties can put ideology aside and focus on reforms that benefit every American. Lawmakers can put ideas before ambition and people before politics. They can vote in support of American patients and American innovation.

The time is now, Senators. Get a full repeal of the device tax done once and for all. Seal your commitment to American innovation and restore hope for American patients. I guarantee, your action will usher in a healthier, more productive tomorrow.

Scott Whitaker is the CEO of AdvaMed.

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.