Congress Looks to Repeal the Excise Tax on Dual-Use Medical Devices

By: Dr. Mark Lutschaunig, director, Governmental Relations Division

U.S. representatives from both sides of the aisle in Congress have signaled their support over the past few weeks to repeal a tax that would impact both human and veterinary medicine.

The Affordable Care Act, commonly referred to as “Obamacare,” contains a provision that would impose a 2.3 percent excise tax on the sale of medical devices by the manufacturer, distributor or importer of the device. The legislation defined a “taxable medical device” as any device that is “intended for humans,” as outlined in Section 201(h) of the Federal Food, Drug and Cosmetic Act.  Congress included the excise tax as a means to raise nearly $29 billion over a period of 10 years, which would help pay for healthcare reform.

The Internal Revenue Service released its final regulations on the provision on Dec. 7, 2012, and the tax went into effect Jan. 1.

What does this mean for the veterinary profession?

Although the tax does not impact medical devices that are intended exclusively for use in veterinary medicine, there are instances when veterinarians purchase devices that are “intended for humans” for use in their practices.  For example, a veterinarian may purchase a human pediatric endoscope for use on smaller animals or exotic pets. This endoscope, under the new regulation, would be subject to the 2.3 percent excise tax on the manufacturer.  Though the manufacturer is being hit with the tax, there is an underlying concern that the additional costs of covering this tax will be passed on to the purchaser, in this case, the veterinarian.

Fortunately, there is growing bipartisan support in Congress to repeal the medical device excise tax.  U.S. Rep. Erik Paulson (R-Minn.) introduced the Protect Medical Innovation Act of 2013 (H.R. 523) on Feb. 6.  It currently has 212 cosponsors (187 Republicans and 25 Democrats). One day later, U.S. Sen. Orrin Hatch (R-Utah) introduced the Medical Device and Innovation Protection Act.  This legislation has 30 cosponsors (26 Republicans and four Democrats).

Then in April, the Senate passed an amendment (70-29) to repeal the 2.3 percent tax on device-maker revenue as part of the chamber’s 2014 budget resolution. Though the budget resolution and the amendment are nonbinding, meaning they cannot progress into law, the level of support from U.S. Senators throughout the political spectrum is an encouraging sign for repeal of this tax.

AVMA continues to argue that this tax is subsidizing human health care at the expense of veterinary medicine, with no direct benefit to the animals that veterinarians treat. AVMA has done a number of media interviews about the tax and has put together a FAQ for members and the public.

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