Allowing medical device manufacturers to pass on to buyers the cost of the upcoming 2.3 percent medical device excise tax would be an unfair and unintended consequence of the Affordable Care Act (ACA), according to several groups, including the American Hospital Association, the Federation of American Hospitals and the Healthcare Supply Chain Association.
A little-known provision of the ACA requires the IRS to impose a 2.3 percent excise tax on all medical devices at the point of sale beginning in January 2013. The agency had published a proposed rule implementing the tax on February 7.
In a 10-page comment letter submitted to the IRS May 7, the groups warned that the tax should be implemented in a way that recognizes the "shared responsibility" by stakeholders to effect health reform via the ACA. The hospitals' contribution is $155 billion over 10 years, largely through reductions in Medicare payments. The manufacturers should honor their financial commitment to promote a better health system and not be permitted to sidestep their financial contribution by passing the tax onto customers, the organizations wrote.
"As the ACA appears to permit device companies to deduct the tax from their income for federal tax purposes, to allow device companies also to pass through the tax to their customers would provide a financial benefit that could leave device companies in a better financial position than before the ACA was enacted," the comment letter stated.
The medical device industry has indicated that the looming tax will hurt them financially, according to a recent KPMG survey.
The Advanced Medical Technology Association (AdvaMed), which represents the manufacturers, has requested that the tax be repealed.