Is the medical device tax the job killer it's made out to be?

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Now that the presidential election is over, news reports suggest there will be renewed efforts by the lame-duck congress to repeal the 2.3 percent medical device tax before the new congressional session begins in January. Just last week, in fact, representatives from the medical device manufacturing community--including the Medical Imaging & Technology Alliance--invaded Capitol Hill to lobby for repeal.

Medical device manufacturers have been making compelling arguments against the tax ever since the Affordable Care Act was passed in 2010. For example, a report prepared by Battelle Technology Partnership Practice for AdvaMed earlier this year predicts the tax will cost the industry 39,000 jobs. A MassDevice article in September reported that in the previous two months, 2,000 jobs were shed by medical device companies, several of which blamed the tax for the job cuts.

But is the tax the job killer it's made out to be? Will it be responsible for curbing innovation and force manufacturers to move offshore, as its critics claim?

An editorial published in Bloomberg View in June argues that many of the criticisms leveled against the tax are based on faulty assumptions. For example, some critics argue that the ACA won't provide device makers with new business because Medicare, Medicaid and private insurance already cover people who need these devices. But, the editors of Bloomberg View pointed out this defies common sense--the new law will bring 30 million newly insured customers people into the market, many of whom will need scans and other procedures that will require the purchase of new devices.

MassDevice also reported on a letter a CEO of a device manufacturer sent to the Syracuse Post-Standard in which he said that using the tax to justify layoffs is "nonsense."

Glottal Enterprises CEO Martin Rothenberg wrote the letter in response to a charge by U.S. Rep. Ann Marie Buerkle  (R-N.Y.) that the tax is responsible for medical device manufacturers laying off employees and shifting production out of the U.S. Rothenberg wrote that, after doing the math, he had concluded the tax would result in a marginal product price increase for a new product his company is putting out and would have "zero effect on sales," assuming the company could successfully market an effective product.

"It would surely not lead us to lay off employees or shift to overseas production," he wrote.

Legislators , in the end, may end up repealing the tax. But let's hope they do it based on a rational evaluation of its impact, and not on a politically motivated reaction to job loss numbers that may or may not be true. - Mike