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Device Firms Dig In Against Baucus Fee, Despite Class I, Revenue Exceptions
Article preview reprinted from "The Gray Sheet" - September 21, 2009
The device industry lobbying machine has accelerated in opposition to Sen. Max Baucus' plan for a $40 billion fee on manufacturers in the lead up to Finance Committee health reform mark-up sessions this week.
The $4 billion-per-year device manufacturer fee proposal was first made public in a health reform "framework" circulated by the Montana Democrat over Labor Day weekend. Further details were included in comprehensive health care reform 1 legislation introduced by Baucus Sept. 16.
Industry groups immediately came out against the idea, calling it an "innovation tax" (2 'The Gray Sheet' Sept. 14, 2009).
Opponents of the fee complained that basic products such as toothbrushes and stethoscopes would be impacted and that smaller start-ups would be disproportionately impacted.
The details fleshed out in Baucus' legislation appears to respond to those concerns somewhat. Under the plan, each company's annual contribution to the $4 billion total would be tabulated based on the firm's share of total U.S. sales of qualifying devices in the preceding calendar year.
In an apparent attempt to address the impact on very small businesses and start-ups, the bill explains that companies' first $5 million in sales would not be counted towards market share calculations, and sales between $5 million and $25 million would only be counted at 50% of their value. In addition, sales of lower-risk Class I devices, as classified by FDA, would not be subject to the fee, the bill explains.
The fees would target both U.S. manufacturers and importers of devices to the U.S. None of the fees would be deductible from U.S. income tax, the legislation says.
- Sue Darcey | 
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