Rep. Erik Paulson co-sponsor of bill to suspend collecting medical device tax

WASHINGTON – Some members of the House Ways and Means Committee, including Minnesota Republican Erik Paulsen, want to suspend collection of a medical device tax for five more years.

Paulsen and Republican colleague Jackie Walorski of Indiana on Tuesday introduced a bill to keep the tax from being collected through 2022. The proposal comes as time runs out on the current two-year moratorium that stopped device companies from having to pay a 2.3 percent sales tax on gross receipts in 2016 and 2017.

"Full repeal is my top priority," Paulsen said.

But for now, he said, a five-year moratorium seemed like the best available vehicle to keep the tax from coming back Jan. 1. Paulsen believes his proposal can be attached to any of a number of year-end spending measures.

Going forward, Paulsen thinks he makes "a good selling argument" for permanent repeal based on the device companies' willingness to expand operations by investing tax savings realized during the current moratorium.

The device tax was part of the Affordable Care Act. Collected from 2013 to 2015, it produced more than $5 billion in federal revenue. But it has long been targeted for repeal by the medical device industry, including hundreds of Minnesota medical technology businesses.

Despite frequent bipartisan verbal attacks on the tax by members of the House and Senate, Paulsen has introduced several repeal bills in the House with broad bipartisan support. But the issue foundered in the Senate among Democrats who saw the legislation as a prelude to undoing the entire funding mechanism for the health care overhaul.

Device tax repeal failed to appear in the initial tax bills offered in the House and Senate. That flustered lobbyists for the medical technology sector. The device industry has mounted an aggressive, multimillion-dollar campaign to kill the tax since its inclusion in the Affordable Care Act, passed in 2010.

News that the House will consider extending the moratorium brought a sigh of relief from the Advanced Medical Technology Association (AdvaMed), but not a great deal of satisfaction.

AdvaMed, a powerful trade group representing dozens of Minnesota companies, has led the charge against the tax. CEO Scott Whitaker issued a statement Tuesday thanking Paulsen and the House leadership for its proposal.

But Whitaker recently said in an interview that five years was the minimum that the moratorium device makers require "to do what they need to do in their innovation cycles." Also, the temporary nature of the fix remains a source of frustration for people trying to make business plans.

"It's definitely kicking the can down the road," Whitaker said. "That's why we're not giving up the fight."

Device tax repeal will likely become a campaign issue in 2018 House and Senate races with med tech advocates trying to exact promises from candidates to kill the tax once and for all.

"There's only so much you can do as a trade association or a company to get them to understand the urgency," Whitaker said. "At the end of the day, Congress has to act. And it hasn't."

Jim Spencer • 202-662-7432