Is The Medical Device Tax On Life Support?

Is The Medical Device Tax On Life Support?

Minnesota companies are closely watching ongoing deal discussions in Washington, D.C.

A drive to suspend or repeal the medical device tax appears to be gaining traction as part of a potential Congressional deal to end the partial federal government shutdown.

The medical device tax hits home in Minnesota, where a host of medical device companies, including large industry players such as Fridley-based Medtronic, Inc., and Little Canada-based St. Jude Medical, Inc., are based.

“Minnesota has the most densely concentrated medical device community in the world,” Shaye Mandle, executive vice president and chief operating officer for the St. Louis Park-based LifeScience Alley, a medical trade association, told Twin Cities Business. LifeScience Alley has consistently advocated for a full repeal of the tax.

Mandle confirmed that a pitch to suspend the medical device tax was included in the U.S. Senate proposal until Monday afternoon, but then resurfaced Tuesday morning in a plan floated in the U.S. House of Representatives.

“It looks like there might be a delay [to the tax] that could be part of this deal,” Mandle said, adding that he’s heard talk of a potential one-year or two-year “delay” for the medical device tax.

“It is unclear to me what that would mean for the dollars already paid in,” Mandle said.

The 2.3 percent tax on medical devices went into effect at the beginning of the year as one of the funding tools to help pay for the Affordable Care Act. Mandle said that the most recent estimate he’s seen indicates that the tax could raise $31.4 billion over 10 years.

According to Mandle, there are more than 400 medical device companies in Minnesota. Although that includes some big industry players, Mandle said that most device companies have fewer than 50 employees.

“This device tax has been a big inhibitor to growth in the state,” Mandle said. “This really kills opportunities for early-stage companies.”

“We estimate that probably about 25 percent of this tax comes from or impacts Minnesota,” Mandle said. “The Affordable Care Act is expensive . . . the device tax is part of that equation.”

A move to end the medical device tax would call for finding another source of revenue. But early Tuesday afternoon, there was still no agreement on a deal to end the shutdown out of Washington, D.C.

“This stuff is so fluid. This thing continues to be a bouncing ball,” Mandle said. “We remain cautiously optimistic.”