Medical-device makers to target tax again

BOSTON — The industry that makes medical devices from artificial hips to miniature pumps for IV drips is looking for a fallback plan to repeal a widely reviled sales tax that almost met its end in GOP health care legislation.

The 2.3 percent excise, one of several taxes and fees in the Patient Protection and Affordable Care Act that pay for expanded insurance coverage, has been the subject of lobbying by manufacturers seeking its permanent repeal. Yet, for now, it’s on track to be reinstated on Jan. 1 after a two-year hiatus, leaving industry leaders worried it will hurt employment and stifle development of innovative, even lifesaving products.

“We know it resulted in job loss when it was in effect and we also know it resulted in decreased investment and development,” said Patrick Hope, executive director of the Medical Imaging & Technology Alliance, one of several trade groups fighting reinstatement of the tax.

The tax covers a range of medical equipment sold to hospitals and physicians but excludes consumer items such as eyeglasses, hearing aids and diabetes kits.

The U.S. medical device market was valued at nearly $148 billion in 2016 with projections it will increase to $173 billion by 2019, according to Emergo, a leading industry consultant.

Companies shed 29,000 jobs from 2013-15 when the tax was in effect, according to government data cited by the Advanced Medical Technology Association. No corresponding employment data exist yet for 2016-17, when the tax was suspended, though another trade group, the Medical Device Manufacturers Association, said a member survey found 70 percent added jobs while research and development spending increased by 19 percent on average.

Skeptics argue it’s impossible to draw a straight line from the tax to overall performance by the industry and point to a variety of other factors, from consolidation to global competition, that influence trends in employment and research and development commitment.

John McDonough, a professor of public health policy at Harvard University, said he doubted the tax seriously harmed most firms while it was in effect, or that it would wreak much havoc if reinstated next year.

“The medical device industry stands out in its determination to be the one industry to get off the hook,” said McDonough, noting that insurers, drugmakers and hospitals were also assessed higher taxes and fees under the Affordable Care Act.

Proponents of the tax, originally estimated to raise $29 billion in net revenue over 10 years, contend that industry sales can only benefit from more Americans having access to health insurance. Still, the tax has long been targeted for repeal, not only by congressional Republicans but also many Democrats who strongly back the health care law and the other taxes that go with it.