CBI Scene Blog

Medical Device Excise Tax (MDET) Conversation Intensifies

Posted by Brittany Lake on Mar 29, 2013 11:23:00 AM

Capitol Building

Medical device companies have a bit more optimism today about the potential repeal of the Medical Device Excise Tax (MDET), as the Senate has voted in a non-binding resolution to repeal the new device tax that was instated to help offset the implementation costs of President Obama’s heath reform law.

The 2.3% tax hike that went into effect in January has been a cause of concern for medical device companies, particularly those based in Massachusetts. According to a new analysis by the Pioneer Institute, this tax will cost the state’s largest companies more than $411 million a year – a detriment to job growth and innovation.

As the bill gains traction in the House, one issue that could affect the bill’s support is how to pay for the repeal. In The Boston Globe article published March 22, "Senate passes bill to repeal medical device tax; industry urges House to do the same," U.S. Representative Ed Markey expresses this particular concern:

 “I opposed the inclusion of this tax in the House health care reform bill. I would support repealing the tax, as long as the revenue replacing it does not impact middle-class families or their health care benefits.”

Also cited in The Boston Globe article is a recent survey of Bay State companies by MassMEDIC that found that in response to the tax, companies plan to reduce their R&D budgets, shrink the size of their workforce and pass the tax along to hospitals and patients. There’s a balancing act needed to resolve the situation, where both the medical device companies and the general public benefit from the repeal – which will most likely lead to a lengthy debate.

MDET isn’t just getting attention from the Massachusetts representatives in Washington, DC; AdvaMed launched an infographic outlining the affect of the medical device tax on the industry to help ignite the conversation.

AdvaMed Infographic

A particular cause of concern that AdvaMed notes in the infographic is diagnostics, one of the most innovative fields of medicine. Molecular diagnostics lab tests represent just 1.6% of Medicare costs, but guide 70% of physician decision making which includes point of care, cancer cardiovascular diseases, personalized medicine and infectious diseases – an unpleasant ripple effect that certainly plagues medical device company executives as they anxiously await the repeal.

We’re closely following the MDET debate at CBI, and as part of our dedication to bringing the industry up-to-date and timely information, this topic will be covered at the Global Transfer Pricing conference on April 23-24 in Philadelphia.

Marjorie Belliotti, Tax Manager at Fujirebio Diagnostics, Inc. will host the extended session, "Medical Device Excite Tax (MDET) – Latest Updates and Key Considerations."

Key questions to be addressed include:

  1. What are manufacturers’ excise taxes?
  2. Analysis of products, supply chain and contracts for determining exposure risk
  3. Requirements for compliance – future audit preparation
  4. Accounting for excise taxes including additional disclosure requirements under U.S. GAAP
Stay tuned for more information as the MDET conversation continues over the next few months, and please comment below with your thoughts on this important legislation.

Photo credit: Glyn Lowe Photoworks / Foter.com / CC BY

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Topics: Compliance, Finance