Hedging its bets on repeal of med device tax, AdvaMed suggests revisions

Multiple pending Congressional bills call for the repeal of the 2.3 percent medical device excise tax set to kick in next New Year’s Day, but industry lobby group AdvaMed isn’t holding its breath. On May 3, the group—a very insistent opponent of the tax—filed 22 pages of comments with the Internal Revenue Services (IRS) amplifying previous input it has offered and suggesting ways the tax can at least be rendered less burdensome.

After expressing appreciation for the “flexibility” the Treasury Department wrote into its proposed regulations to “accommodate the complexity of the industry,” the document proposes various exemptions and asks for amendments to rules and policies “ill-suited for this dynamic, heterogeneous industry.”

The comments are presented in the context of a set of overarching principles, such as the appropriateness of:

• Disallowing multiple layers of taxation on individual devices;
• Defining which company within the chain of the manufacturing process is responsible for the tax; and
• Taking into account demands from “other regulatory regimes with which the heavily regulated medical device industry is familiar and must comply.”

“These principles are intended to facilitate development of guidance that reflects the substantial product differentiation of medical devices, large number of regulatory device classifications, large number of device manufacturers and importers of varying size, frequency of product innovation, complexity of manufacturing and distribution chains, [and] complexity of transactions (e.g., sales, leases, rentals, devices bundled with other devices or services) through which medical devices are sold,” the document reads. 

The document is addressed to IRS Depty Commissioner for Services and Enforcement Steven T. Miller, and signed by AdvaMed CEO Stephen J. Ubl, who uses it to also ask for time and a microphone at a May 16 public hearing on the tax.

Bills to repeal the tax are pending in both the House and Senate. The most strongly supported, the House’s Protect Medical Innovation Act of 2011 sponsored by Minnesota Republican Erik Paulsen, has 232 co-sponsors and could reach the floor for voting this summer or fall.

Meanwhile, the tax is a piece of the historic Patient Protection and Affordable Care Act of 2010—all or parts of which the Supreme Court may strike down in a ruling due next month.