The House passed Rep Erik Paulsen’s Protect Medical Innovation Act of 2011 which repealed the 2.3 percent medical device tax, part of the healthcare reform law.
But very few believe the bill has a chance of passing in the Democratically controlled Senate.
That includes Morgan Stanley Analyst David Lewis. Nonetheless, in a May 31 research report, Lewis increased his odds of the device tax repeal to 30 percent. Even as of early May, it stood at only 10 percent.
Lewis added that although it still is a long shot, he thinks repealing the tax has become a priority for many Republicans. And it is a bipartisan issue in states like California, Indiana, Massachusetts, Minnesota where the medical device industry employs a larger portion of the population than in other states.
A repeal would most benefit companies like Abiomed and Boston Scientificwith lower operating margins and higher proportion of revenue coming from the U.S. market.
Lewis also believes that if the Supreme Court rules against the individual mandate, the device tax could die a natural death, although he appears to hedge that prediction.
“If the Supreme Court rules against the individualmandate, it would be politically challenging to keep a tax thatwas created to pay for a mandate that would no longer exist,however in the current budget situation, it is difficult to forgo taxrevenues, and this tax is estimated to collect over $29billion of taxrevenue from 2013 to 2022,” Lewis wrote.
Still, Lewis believes that the repeal, if it were to happen, would not become a reality before next year.
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