In Senate vote to cancel tax on medical devices, a small show of bipartisanship

A vote to repeal part of President Barack Obama’s health law has united Democrats and Republicans in a small show of bipartisanship in the U.S. Senate.

 

Pennsylvania’s Sens. Pat Toomey and Bob Casey both oppose the tax on medical device makers. In addition to Casey, 33 Democrats supported the amendment that would nix the 2.3 percent tax on the sale of hip joints, implants and other medical devices. Still, experts say, it’s a mistake to interpret the vote as an attack on the federal health law.

Policy watchers says that before the November election, support for a repeal of the device tax may have reflected badly on the White House.

“I think what’s happened more recently is they’ve been given permission to do what they need to do represent their constituents,” said Chris Molineaux, president of the industry group Pennsylvania Bio.

“States with a larger medical device footprint, like Pennsylvania, Minnesota and Massachusetts and others, recognize that this is a poorly conceived excise tax that’s going to hurt jobs, hurt innovation and ultimately hurt patients,” Molineaux said.

Job-killer, say industry groups

The mounting consensus seems to be that the tax is a job killer, said Tom Connaughton, vice president of governmental affairs for Cook Medical.

Cook, which manufactures stents and catheters, is based in Indiana, but employs more than 200 workers at two sites in Pennsylvania among its 10,000 workers worldwide.

The device tax, which began in January, costs Cook more than a million dollars each month and has frozen the company’s plans to expand in the United States.

“If the tax does not go away, it will move production abroad — not in the sense of laying anybody off — but new products and the expansion will go abroad, and those are jobs that could have been had in the United States,” Connaughton said

The tax was designed to raise as much as $30 billion to help pay for the expansion of health insurance coverage under the Affordable Care Act.

Last week, Toomey said the tax was poorly designed because it collects on total sales.

“If you are a startup company, if you are a small growing company or if you are an established company and having hard times,” Toomey said. “This is a tax that disregards whether or not you are operating in the black, and says we’re just going to apply this tax on your total sales.”

Tax could deter innovation

Connaughton said the tax has unintended consequences that could also stifle lifesaving innovation.

“Some companies will choose to reduce their research and development. Because they may not have any choice to do that. And if that’s the case, it’s patients that suffer as well as employees,” he said.

The tax repeal proposal is “budget neutral” but there is no word yet on how the lawmakers would offset the loss of revenue for the health law.

The medical device tax would result in 43,000 lost jobs nationally and 1,916 in Pennsylvania, according to estimates from the Manhattan Institute for Policy Research.