August 31, 2020

Weekly Column: Making Medical Innovation More Affordable

Guest column submitted by U.S. Senator Mike Crapo

Now, maybe more than ever, as Americans face months of dealing with the impacts of the pandemic, and we anxiously await effective vaccines and treatments to advance, we must be thorough in considering all cost drivers affecting the affordability of medical care.  Over the past months, Congress has dedicated and the Administration has directed considerable resources to our health care providers on the frontlines of the fight against the pandemic.  We also must make certain that as innovative medications and medical devices are developed, unnecessary costs do not hinder Americans from affordably accessing medical advancements. 

Thankfully, in December, Congress passed and the President signed into law legislation that removed an unjustified federal cost imposed on medical devices.  S. 692, the Protect Medical Innovation Act, became law as part of a comprehensive federal appropriations bill.  I co-sponsored the bipartisan S. 692 that permanently repealed the excise tax on the sale of medical devices by the manufacturer, producer or importer. 

Prior to its permanent repeal, the medical device tax was among Obamacare taxes passed along to consumers in the form of higher costs and premiums.  The medical device tax was a 2.3 percent excise tax on the sale of medical products, including pacemakers, stents, defibrillators, joint replacements, surgical tools and much more.  The tax took effect on January 1, 2013.  Starting in 2016, broad, bipartisan majorities in Congress suspended it twice before its full repeal at the end of 2019. 

While the tax was in place in 2015, the Senate Committee on Finance Subcommittee on Health Care held a hearing to assess the impact of the tax on jobs, innovation and patients.  Bruce A. Heugel, Senior Vice President and Chief Financial Officer for B. Braun of America, a manufacturer and distributor of medical devices, testified about the impacts of the tax.  He stated, “We cut clinical trials; research; development; capital investment; product line expansion; building a new headquarters building, campus, and training center; important national sales meetings; trade shows; travel; and our pension plan.  We cut people’s pay, we cut the company’s share of benefits, we cut most budgets.”  In a letter submitted for the hearing record, the Advanced Medical Technology Association, which represents medical device, imaging and diagnostic technology manufacturers, wrote, “Evidence continues to mount how the medical device tax is a drag on a high-technology, research-based manufacturing sector that provides life-saving, life-enhancing innovations.”

It is also important to consider what potential impacts this tax, if still in place, could have had on COVID-19 tests and related medical devices.  In a 2012 letter regarding the regulations to impose the medical device tax, the American Clinical Laboratory Association identified clinical test kits sold to clinical laboratories, hospitals, and other health care providers among the medical devices subject to the excise tax.  Thankfully, Congress eliminated the tax. 

As has become all too clear these past months, medical breakthroughs are critical to facing down both known and yet unknown medical challenges.  We must take a lesson from the medical device tax.  As we further consider ways to best provide for a robust health care system and encourage medical innovation, continuing to take a hard look at federal policy creating disincentives for innovation and growth must be a central congressional objective.  There is no doubt that once we can stop the federal spending needed to address the pandemic while strengthening our country’s pandemic response, our first order of business must be a strong fiscal policy.  Throughout our efforts, we must be ever mindful of ensuring federal policy enables creativity in this field to ensure accessibility of affordable life-saving technologies. 

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