Medical-Device Industry Urges Repeal of Excise Tax

More than 400 companies in a letter Monday urged Congress to repeal a $20 billion medical-device tax scheduled to go into effect in 2013.

Over 400 health-care companies, venture capital firms and other associated organizations, including Boston Scientific Corp. (BSX), Kimberly-Clark Corp. (KMB)'s health-care unit and the National Association of Manufacturers, pushed for the repeal of a 2.3% excise tax on medical-device manufacturers. The tax is designed to help offset the cost of the health-care overhaul Congress passed in 2010.

"We believe that implementation of this $20 billion excise tax will adversely impact patient care and innovation, and will substantially increase the costs of health care," the coalition wrote Monday in two identical letters to the top lawmakers in both the House and Senate.

Congress passed the fee on medical device makers to help pay for the health-care overhaul's expansion of coverage. The excise tax, which requires manufacturers to pay a tax of 2.3% of a product's gross sale price, is expected to raise $20 billion over 10 years. An earlier version of the tax was intended to raise $40 billion over 10 years, but was slashed in half following aggressive lobbying from the industry.

Now the Advanced Medical Technology Association, the main trade organization for the medical-device industry, is helping lead an effort to repeal the tax. The joint letter sent Monday argues that the fees will cut companies' budgets for research and development and hiring, and could lead to higher health-care costs.

"If this tax is implemented in 2013, it will undermine our industry's ability to create and maintain good jobs in the U.S., and worse, will lead to higher costs for patients, undercutting one of the primary goals of health care reform," the trade group's president and chief executive, Stephen J. Ubl, said in a statement Monday.

Sen. Orrin Hatch (R., Utah), the top Republican on the Senate Finance Committee, in January introduced a bill that would repeal the excise tax.

-By Kristina Peterson, Dow Jones Newswires; 347-882-7215; [e-mail]