A recent Reuters report listed medical device makers among “the winners” in the Senate bill because it, like the House version, includes a $20 billion industry tax – just half of the originally proposed $40 billion.

Kudos to AdvaMed and member companies such as Boston Scientific and Medtronic for making their concerns heard and understood by lawmakers. The Reuters report also includes device makers to be winners because the Senate bill delays the tax to 2011, though device makers are pushing for a delay until 2013, which is part of the House bill.

While AdvaMed Senior Executive Vice President David Nexon isn’t on board with labeling any group a clear winner when it comes to the pending health care bills, he is pleased with the direction in which reform is headed. Nexon would like to see four components in the final legislation. 

These, of course, include the 2013 delayed start date for the industry tax. The others:

• Small business-friendly provision that would exclude a device maker’s first $100 million in revenue from being taxed, with the next $50 million to be taxed at half the regular rate.

• Provision that would make the industry tax deductible from corporate income.

• Assurance that however the tax is designed – whether it’s a conventional excise tax or some other form – it collects $20 billion – not more.

The House bill levies an across-the-board 2.5% point-of-sales excise tax, which Nexon says could amount to $30 billion by 2019, instead of $20 billion. The Senate bill bases the amount of tax a company owes on previous year’s market share. Of the two, he says the Senate version would carry with a greater assurance of not going beyond the $20 billion.

At press time, lawmakers were still hammering out details of the final legislation, with Nexon expressing optimism over passage before the president’s State of the Union address this month.

 “AdvaMed’s been a supporter of healthcare reform, and we think the Senate and House bills represent a giant step toward giving every American access to quality health care at a price that they can afford,” says Nexon. “We also think it takes important steps toward reorienting the healthcare reimbursement system to make it more about quality and efficiency, rather than simply rewarding people for more tests and procedures.”

He cites as an example advancements in knee replacements and their associated cost savings in terms of reduced custodial care costs over the life of the patient. Currently, a total knee replacement saves, on average, $77,000 per patient.

“We want to see an emphasis on products that demonstrate value, particularly products that can show cost savings,” says Nexon. Of course this doesn’t come without a price. “Additional data and more R & D spending may be required of device makers. And device makers will continue to feel pressure to keep costs down, and they will.” Nexon says that for the last 18 years, medical device prices have risen at a rate half that of the general Consumer Price Index. 

Still, AdvaMed continues to monitor what the legislation has to say about cost. “As you move toward cost containment,” says Nexon, “you have to be careful not to squeeze out innovation. As we move into implementation phase with new payment paradigms we’re working closely with policymakers to make sure that they’re constructed properly.”

Nexon encourages device makers to continue contacting their representatives in Washington to make sure legislators understand the importance of protecting innovation in healthcare.

Joe Jancsurak, Editor
joe.jancsurak@penton.com