Time to repeal medical device tax once and for all

Suspension is about to end, making R&D decisions difficult

THERE’S A LOT OF TALK in Washington about health care, its future, and what our health ecosystem could look like in the next 5, 10, and even 50 years. These are important policy questions, with nationwide implications if lawmakers get it wrong. Here in Massachusetts, we know a thing or two about health care, health technology, and how the two intersect. With the help of our congressional delegation and the governor, new horizons have been reached to foster the right environment for improved health care delivery. We can be proud of that, but at the same time, we are always looking to remove obstacles that could set us back. I believe the current federal tax on medical devices is one such obstruction.

More than 400 medical device and diagnostics manufacturers operate in Massachusetts, including Siemens Healthineers. Massachusetts has one of the highest rates of medical technology employment in the country, almost two times the national average. We are producing life-saving innovations that would have been unimaginable just 10 years ago. However, if the $20 billion device tax returns at the end of this year, it puts at risk our ability to continue exploring innovative solutions to improve and save patients’ lives and contribute to the local economy at the current levels.

The medical device tax is a 2.3 percent excise tax on the sale of medical devices. Overnight, producers of point-of-care diagnostic lab instruments, pacemakers, artificial hips and knees, and cancer-fighting radiation therapy technologies found themselves subject to one of the highest effective corporate tax rates in the world.

The industry had hard choices to make. Data from the US Department of Commerce showed that close to 29,000 medical technology industry jobs were lost over a three-year period while the tax was in effect.

Congress temporarily suspended this onerous tax in 2015, thanks in part to leadership from members of the state’s congressional delegation and support from Gov. Charlie Baker. Companies like ours used savings from the suspension to reinvest in research, innovation, and new medical technology industry jobs right here in Massachusetts.

At Siemens Healthineers, we expanded our offerings through acquisitions, driving forward our mission to enable healthcare providers to achieve better outcomes at lower costs. Our most recent acquisition, for example, enables quick and consistent diagnostic results for critically ill patients whether they are being tested in an ambulance, in the ER, or via the central laboratory.

We are looking for more opportunities to collaborate and innovate. But it is less than a month until the suspension ends, which means that commitment will be put in jeopardy. Ambiguity surrounding device tax repeal has made it nearly impossible to make research and development decisions for 2018.

On the other hand, if Congress repeals the device tax once and for all, medical device manufacturers in the state could plan for the future and create high-quality and well-paying jobs. A recent study found that permanent repeal of the device tax could result in thousands of additional American jobs.

Meet the Author

Peter Koerte

President, Siemens Healthineers point of care diagnostics
American manufacturers need a win just as much as Congress does. Despite overwhelming bipartisan support for full and permanent repeal, medical technology innovations and the patients they serve have become collateral damage in the health care debate. But it is not too late for Congress to act. It is time to put patients first. It is time for permanent repeal of the medical device excise tax.

Peter Koerte is the president of point of care diagnostics at Siemens Healthineers, a medical technology company with a laboratory diagnostics manufacturing and research and development facility in Walpole.