Repeal the Medical Device Tax

Repeal the Medical Device Tax

Encourage Medical Innovation, Save Lives,
and Fuel the U.S. Economy

This piece was originally published in the November 2016 issue of electroindustry.

Congressman Erik Paulsen (R-MN)

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Investing in medical innovation is essential to ensuring the health and prosperity of our nation and affords the opportunity to export American ingenuity. Unfortunately, manufacturers’ ability to make such investments was threatened by a provision of the Affordable Care Act (ACA) that placed a 2.3 percent excise tax on medical devices, requiring an estimated average of $194 million in monthly payments to the IRS.

The medical device tax was originally intended to help pay for the ACA, but it has had a number of adverse effects. Specifically, it threatens the vitality of an economically sound industry and stifles medical innovation across academic, public, and private institutions. Innovation does not happen in a vacuum; it is these very links between such institutions that have helped create an estimated 35,000 jobs in Minnesota alone.

Fortunately, patients, physicians, and manufacturers breathed a sigh of relief late last year when Congress voted to suspend the device tax for two years. With its suspension set to expire at the end of 2017, however, the tax is again looming and threatening this vital industry just as innovation is picking up.

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Congressman Erik Paulsen

Research and development (R&D) is the bedrock of innovation, but going from idea to prototype to FDA approval to distribution can take years. The device tax is a tax on innovation because R&D budgets get cut when things get tight. The payoff from investing in R&D is immense but not immediate. Without the trailblazers who develop lifesaving and life-enhancing products, our nation would not be the exemplar of medical advancement that it is today. The medical technology sector is representative of the hard work and forward thinking required to position an industry at the forefront of innovation.

The medical industry employs more than 400,000 U.S. workers, generating approximately $25 billion in payroll, paying salaries that are 40 percent higher than the national average, and investing nearly $10 billion in R&D annually. The medical imaging industry bolsters America’s economic strength and global competitiveness, and its technologies are crucial to patient care, helping to prevent exploratory surgeries and reduce hospital stays. With an average daily cost of $1,172 for standard hospital care, every dollar spent on medical imaging in turn saves approximately $3 in total costs.

This is why I have long championed efforts to repeal this burdensome, job-killing tax in Congress. I sponsored the bipartisan Protect Medical Innovation Act (HR 160) in 2015, which passed the House with a vote of 280 to 140. I am proud that my colleagues and I were able to find a solution that would prevent further damage to medical innovation and economic growth, at least temporarily.

As a result of the suspension, new lifesaving medical devices received FDA clearance, plans for new products that were frozen due to a lack of funds are now being refreshed, and manufacturers in Minnesota and around the country are looking toward overall expansion rather than bracing for a halt.

Republicans and Democrats alike have a responsibility to show Americans that we can get things done. If we want to incentivize today’s visionaries to write the next chapter of the American medical technology success story, Congress must vote to fully repeal the medical device tax.

Read the November 2016 issue of electroindustry.

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