Medtronic Lauds Efforts to Repeal Federal Med Device Tax

The Senate voted last week to repeal the tax, which is expected to cost Medtronic up to $175 million annually, but there are major hurdles yet to overcome and the company acknowledged that a repeal would be “an uphill battle.”

An effort to repeal the federal medical device tax that took effect in January has gained some traction, and Minnesota’s largest medical device company is greeting the news with a warm reception.
The tax, which was included in the Patient Protection and Affordable Care Act, places a 2.3 percent tax on the sale of medical devices. The tax is expected to raise nearly $30 billion in revenue over 10 years to fund the health law, and according to the Medical Device Manufacturers Association, it has already cost U.S. companies $388 million.
The Senate voted 79-20 last week to repeal the tax, but there are still major hurdles to overcome in order for the repeal to become a reality: Last week’s vote was an amendment to the Senate Democrats’ budget, which is expected to have little chance of passing the Republican-led House—and Congressional leaders are saying that they would need a way to generate the same amount of revenue before voting to pass the bill into law.
Fridley-based Medtronic, Inc., Minnesota’s largest medical device manufacturer, on Monday praised Minnesota Senators Al Franken, Amy Klobuchar, both Democrats, and Representative Erik Paulsen, a Republican, for their efforts to introduce bipartisan legislation to repeal the tax.
Medtronic said the tax has added “a significant challenge to the medical device industry in its ability to continue to deliver innovative research and development and create jobs in an innovative sector of the Minnesota economy,” adding, “We applaud continued efforts to address this challenge through a variety of options and recognize that a repeal of the tax will be an uphill battle.”
Medtronic, which reported $16.2 billion in revenue for its most recent fiscal year, expects to pay up to $175 million per year in excise tax. It is among hundreds of Minnesota medical device companies that collectively employ thousands of people.
Medtronic said that Franken, Klobuchar, and Paulsen “have demonstrated persistent and thoughtful leadership around the medical device tax from the beginning in an attempt to exclude it from health care reform . . .” adding, “We need policies in the U.S. that will encourage investment and job creation in this high-skill industry and maintain a favorable balance of trade, providing tremendous opportunity for growth in emerging markets around the world.”
Businesses, including many in Minnesota, have claimed that the tax would hurt profits and lead to job losses in the country—and Klobuchar’s office said that the tax will hinder industry innovation, job creation, and “the overall delivery of quality patient care.”
Meanwhile, supporters of the tax have reportedly said that changes brought by the Affordable Care Act will add millions of new patients, which will bring medical device companies millions of new users and thus new income. Other health-care sectors have also reportedly argued that the burden of paying for the health-care law should be evenly distributed and they’ve already made financial sacrifices.
In December, Klobuchar and Franken fought to delay the implementation of the medical device tax. They were among 18 Senate leaders who signed a letter addressed to U.S. Senate Majority Leader Harry Reid, urging the delay, but their attempts were unsuccessful.
“The medical device industry has received little guidance about how to comply with the tax—causing significant uncertainty and confusion for businesses,” the letter stated.