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GOP tries again to axe medical device tax

by Brendon Nafziger, DOTmed News Associate Editor | January 28, 2011
A 2.3 percent excise tax on medical device companies included in the Obama administration's health reform legislation is again in the crosshairs of Republican congressmen.

Four GOP senators unveiled a bill Thursday that would abolish the tax, expected to raise $20 billion to help pay for reform provisions over the next decade. The tax goes into effect in 2013.

The bill matches legislation introduced into the House by Minnesota Republican Erik Paulsen on Tuesday.

Politicians from both sides of the aisle in Minnesota, home to about 300 medical device companies, have actively lobbied against the tax. But attempts to squash the tax last year faltered in Congress, and it's unclear whether the GOP can muster enough votes in Senate this time to force the bill through.

The industry has fought the tax since the original proposals came out more than a year ago, and succeeded in slashing it in half -- under original proposals, the tax would have raised $40 billion from device companies.

The bill's sponsor Orrin Hatch (R-Utah), ranking member of the Senate Finance Committee, said the tax would kill jobs, crimp innovation and lead to higher insurance premiums and more expensive devices.

"That's the wrong thing to do at a time when consumers are already facing skyrocketing health costs," Hatch said in a statement.

One fear of the tax's opponents is that it will drive jobs overseas. In a report released this week, market research firm Kalorama Information predicted that the tax alone wouldn't force outsourcing, but that coupled with a more budget-conscious health care environment, it could help drive some medical device companies to look at production abroad.

"[S]ince the law taxes revenues notwithstanding the cost of manufacture, it could add further pressure to bring costs down in order to restore profits," Bruce Carlson, publisher of Kalorama Information, said in a statement.

The bill, S.17, was co-sponsored by Sens. Richard Burr (R-N.C.), Tom Coburn (R-Okla.) and John Cornyn (R-Texas).