Some things in life are obvious, such as what Vice President Joe Biden is thinking. Other things? Not so much. Here are three things I don’t understand about the medical device tax.
One: Why make it a tax on revenues?
One suspects industry would be less exercised if the 2.3% tax had been applied to profits rather than revenues. Yes, device makers will play accounting games, and Max Baucus, chairman of the Senate Finance Committee, was most likely looking at things from 40,000 feet, so perhaps the difference was lost on him.
Still, someone must have told Baucus that device and diagnostic R&D would be badly affected. I think the complaint about device flight is a bit overblown – after all, a good source of export revenues is hard for policymakers everywhere to resist – but there’s no doubt that this tax gives device makers one more reason to get out of the U.S.A.
Two: What it will take to get a repeal through the Senate?
The Senate Finance Committee, which I’m pretty sure is the committee of jurisdiction, has 13 Democrats and 11 Republicans. To get through committee, a medical device tax repeal bill needs two Democrats. As far as I can tell, John Kerry will not back any such bill, and there are no other Democrats on the committee who appear to be from states that are med-tech intensive.
Assuming that’s the case, a repeal bill would have to hitch a ride on another piece of legislation on the Senate floor, meaning 60 votes are needed. There are only 47 Republicans, and that leaves at least 13 Democrats. You can count on Minnesota’s Amy Klobuchar and Al Franken, but Kerry would probably not change his mind. California’s Dianne Feinstein might respond, but Barbara Boxer? No way.
Frankly, I’m hard pressed to scroll through the list of Senate Democrats and find another 10 votes, even if you add Maryland’s Cardin and Mikulski to the tally. So if you can’t get a repeal bill in play via committee, and can’t get 60 votes on the Senate floor …
Three: What in the world is Steve Ubl talking about?
Steve Ubl, President/CEO of AdvaMed, has been trotting around a device tax disclaimer recently. In a June 7 conference call after the House vote on H.R. 436 (by Rep. Erik Paulsen), he did it again, claiming “we never bought into the tax,” asserting further, “we never supported the tax in any form or fashion.”
The problem is found in a letter dated May 11, 2009, signed by Ubl and several others making the collective promise that they were “committed to doing our part to make reform a reality.”
The letter does not mention a device tax, but I guarantee you Ubl didn’t think it meant AdvaMed was on the hook for hot dogs and baked beans at the next Capitol Hill cookout. Furthermore, I can’t see St. Jude bailing out of AdvaMed just because of the hefty dues, so it has to be the device tax, which this source and several others claim is precisely what happened.
How many times has Ubl or someone else at AdvaMed denied having “bought into” the tax? Thrice? I don’t know whether anyone at AdvaMed has been crucified over this thing, but I’m pretty sure I heard cock-a-doodle-doo after Ubl’s June 7 denial.
Will I understand all these things by this time next year? Probably, but not just yet.