House Passes Bill to Repeal the Medical Device Tax

The holidays may have just gotten a little happier and a lot brighter for those of us in the medical device industry! Earlier this week, the U.S. House of Representatives passed legislation to repeal the impending and much-criticized Medical Device Tax, a 2.3% excise tax on sales of medical devices in the United States. Originally implemented in 2013 as part of the Affordable Care Act, the tax was slated to come back into effect as of January 1, 2020.

In an exciting turn of events, the U.S. Senate is expected to pass the repeal over the next several days, where it would then be sent to the President for signature, sending the tax repeal into effect permanently.

If not repealed, the 2.3% Medical Device Tax would have far-reaching and stifling negative effects for the medical device industry. We could expect a significant financial impact on bottom lines, consequently shrinking profit margins, Research and Development (R&D) spending, and operating budgets. It would also have an enormous impact on our patients globally, as the tax takes away dollars from R&D spending, resulting in less innovation and slowed down the delivery of new device advances into the market.

According to the Advanced Medical Technology Association (AdvaMed) and a report published recently by the Tax Foundation, there is potential in 2020 for a loss of over 21,000 full-time medical technology jobs if the tax is not repealed. On the other hand, a repeal would likely stimulate the creation of new jobs as it frees up investment funding for product innovation.

When R&Q experts consider the immediate impacts of the likely repeal of the Medical Device Tax, we anticipate an opportunity for our clients to have more funding available to support the compulsory transition of their products to meet the new European Union Medical Device Regulation (MDR) and In Vitro Diagnostics Regulation (IVDR), which come into full effect May 2020 and May 2022, respectively.

As many in the medical device industry know, the looming MDR and IVDR transitions have us facing enormous hurdles that impact patients as well as our clients’ quality systems, product approvals, product registrations and the addition of clinical and post-market surveillance (PMS) requirements that did not exist before. The new requirements also have significant impacts on product development, clinical affairs, quality and regulatory affairs functions which need to invest time to complete the required transitions.

As a full-service medical device, combination product, and IVD consultancy, R&Q has the experience and resources your company needs to tackle the EU MDR & IVDR transitions, as well as drive product innovation with additional funding freed up by the potential permanent repeal of the Medical Device Tax.