House Passes Bill to Repeal Medical Device Excise Tax; Veto Threat Looms

By Kurt R. Karst –      

In a late-day vote, the U.S. House of Representatives passed H.R. 436, the Health Care Cost Reduction Act of 2012 (formerly titled the Protect Medical Innovation Act of 2012), by a 270-146 vote.  Among other things, the bill repeals the medical device excise tax created by the Affordable Care Act (“ACA”).  Under the ACA, beginning in 2013, an excise tax of 2.3% will be imposed on the sale of any medical device (as defined in the FDC Act) by the manufacturer or importer.  Exemptions are provided for eyeglasses, contact lenses, hearing aids, and other devices determined by Treasury to be of a type that is generally purchased by the general public at retail for individual use.  According to a House report, the excise tax, if it goes into effect, “will adversely impact the industry . . . , increase the cost of healthcare, slow medical innovation, and lead to loss of jobs in the industry.” 

The vote was taken after the House passed a resolution (H. RES. 679) paving the way for consideration of a substitute version of the bill consisting of the text of Rules Committee Print 112-23.  That version includes three items in addition to the original text of H.R. 436:

(1) H.R. 1004, the Health Flexible Spending Arrangements Improvements Act of 2012, which would increase participation in medical flexible spending arrangements;

(2) H.R. 5842, the Restoring Access to Medications Act of 2012, which would repeal the amendments made by the ACA that disqualify expenses for OTC drugs under health savings accounts and health flexible spending arrangements; and

(3) the Reconciliation Recommendation Related to the Recapture of Overpayments Resulting from Certain Federally Subsidized Health Insurance (see here). 

While repeal of the medical device excise tax and the provisions in H.R. 1004 and H.R. 5842 were tagged by the Congressional Budget Office (see here) and the Joint Committee on Taxation (see here) as measures that would increase the deficit ($29 billion alone for repeal of the excise tax), the Reconciliation Recommendation included in the as-passed version of H.R. 436 provided the needed off-set to make the bill pay-as-you-go compliant. 

The Advanced Medical Technology Association (“AdvaMed”) quickly issued a statement after the passage of H.R. 436 commending the House for voting to repeal the device tax.  AdvaMed conducted a study estimating the potential effect of the device excise tax on employment in the medical device industry, and issued a report last year saying that the excise tax “could reduce employment in the industry by cutting back on the demand for medical devices and by encouraging American firms to shift production overseas.”

It is unclear when the U.S. Senate might take up medical device excise tax legislation.  The White House has already signaled its opposition to repeal of the excise tax.  A June 6th Statement of Administration Policy from the Office of Management and Budget says that “[i]f the President were presented with H.R. 436, his senior advisors would recommend that he veto the bill.”

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