The U.S. Senate last month passed bipartisan legislation to repeal a medical device excise tax, which would have impacted device developers and manufacturers across the country, including some big players in the San Fernando Valley. The tax was originally enacted as part of the Affordable Care Act in 2013 and imposed a 2.3 percent tax on domestic sales of medical devices. It went into effect in 2016 and was renewed in 2018. A two-year moratorium was placed on the tax prior to its implementation in 2016; the tax was also suspended multiple times in the past two years. The device manufacturer or importer was responsible for paying the tax. Medical device companies in the Valley region, including Second Sight Medical Products Inc. in Sylmar and Medtronic, which has its insulin pump division in Northridge, have watched discussions about the medical device tax at the federal level. Will McGuire, chief executive of Second Sight, even penned an op-ed to the Business Journal in November when manufacturers were still not sure if the tax would be repealed. McGuire noted the serious burden the tax has on small medical device companies with big goals like his company, which aims to provide artificial vision to the blind. “Originally passed in 2010 as a funding mechanism for the Affordable Care Act, the medical device excise tax was in effect for three years – from 2013 through 2015 – before Congress passed a bill with bipartisan support, to suspend the tax,” added McGuire in his November letter to the Business Journal. “Congress and President (Donald) Trump extended the suspension.” “When the tax was in effect from 2013 to 2015, the medtech industry shed nearly 29,000 jobs and cut back significantly on investment in R&D and infrastructure,” explained McGuire. According to a study conducted by the Tax Foundation, not only were jobs expected to be cut, but a $41.7 billion decline in the nation’s GDP was anticipated as well. AdvaMed, a medical technology association, aggressively lobbied to have the tax repealed. Research indicated that the tax would not lower health care costs for patients, instead increasing costs in the industry, the Tax Foundation study said. The tax would have raised approximately $25 billion over the course of 10 years. Now, companies such as Second Sight can breathe a sigh of relief. “The permanent repeal will allow Second Sight to more easily grow our staff and continue to fund the research and development needed to bring new and needed innovations, like our Orion Visual Cortical Prosthesis System, to market,” McGuire said in a recent email to the Business Journal. “This is a great day for American patients, American jobs and American innovation: The medical device tax is officially history,” Scott Whitaker, chief executive of AdvaMed, said in a statement Dec. 20. “With the end of this burdensome tax, the U.S. medtech industry can do what it does better than anyone else in the world: develop life-changing innovations that save and improve patients’ lives, and create high-paying, high-tech jobs to keep the American economy booming.”
