The medtech industry should be going into 2016 in a celebratory mood: The medical device excise tax, the longtime enemy of the industry, was finally repealed at the very end of 2015…at least for two years. Brought into effect in 2013, it has always been unpopular within the industry, enduring ongoing uproar, plenty of back and forth on its effect, and millions of lobbying dollars thrown against it since its launch.
To tell the truth, I’d sort of given up on the medical device excise tax story. I’ve written quite a bit about it (here, here, here, oh and here…I could go on). Although lobbying against the tax was ongoing, it had managed to stay standing for 2 years, and multiple studies of the medtech industry continued to show that the medical device tax actually wasn’t harming the industry in the “job killing” and “innovation crushing” way it was meant to. Although many naysayers did point out that these studies often didn’t represent the smaller medtech firms, it just seemed to be a lot of back and forth on the same stuff. I’d sort of accepted that the ongoing grumbling was just the way it was going to be.
However, the repeal did start to gain more traction when the tax failed to bring into the promised dollars. And after 2 years, the industry finally got what they wanted. At least for now. As this article rightly points out, the fact that the tax is only definitely suspended for 2 years leaves a lot of uncertainty for companies—at least if you know one way or the other, it’s much easier to plan around. Also, Congress didn’t find a way to make up the lost dollars, meaning that the tax could add nearly $30 billion to the national deficit, which is a tough sell when this comes up again in 2 years.
So where do we go from here? Possibly, this represents a first major chip at the ACA by opponents, creating more leeway and momentum to undo other parts of the Act. But for the medical device industry, they really need to take this reprieve and make the best use of it. The larger medtech companies spent millions of dollars paying the excise tax in 2015—they should theoretically have a lot more dollars to work with this year. If these companies prove that they can put these dollars to good use and advance health care forward, they’ll be in better shape to support the repeal when their 2 years runs out. But it remains to be seen how much will really change.
Follow Karen Gierszewski on Twitter at @kgierszewskiDRG for additional medtech market insights.