Article preview reprinted from "The Gray Sheet" - November 2, 2009
The updated House health care reform bill includes a substantially reduced device industry excise tax compared to a Senate bill, but includes no exceptions for small businesses. Read more...
Article preview reprinted from "The Gray Sheet" - November 2, 2009
House Bill Lowers Device Tax, But Offers No Break For Start-Ups
The updated House health care reform bill includes a substantially reduced device industry excise tax compared to a Senate bill, but includes no exceptions for small businesses.
The decrease in tax collections from $40 billion in the Senate bill to $20 billion in the House bill got a positive response from some in industry, but was still met with serious reservations, particularly from smaller and venture-backed firms.
Intense Lobbying Makes A Mark
On Oct. 29, House leadership released legislation that consolidates and updates bills passed out of three committees this summer. Democrats expect floor debate and a possible vote on the bill this week.
Through a series of reforms, including a new government health insurance option, stronger insurance market regulations and an individual coverage mandate, Democrats say the bill will cover 96% of the population and will cost $894 billion. The device tax, which was not included in any of the bills passed by House committees this summer, is among provisions designed to cover that cost.
Under the House language, device companies would need to shell out about $27 billion between 2013 and 2019. Because the pay-out is tax deductible, the net cost to industry and net revenue to the government would be $20 billion, according to the Joint Committee on Taxation. That compares to the $40 billion, non-deductible fee that would be collected between 2010 and 2019 under legislation approved by the Senate Finance Committee Oct. 13.
"AdvaMed appreciates the decision by House leaders to reduce the device tax," said Steve Ubl, president of the trade association.
For the past month, AdvaMed, the Medical Device Manufacturers Association (MDMA) and others have railed against the Senate Finance Committee's $40 billion fee provision and its potential impact on innovation, rallying many Republicans, as well as some Democrats from device manufacturing-rich states, to the cause (The Gray Sheet' Oct. 5, 2009).
AdvaMed, which has played a significant role in backroom negotiations on a compromise tax provision, appears satisfied with the size of the House tax and with the three-year delay, from 2010 to 2013, on beginning tax collection.
But Ubl says his group is pushing for language that would "protect" companies with less than $100 million in annual revenue.
Exclusions for small companies might, however, be difficult to make work within the tax collection structure proposed by the House.
House Bill Would Tax At Point Of Sale
The Senate Finance language would collect $4 billion per year via annual company payments, levied on the basis of each firm's prior-year share of the U.S. device market (excluding certain product categories). In an attempt to provide at least some breathing room to smaller companies, the calculation would not include the first $5 million in revenue and would count sales between $5 million and $25 million at only half the value.
- David Filmore
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