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Tax Could Ensnare Medical Device Industry

August 21, 2017

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When a 2.3% excise tax on all medical devices sold in the United States went into effect in 2013, Checkpoint Surgical was just getting started with its intra-operative nerve stimulators, used to locate and assess nerves during surgery.

For a company that was at the time not yet profitable and still dependent on investor revenue, the tax was significant, said Len Cosentino, president, and CEO of the biomedical company in Cleveland. The cost of the tax was equivalent to hiring an additional employee that he estimates would have brought in another $300,000 to $400,000 of revenue.

Checkpoint Surgical and the medical device industry caught a break in 2016 and 2017 thanks to a bipartisan decision in 2015 to place a two-year moratorium on the tax, which was created to help pay for the Affordable Care Act. During that time, the company was able to get more investment dollars, hire more people, and spend money on sales and marketing.

Efforts to again halt the tax before it’s set to go back into effect in January were tied to the ultimately unsuccessful efforts to repeal and replace the 2010 health law, also known as Obamacare. Still, after enjoying such broad bipartisan support in 2015, biomedical leaders say they’re hopeful that Congress will put forward legislation to ensure the tax will not be in place come Jan. 1, 2018. Republican Sen. Rob Portman of Ohio, in particular, has been a vocal opponent of the tax.

Democratic Sen. Sherrod Brown of Ohio, on the other hand, has voted against repealing the tax in the past but also voted for the temporary moratorium. According to his office, Brown in the meantime has asked medical device companies for information about how the moratorium over the last two years has affected their businesses — whether they’ve been able to hire more workers, increase wages, maintain manufacturing jobs in the U.S. or lower consumer costs, for example.

“The last time this was on the floor of the Senate as a standalone measure, it garnered 79 Senate votes,” said Greg Crist, spokesman for the Advanced Medical Technology Association (AdvaMed) in Washington, D.C. “If you put this bill on the floor tomorrow, in either chamber, it would pass overwhelmingly.”

Read More at the Source: Tax could ensnare medical device industry – Crain’s Cleveland Business


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