Paulsen's medical device tax repeal bill garners near veto-proof House majority

WASHINGTON – The House on Thursday voted to repeal a medical device tax that Minnesota's medical technology sector lobbied extensively to kill.

Rep. Erik Paulsen, R-Minn., the bill's lead sponsor, expressed delight at the lopsided 280-140 vote. "I knew support was broad and deep" to get rid of the 2.3 percent tax on device sales, Paulsen told the Star Tribune.

Minnesota's other Republican representatives, John Kline and Tom Emmer, voted to kill the tax, as did three of the state's five Democratic congressmen — Rick Nolan, Collin Peterson and Tim Walz. Concerns about the tax's impact on jobs and innovation drove their votes.

Democrats Keith Ellison and Betty McCollum voted against repeal, both saying that they support ending the tax, but believe there must be a way to replace the revenue it produces.

Several Republican representatives missed the vote to travel to South Carolina to address a racially motivated mass murder in a church. If they had voted, Paulsen said, "there would have been a veto-proof majority."

That level of support could eventually be necessary because on Monday, the White House threatened a veto of Paulsen's bill in its current form.

The legislation's lack of an alternative revenue source is a sticking point with President Obama and many Democrats because the device tax helps pay for the Affordable Care Act. Without another funding stream, repeal would add a projected $24.4 billion to the federal deficit over 10 years.

So the fate of device tax repeal remains uncertain not only in the White House, but also the Senate.

Still, Thursday's vote showed the device industry's lobbying muscle. Paulsen received $109,000 in campaign contribution from supporters of repeal in the 2012-2014 election cycle, more than any other member of Congress, according to the open records group Maplight. Paulsen's district includes several big med tech firms. He has led the charge against the device tax since it was approved in 2010 as part of the Affordable Care Act.

Medtronic PLC, one of the state's major med-tech employers, said Thursday that the tax "runs counter to the goal to promote innovation in our industry." The Center for Responsive Politics says Medtronic spent more than $600,000 on campaign donations in the 2012-2014 election cycle with much of the money going to representatives and senators who opposed the device tax.

St. Jude Medical Inc., based in Little Canada, called the vote "an important milestone for our industry and represents that both parties realize that repealing the medical device tax will allow us to create jobs, build infrastructure and expand our investment in innovation for the patients we serve."

In 2012 and 2013 Paulsen guided repeal bills through the House only to watch them buried in a Senate controlled by Democrats.

With Republicans gaining a Senate majority in 2014, he now thinks his bill will finally get to a vote in the upper chamber and pass.

Whether a veto-proof majority exists is another question.

The House vote "sends a powerful message to the Senate," Steve Ubl, CEO of AdvaMed, the nation's major device trade group, told the Star Tribune. "It represents a high mark in Democratic support."

On Thursday, 46 Democrats voted for repeal. In 2012, when Paulsen's first repeal bill passed the House, only 17 Democrats supported it, Ubl said.

"We've been here before," said Shaye Mandle, president of LifeScience Alley, which represents hundreds of Minnesota med tech businesses. "But we're in a better position this time."

In an interview, Mandle called Ellison's and McCollum's votes "disappointing." He also acknowledged that he didn't know if supporters of repeal could gain a veto-proof majority of 67 votes in the Senate.

The tax's role in paying for Obama's signature first-term legislation complicates any attempt to remove it. Industry-sponsored studies have concluded that the tax has cost jobs and innovation. But other studies have shown the device industry continuing to make money, do research and add jobs.

Some Democrats argue that Paulsen's bill is little more than an attempt to undo the Affordable Care Act by killing one funding source at a time. Congress also placed added tax burdens on health insurance companies and drugmakers to pay for health care reform. If one industry gets to shed its tax burden, others will want to, opponents of device tax repeal claim.

U.S. Sen. Al Franken, D-Minn., said he opposes the tax.

"This tax doesn't just threaten companies, it stymies research and innovation, which is a problem for our patients and providers," Franken said in a statement to the Star Tribune.

But Franken, who voted for the device tax as part of the Affordable Care Act, conditioned his support for repeal on finding "a responsible offset."

Sen. Amy Klobuchar predicted that will happen.

"I believe that it is something we can get done this Congress," said Klobuchar who cosponsors a Senate device tax repeal bill similar to Paulsen's. "While our bipartisan bill as introduced does not contain an offset, my colleagues and I are continuing to work on options for an offset."

Despite swelling support, Ubl said the device industry may not push for a stand-alone Senate vote on device tax repeal. Instead, it will try to avoid a showdown by asking its friends in the Senate to attach repeal to another bill that the chamber has to pass and the president has to sign, say the highway trust fund bill.

In the end, the White House seems likely to want to insure the future of the Affordable Care Act before it gives in.

"In order to get the president to sign this," said LifeScience Alley's Mandle, "the president will want a pay-for well articulated."

Jim Spencer • 202-383-6123