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Why the medical device tax repeal bill shouldn’t pass anytime soon

The proposed Protect Medical Innovation Act of 2013

The Protect Medical Innovation Act of 2013 has gained bi-partisan support in the House of Representatives, ensuring the bill passes when it comes to vote. But the keyword is “when” it comes to vote.

Witnessing large layoffs by companies like Stryker Corp. in November 2012, lawmakers began taking interest in the tax repeal pleas of the medical device community. Following intense lobbying by manufacturing giants like Boston Scientific, members of congress—including the nearly 40-member House Republican freshman class—are currently pressing party leadership to repeal the 2.3% medical device excise tax that Obamacare implemented in January.

Repeal Effect on Federal DeficitEnlarge Graph

The tax has hurt medical device ETFs

With more than 8,000 medical device manufacturers in the United States, the tax on medical devices is expected to generate nearly $30 billion dollars in revenue for the next nine years—putting approximately 43,000 jobs at risk, according to a letter sent to party leadership from GOP freshmen. As of July 2013, the tax has already cut out 1 billion dollars in revenue from the industry, driving medical device ETFs like IHI and XHE to perform lower than their healthcare counterparts through the beginning of this year.

But the repeal hasn’t taken effect—and it isn’t likely to anytime soon

Earlier in the year, the senate voted 70–29 to repeal the tax. Yet the vote came as part of a budget amendment in a non-binding resolution, so the repeal hasn’t taken affect. The Protect Medical Innovation Act would be a binding resolution, and it’s currently waiting on a vote in the senate.

However, despite Senate support of repeal, many believe the tax will stay in place. In order for the government to completely repeal the tax, congress needs to find a way to replace the lost income—a difficult task. As the Obamacare funding hole recently got $10 billion deeper, without a $30 billion dollar offset for the repeal, Democrats are very unlikely to agree on cutting the tax. As time passes and Obamacare implementation costs rack up, the repeal of the law seems less and less likely despite the repeal’s support. The final nail in the coffin for the repeal could be a recent statement by President Obama stating his intention to veto any device tax repeal bills the senate passes. Without repeal, the tax continues to stifle industry earnings and drive down valuations among manufacturers.

The Realist Discussions

  • B. Egan

    Thanks for a realistic picture. People keep thinking they can lobby these taxes away but WHERE IS THE MONEY GOING TO COME FROM. These taxes are not going away because we are facing an impending disaster with respect to our deficiit! The tax is a factor that should remain in industry analysis — not going away anytime soon.

  • http://ducknetweb.blogspot.com/ Medicalquack

    Exactly right on replacing the revenue and I had their answer, tweeted it to them, AdvaMed, the NIH, and more …they couldn’t see it..2 birds one stone..data selling excise tax on the billions made..simple answer and good source of revenue

    http://ducknetweb.blogspot.com/2013/03/medical-device-companies-not-putting-up.html

  • socialismisevil

    how about stop the spending then you dont need to have a tax to fill a need that is only needed in a socialist world

    • gearbox123

      That would be too easy. Then who would pay for Sandra Fluke’s birth control pills?

      • socialismisevil

        bruce f kc n springsteen

        nancy pelosi

        etc etc

        thanks

  • gearbox123

    It’s hilarious that raving lefties suddenly become deficit hawks when Obamacare starts to look bad. “We can’t stop raping you with these taxes – that would increase the deficit!”

    I hope you like all your plastic Chinese hip implants and pacemakers, because that’s where they’re all going to be coming from in 10 years, you dummies.

  • Balzak Schlemp

    These fuckers are worse than King George III.