Medical Device Tax tops $1 billion from health companies

U.S. Chamber of Commerce

Obamacare’s medical device tax, in effect for over seven months, has raked in $1 billion according to the Medical Imaging & Technology Alliance (MITA), the Advanced Medical Technology Association (AdvaMed) and the Medical Device Manufacturers Association (MDMA):

“The $1 billion threshold is frightening as every dollar spent paying for this medical device tax threatens medical innovation and American jobs,” said Gail Rodriguez, executive director of the Medical Imaging and Technology Alliance.

$1 billion is a lot of pacemakers and defibrillators and stethoscopes and thermometers and tongue depressors and …

Because the 2.3% tax is applied to total revenue and not profits, it’s an additional cost on medical device companies. Many of these are small companies that don’t have profits yet on new products or operate on thin margins.  The Tax Foundaiton’s Kyle Pomerleau explains:

This means that $100 of sales of medical devices is a tax bill of $2.30 regardless of the company’s costs. It could be the case that a business made $100 in sales, but had $100 in labor and research and development costs. Compared to a corporate income tax, which would be zero in this case due to zero profits, this excise tax would cost more than 100 percent of the company’s profits. It is clear that fewer investors will want to enter an industry in which it is now harder to make a profit due to a tax.

Fred Burbank and Thomas Fogarty, California doctors and medical device developers recently asked in the Wall Street Journal, “Who would want to invest in a highly-regulated, government-controlled industry that faces a unique tax? What startup medical device company can reach the magical break-even point with a tax on its revenue?”

Less investment makes the U.S. medical device industry less innovative and less competitive globally.

“Each day that goes by with the medical device tax in effect is a major roadblock for patient care, job creation and innovation,” said Mark Leahey, President and CEO of MDMA.

$1 billion in taxes could have gone into development and job creation, but instead are going to pay for the unpopular health care law. Bipartisan majorities of House and Senate members support repealing this tax. All that’s standing in the way is the Obama administration.