Medical Device Daily Washington Editor
WASHINGTON – The Advanced Medical Technology Association (AdvaMed; Washington) made use of its bully pulpit yesterday in a session during which the association's president and board chairman warned that the $40 billion tax on the device industry as embodied in the bill by the Senate Finance constitutes "a really devastating proposal for a large share of our membership."
Mike Mussallem, the newest board chairman for AdvaMed and the CEO of Edwards Lifesciences (Irvine, California), acknowledged that he had "no idea what kind of year 2009 might be" when he was voted in as chairman of the AdvaMed board. All that aside, he said of the proposed $40 billion tax, "we don't believe that taxing our industry is a great vehicle" for covering the Finance Committee bill's costs.
Mussallem noted that the association's members have been "strong proponents of healthcare reform for a long time," a reference to the AdvaMed healthcare reform proposal of 2007. "We have been consistently engaged" with various political leaders and have "tried to offer solid, credible ideas along the way," he asserted.
In reference to yesterday's Finance Committee markup of its healthcare reform bill, Mussallem said, "we still feel as though today could be a historical day, but we still have a long way to go" to get to a final bill that deals with a number of issues, including value-based purchasing and comparative effectiveness research.
Physician payment disclosure is also "an important element that we endorse," providing "meaningful information" regarding ties between industry and physicians, Mussallem said, adding that he is impressed by "the broad level of support for our industry" as evidenced by the letter from 14 Senate Democrats to the Senate leadership, voicing opposition to the tax (Medical Device Daily, Oct. 9, 2009)
AdvaMed's President/CEO Steve Ubl acknowledged that Mussallem "really did draw the short straw in assuming the chairmanship" at a turbulent time. He argued that of all times to impose a tax on the device industry, this is about the worst. "We're facing unprecedented challenges," he said, adding that the global economy "has yet to emerge from the worst global recession in 60 years."
Ubl said, "we continue to believe that it's bad policy" and is "bad for innovation," commenting further that "only in Washington is $40 billion a small amount of money." He made the case that firms with sales of less than $100 million will be hit especially hard, adding that research and development is liable to suffer. "This is a really devastating proposal for a large share of our membership," he commented.
Ubl also remarked that the device industry is "making an enormous contribution" even without the tax on industry. He noted that "comparative effectiveness will create winners and losers," and the effect of the bill on Medicare will be to trim "hundreds of billions of dollars in reductions" to payments.
Regarding how many of the 14 Senate Democrats might see the tax as a deal-breaker on the Finance Committee bill, Mussallem said he was "not sure I can specifically speak to that," but said the tax is dwarfed by the overall size of the bill's cost provisions. "Unfortunately a number like $40 billion has got a low priority ... and only in Washington could this be the case," he said.
When questioned about the reliability of the CBO scoring of the Finance Committee bill, Ubl said, "I think CBO has been pretty conservative actually. We firmly believe that investments in prevention and wellness," will have the desired effect on aggregate costs. However, Mussallem acknowledged that the Medicare physician fee schedule under Part B is a legitimate point of concern on the CBO score.
"The SGR experience does raise challenges in that regard," Mussallem said in reference to the sustainable growth rate mechanism that is routinely undercut by Congress. He intimated that the SGR is liable to be repealed yet again. "However hard Congress might try to find savings," it does not prevent future congresses from "revisiting those savings," Mussallem said.
MDMA rings in on industry tax
AdvaMed is not the only industry association that is vehemently opposed to the tax. In an Oct. 8 statement, the board of directors of the Medical Device Manufacturers Association (MDMA; Washington) issued a statement leaving no uncertainty as to the association's position.
According to the statement, the board "unanimously voted to oppose any device tax as part of the healthcare reform bills moving through Congress." MDMA's board chairman, Joe Kiani, who is also the CEO of Masimo (Irvine, California), says that MDMA "supports bipartisan legislation to improve patient care, reform the insurance industry and promote prevention and wellness." Kiani argues that the tax will slow down that process because of a disproportionate impact on small firms "who work closely with clinicians and engineers to develop the therapies and treatments of tomorrow."
The MDMA statement indicates that the association's members "met with members of Congress to communicate their concerns about the device tax" and quotes the association's President/CEO Mark Leahey as stating, "there can be little doubt – the proposed tax will have a cascading effect upon innovation, access to technology and employment in the industry."
MDMA makes the argument that "given the bundled payment structure, the device industry will already be negatively impacted by $155 billion in cuts to the hospital industry over the next 10 years," which MDMA argues "will translate into $15-$17 billion in cuts to the device industry alone." MDMA further expects that "proposed cuts in the areas of imaging, durable medical equipment and clinical lab supplies are expected to total approximately $6 billion over 10 years."
Mark McCarty, 703-268-5690