Originally Published MD&DI November 2009
FROM THE EDITORS
Tax on Industry Not Dead Yet
With the healthcare reform out of committee with the device industry tax intact, industry must speak louder about its potential damage.
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Industry is facing unprecedented challenges across the board as well as unprecedented opportunities as healthcare reform moves forward. That was at the heart of a message from AdvaMed president Steve Ubl and its chairman Michael Mussallem. The two spoke at a the annual AdvaMed conference on October 13. On the challenges side, Ubl said, “We’ve yet to emerge from the worst global recession in over 60 years; FDA is reexamining key regulatory mainstays; and the desire for cost containment is increasingly driving healthcare policy.” On the international stage, he said, “We see countries imposing increased regulatory requirements that we believe undermines harmonization efforts, [even though] they want lower prices and demand the latest technologies.”
These challenges, however, were overshadowed by discussion of the $40 billion tax on industry in the healthcare reform bill that had made it out of the Senate Finance Committee that very morning. “We continue to believe that the device tax is bad policy, that it will be bad for patients, bad for jobs, and bad for innovation and medical progress,” said Ubl. “Only in Washington does $40 billion seem like a small amount of money. But if you consider the fact that 95% of our companies have less than $100 million in revenue, and if you consider the magnitude of this tax—the fact that $2 of every $5 is spent on research and development—this is a really devastating proposal for a large share of our membership.”
Ubl said that a better option would be a bill that would focus on prevention and wellness. Such a bill would lead to improved patient access to diagnostics and imaging technologies that detect disease early and tailor treatments to the individual. “We’re already seeing these technologies usher in a new era of personalized medicine. Better management of chronic disease, even comparative effectiveness, holds the promise to move us past the cheapest-and-best approach while improving clinical decision making,” he said.
Mussallem added that in an effort to afford healthcare reforms, particularly the goal of covering all Americans, “there’s a big bill to pay for that.” He recognizes the need for funds, but at the same time, he says, “this $40 billion is devastating to our industry.” AdvaMed, he says is working to point out the shortcomings in taxing an industry “that provides innovation that is valuable and that should be part of the solution.”
The industry, both leaders agree, is making an enormous contribution in the context of the bill, noting that the device industry supports the reforms called for in the bill including comparative effectiveness, value-based purchasing, and other elements designed to address utilization. AdvaMed supports those structural changes.
Ubl also pointed to hundreds of billions of dollars in reductions in the bill aimed at the industry’s primary customers that would be burdensome to industry and should be taken into consideration. “The view that the finance committee takes,” Ubl said, “is that none of those reductions will be passed on to our members.” He notes that there are tens of billions of dollars in reductions to the clinical laboratories fee schedule and the durable medical equipment fee schedule, as well as reductions to be absorbed by hospitalsand skilled nursing facilities. “Obviously those communities have fixed costs. Where are they going to turn to lessen their obligation in the face of these reductions? To their variable costs, which include the negotiations that companies have with those providers. Any analyst will tell you that over time those reductions are going to be passed on to our members,” he said.
Mussallem puts it rather bluntly: “The idea of taxing the industry is out of line. We understand why it’s there—because they are trying to fund this overall effort. But we think that this one has a very negative impact on the industry, jobs, and ultimately, Americans.”
He said he is optimistic that this debate will continue and that this issue will get addressed. He noted a recent letter that was signed by 14 senators. The letter highlighted the devastating impact the tax would have on job growth in their states in addition to impeding innovation. “We think good sense will prevail over time.”
Sherrie Conroy for the Editors
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