Med-tech trade group takes aim at device tax

Congressional staff members have begun seeing ads urging a repeal of the tax on medical device sales, as a Washington-based trade group for the medical technology industry ramps up lobbying efforts ahead of a key vote expected to happen this month in the House of Representatives.

AdvaMed, a Washington-based trade group for medical technology companies like 3M Health Care and Medtronic, said Monday it was rolling out a media blitz designed to reach key lawmakers and staff members to drive home the real-world impact of a tax that they say harms the industry.

One TV spot, also available on YouTube, shows a diverse set of Americans telling the camera that the 2.3 percent tax on device sales is actually a tax on their medical cures. Another ad designed to run on news websites says the tax on device sales is actually a tax on medical innovations that reduce hospital stays by 58 percent.

"It's an effort to take this obscure, and some might say difficult-to-follow excise tax, and put a face on it. How does it translate for average Americans?" AdvaMed spokesman Greg Crist said Monday.

The medical device tax was included in the Affordable Care Act, ostensibly as a way to help offset the higher costs from other wide-ranging changes enshrined in the controversial 2010 federal health care reform law.

The tax was expected to generate $26 billion over 10 years; repealing it would shave more than $2 billion a year from federal revenue.

Unlike taxes on corporate profits, the 2.3 percent excise tax applies to medical device sales, which means even companies that lose money are subject to the tax.

Funds collected via the tax are deposited into the U.S. treasury, not into a specific fund to offset direct cost created by the reform law.

Although the tax has been on the books for the better part of a decade, it was only applied for three years, from 2013 to 2015, during which time med-tech companies said they scaled back on hiring and research.

Larger med-tech companies saw increased sales in those years, while smaller firms saw a net sales decline, the Government Accountability Office has found.

A temporary suspension of the tax for 2016 and 2017 was included in a spending bill signed by President Obama. A second suspension of the tax, from 2018 and 2019, was signed by President Donald Trump as part of a temporary budget bill in January. (The bill was signed Jan. 22, with the suspension retroactive to Jan. 1.)

"The medical device tax is a job killer. It's harming many small- and medium-sized medical device companies across Minnesota, making it harder for them to grow and hire, and making lifesaving medical technology more expensive for patients," said John Elizandro, communications director for Rep. Erik Paulsen, R-Minn. "Repealing it has been one of Rep. Paulsen's top priorities in Congress for years, and he's hopeful we'll get it done as soon as possible."

Paulsen has a repeal bill pending in the House Ways and Means Committee with 271 cosponsors, including dozens of Democrats. AdvaMed said the bill appears likely to get a House vote sometime later this month. A companion bill in the Senate has 17 cosponsors, including members of both parties.

Both of Minnesota's senators are co-sponsoring the Senate bill, and all eight of Minnesota's representatives support the House version.

Hundreds of small and large medical device companies operate in Minnesota, employing more than 30,000 people and creating a net $7.5 billion economic impact when sales and wages are factored into the equation. Shaye Mandle, CEO of the state's Medical Alley Association trade group, said the tax is one of the most talked-about issues among his members.

Joe Carlson • 612-673-4779