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Medical Device Lobby Wins Lower Fee in House Bill

WASHINGTON – House lawmakers will propose a $20 billion fee on medical device makers, while Senate leaders have whittled down their plans to tax the industry to pay for the health overhaul.

The Senate bill assembled by Senate Majority Leader Harry Reid (D., Nev.) is expected to levy a fee of between $15 billion and $20 billion over a decade on device makers, according to an individual familiar with the plan. The plan passed by the Senate Finance Committee earlier this month called for a $40 billion tax over that time, based on the companies’ market share. Details were still being worked out Monday.

The lower fee comes as big device makers like Medtronic Inc., St. Jude Medical Inc., and Johnson & Johnson have lobbied furiously against the Senate proposal. Their congressional allies from Minnesota, California, Massachusetts and elsewhere have barraged Democratic leaders with calls and letters.

“They’re in a complete panic,” said one House aide. The House version of the fee doesn’t remove the sting entirely, but it would whittle down and delay a financial hit the industry says will hurt product innovation. Under the terms of House legislation, which has not yet been released, the tax would wait until 2013 to kick in.

House Democrats may unveil their broad health-care proposal as early as this week, with a vote aimed for November. The medical-device tax will help bring revenue that Democrats have sought to ensure their proposals expanding coverage to the poor and to the uninsured won’t add to the deficit.

The structure of the House tax, details of which were described to Dow Jones by House aides and industry officials, is also different from that approved by the Senate Finance Committee. The Finance Committee version would divide up the tax based on the prior year’s market share–leading older, established companies to claim they would be paying disproportionately with respect to start-ups.

The House version will be an excise tax imposed on the device at the point of sale. The tax would be set at a level that would yield a total of $20 billion between 2013 and 2019.

Because the tax is imposed at point of sale, it would be paid by wholesalers and distributors in the case of some cheaper medical devices such as bedpans, tongue depressors and the like. High-end medical devices are sold directly to hospitals by the manufacturer, so in these cases the manufacturer would pay the tax directly.

Also, all retail products would be exempt from the tax under the House plan. The Senate Finance version would have exempted only retail products that sold for less than $100 per unit.

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Josh Sandberg

Josh Sandberg is the President and CEO of Ortho Spine Partners and sits on several company and industry related Boards. He also is the Creator and Editor of OrthoSpineNews.

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