Telehealth Soapbox: Medical device tax finally under fire; implications many (US)

[grow_thumb image=”” thumb_width=”180″ /]A key part of the Rube Goldberg (or Heath Robinson)-esque funding of the Accountable Care Act (ACA, a/k/a Obamacare) is a punitive medical device tax of 2.3 percent levied on gross sales (not profits) of hip, knee, cardiac implants, many dental materials, diagnostics such as scanners, radiotherapy machines, catheters and more. Since it went into effect on 1 January, it has raised $1 billion according to the Medical Imaging & Technology Alliance, the Advanced Medical Technology Association and the Medical Device Manufacturers Association in July–for a program that does not start till 2014. According to The Hill, senior Senators Orrin Hatch, Barrasso and Hoeven are pushing for a repeal amendment to be attached to the stopgap spending bill. The reasons why the tax deserves to be tossed out on its ear are:

  • Effectiveness. Attributable to medical devices–both implant and diagnostic–is a 4 percent increase in US life expectancy, a 16 percent decrease in mortality rates and a 25 percent decline in elderly disability rates, 1980-2000, according to a study by MEDTAP International.
  • Economy. According to most estimates since the act’s 2010 passage, it has jeopardized thousands of jobs and put a crimp in the R&D constantly needed in the field. 80 percent of companies in the field are small businesses with 50 or fewer employees–not the BDs, GEs or Strykers
  • Investment not ‘watering’ development. VC investment in medical devices is trending down consistently, most recently down 29 percent [TTA 9 July].

This Editor believes this tax is exactly contrary to the much-bandied ‘Triple Aim’ of healthcare reform touted by HHS and CMS–improving patient experience, improving population health and lowering healthcare cost–by raising cost, decreasing innovation, reducing population health by making devices and diagnostics more dear, and generally stomping on this highly active and leading part of the US economy (40 percent of the global market is not to be sneezed at.) More expensive, less choice is not supposed to be the outcome! It is especially punitive on those who need device assistance and innovations the most–adults over 50. Add to this delays at the FDA, and it is no wonder that many companies are following pharma’s lead and R&Ding plus manufacturing overseas where it is marginally friendlier. Thus one can only hope for the amendment’s success in both Senate and House.

For those in telehealth and apps who believe this is not of concern–think again. Fitness devices, smartphones, monitors and apps are becoming more and more medicalized and integrating with implants, EHRs and larger monitoring systems. Nanobots will be carrying drugs into brains and hearts. The Feds will hunger to spread the net and tax first those closest to the hospital or EHRs, then the consumer side– that $26 billion or $60 billion or whatever that real number will be in but a few years is all too tempting. After all, it’s a device! Who by that point will be doing the objecting, if we don’t object now?

Related reading: ‘Stupid’ medical device tax faces GOP repeal (FierceMobileHealthcare, with an unfortunately ’embalmed’ portrait of Sen. Hatch). His article published on FoxNews in 2012: New medical device tax threatens innovative American industryU.S. Medical Device Industry In Critical Condition (Henry I. Miller in Forbes)

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