Obamacare Replacement Would Repeal Medical Device Tax

by Knobbe Martens
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Republican lawmakers recently proposed a replacement of Obamacare known as the American Health Care Act (AHCA).  One provision of the proposed legislation would permanently repeal Obamacare’s 2.3% medical device excise taxBeginning in 2013, manufacturers and importers of certain medical devices were required to pay a 2.3% tax on sales of these devices.  Although the medical device tax was suspended for 2016 and 2017, it was set for reinstatement in 2018.

Introduction of the AHCA is not the first time that lawmakers and industry lobbyists have attempted to permanently repeal the medical device tax.  For example, in January 2017, a group of more than 220 Representatives introduced a bill in the House of Representatives that sought to repeal the tax.  In introducing that bill, Rep. Erik Paulsen (R-MN) released a statement citing improvements in the industry after temporarily suspending the tax:

We are already seeing new American jobs and increased investment in research and development as a result of the temporary suspension of this tax. With over 200 cosponsors at the start of this new session, and with overwhelming bipartisan support, permanent repeal should be a top priority for Congress.

Beyond repealing the medical device tax, the Washington Post reports that the AHCA seeks to repeal a wide array of taxes that were expected to cost insurance, medical device, and other healthcare companies billions of dollars over the next decade.  Indeed, according to the Joint Committee on Taxation the 2.3% medical device tax, alone, was expected to cost these companies $20 billion over the next ten years.

Medical device industry representatives are encouraged by the prospect of a full repeal of the medical device tax.  Scott Whitaker, CEO of the trade association AdvaMed stated:

Repealing the tax will provide medical technology innovators with the long-term certainty necessary to support future job growth and sustainable, cutting-edge R&D that will ultimately lead to the next generations of breakthroughs in patient care and treatment. We urge the House and Senate to act expeditiously to pass this important legislation.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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