President and CEO of AdvaMed (the Advanced Medical Technology Association)
Creating life-changing innovations is central to the role the medical technology industry plays in improving patient care. For people with neurological conditions — like spina bifida, epilepsy, Parkinson’s, multiple sclerosis and many others — advances in medical technology are not only improving, but also saving lives. Unbeknownst to many, however, is how one harmful tax policy is creating unnecessary barriers to future advances, and negatively affecting those living with chronic diseases and conditions and those yet to develop them, including our children and grandchildren.
The little-known tax wreaking havoc on medical technology innovation is called the Medical Device Tax, a 2.3 percent excise tax on the sales of all medical devices, including innovations for the treatment of complex neurological conditions. Originally passed to help pay for the Affordable Care Act (ACA), the tax is responsible for not only halting the production of the next generation of life-saving technologies, but has also cost the U.S. thousands of jobs.
For decades, the medical technology sector has been a uniquely American success story, developing innovations that are advancing and improving patient care in the U.S. and around the world. These medical innovations would not be possible, however, without the partnership between our industry and the physicians that use our technologies for the benefit of patients. Together, we have helped add five years to average U.S. life expectancy since 1980 and helped reduce fatalities from stroke by more than 60 percent. Medical technology has also helped people overcome functional limitations, enabling them to continue to live independently in their homes. And disability rates are on the decline — down 25 percent over a 20-year period — with disability-free life expectancy increasing over time.
The industry is proof that fostering innovation can lead to positive outcomes. And that’s why policies that support medical technology innovation are so critical to not only helping patients’ live longer, healthier lives, but also to reducing health care costs and creating good-paying jobs in communities large and small. In fact, the medical technology industry is responsible for nearly 2 million jobs nationwide. But the industry’s potential for continued job creation and its ability to develop the next generation of life-changing advancements is under threat by the continued existence of the medical device tax.
New government data released just last month showed the industry lost nearly 29,000 jobs in the three-year period in which the tax was in effect. These numbers reveal just how devastating an impact the device tax had on our industry and underscore the urgent need for permanent repeal. Congress took a positive step forward in 2015 by suspending the tax for two years. However, if they don’t permanently repeal the tax, it will go back into effect starting in January 2018.
And here’s why that can’t happen. Medical technology research and development is not a stop-start process; it requires significant capital investments committed over many years. And that, in turn, impacts every aspect of a company’s innovation cycle — from workforce retention and job creation to employee compensation and benefits, facility expansion and the medical device R&D pipeline itself. When that R&D pipeline is disrupted, patients lose.
America’s patients deserve better. Patients like Kelly Smith, a long-time nurse who was diagnosed with essential tremor and forced to quit her job due to debilitating symptoms. Kelly is now living virtually symptom-free with the aid of a deep-brain stimulator. Such transformational stories demonstrate the life-changing power of innovation, and should be cause enough for Congress to act now to repeal the medical device tax for good.
Editor’s Note: In the early morning hours on March 9, 2017, the House Ways and Means Committee advanced part of the American Health Care Act, which would permanently repeal the medical device excise tax.