The writing on the wall was there before, but now it is shining unmistakably like reflective paint on a dark night.
With President Obama’s re-election and likely continued Democratic control of the Senate, Obamacare and the industry-reviled 2.3 percent medical device tax is here to stay.
Discussing whether it kills jobs and hurts innovation as some device industry lobby groups and some companies have done for months is pretty pointless. But one argument is valid. The tax is confusing and it needs clarification.
When Investment Rhymes with Canada
Canada has a proud history of achievement in the areas of science and technology, and the field of biomanufacturing and life sciences is no exception.
Gunter Wessels, partner and healthcare principal at consulting firm the Total Innovation Group Inc. (TIGI) described the conundrum:
Who pays the 2.3 percent? Is it at origin? What about things that are modified, repackaged or distributed? Are distributors on the hook? They think they are. So are we going to tax the device maker plus kit maker? And is the device included in the kit? How do we account for that across the hand-off? Who reports it? Who monitors it? It seems pretty darn difficult.
Distributors are really worried because their margins approach 2.3 percent. If they’ve got to add a 2.3 percent tariff to this, it’s going to end up pretty devastating. There’s a lot of modification that gets done to devices that are ordered in one point, made by one group and then kind of synthesized into kits at another one. So they themselves are regulated, make a profit on each individual device – does that get taxed as well? Because if it is, then you’ve got a 2.3 percent ttac that could quickly turn into a 10 percent tariff for the entire supply chain.
Wessels recommends that the best way to move forward is to sponsor legislation that addresses these issues and modifies the tax so that it becomes less confusing.
