Taxes on Medical Devices, Pacemakers may return in 2018

While 2018 will see multiple American industries and businesses enjoying the benefits of reduced tax rates, the healthcare sector may be in for some disappointment. Manufacturers of medical devices will again be charged with an excise duty resulting in increased production costs. And this might mean that consumers would have to shell out more money for critical medical items such as pacemakers and artificial joints.

Potential hazards of tax resurfacing

According to Scott Whitaker, CEO and president, Advanced Medical Technology Association, this tax will impact innovation, jobs, and the well-being of several million American patients. He adds that it makes absolutely no sense, both from a taxation and healthcare policy perspective.

It was at the start of 2013 that the 2.3% tax had first been introduced. The idea behind this tax imposition was to fund the extended healthcare insurance under the Affordable Care Act. In 2016, Congress decided to halt the tax thinking that it will eventually be canceled. But 2018 is the year that the tax resurfaces.

On 20th December, Whitaker drafted a letter addressed to the U.S. President, requesting him to look into the critical issue before 2017 ended. In the letter, Whitaker warned Trump of the destructive impact the tax might have on the healthcare industry.

The excise duty is also likely to impact the trade organization called ‘The Medical Imaging and Technology Alliance’. It predicts that medical device manufacturers may have to jointly pay over $194 million to the IRS (Internal Revenue Service) each month. Meanwhile, the Joint Committee on Taxation estimates that the excise duty may raise approximately $3 billion on an average in federal revenues each year. The government revenues are predicted to reach $3.6 billion by the end of the year 2022.

Tax re-implementation to cause unemployment

John Conrad, CEO, Illinois Biotechnology Innovation Organization, decided to write an op-ed in the Chicago Business last month highlighting that firms had to avoid or delay hiring in order to make the tax payment. He cited research data from the American Action Forum suggesting that the re-implementation of the tax would result in job losses amounting to 25,000 by 2021.

Conrad wrote that stents, prosthetics, pacemakers and state-of-the-art imaging technologies like CT scans, X-rays, ultrasounds, and MRIs will all be impacted by the poorly conceived tax. He added that Congress was right in suspending the tax 2 years before.

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