Medical device tax could hurt medical app developers

By: Brian Dolan | Oct 2, 2012        

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iBGStar Diabetes Manager App iPhoneIn an editorial published in The Wall Street Journal last week, former Senator Evan Bayh, a Democrat from Indiana, argued that at least one provision in the Affordable Care Act “threatens thousands of American jobs and our global competitiveness”. Bayh was pointing to the 2.3 percent tax that the law requires medical device companies to tack on to each sale starting in January.

For the first half of his editorial Bayh extols the medical device industry before making his most provocative point:

“All of this is now threatened by the only law that is guaranteed to pass in Washington: the law of unintended consequences. A 2.3 percent tax on medical-device sales, not profits, was imposed under the theory that sales to medical device companies would surge after patients newly insured by the Affordable Care Act poured into the system. What the industry lost in margins, it was supposed to make up in greater volume. That calculation ignored the fact that the vast majority of medical-device consumers already are covered by Medicare, Medicaid or private insurance,” Bayh writes.

Bayh also glancingly referenced FDA regulated medical apps, which, of course, are also medical devices:

“Especially hard hit could be the hundreds of small companies developing medical software applications. These apps promise to revolutionize the practice of medicine—for instance, by delivering blood-sugar test results for diabetics. The IRS is deciding now whether to treat apps as medical devices subject to the tax,” he writes.

Bayh, who now works at a law firm that represents a number of medical device companies, points out that the House has already voted to repeal the medical device tax, but the Senate appears less likely to do so.

Quick Plug: The medical device discussion here on MobiHealthNews is largely centered on remote patient monitoring — using converged medical devices and sometimes companion medical apps on mobile devices to provide care any place and any time. MobiHealthNews is excited to discuss this trend with the Mayo Clinic and their partner Preventice during a free webinar this Thursday at 2PM ET. Don’t miss it! Register here for The Inevitable, Imminent Rise of Remote Patient Monitoring to join the discussion.

  • David

    Bayh should be embarrassed making such Chicken Little claims about a 2.3% tax, including this ridiculous assertion: “That calculation ignored the fact that the vast majority of
    medical-device consumers already are covered by Medicare, Medicaid or
    private insurance,” Bayh writes.”  50 million Americans don’t have insurance, but few of those need devices??? 

  • Winter

    Hi David,

    I develop apps for medical device companies and what we’re hearing from our clients is that they aren’t spending money because of this tax. They really are laying people off. They will likely consider spending money again if Romney wins because they then will have a little hope that ObamaCare might get the curb. I’m sure if you’re just considering this as an outsider, it might make you think Bayh’s premise is flawed, but I assure you, real companies, like mine, are enduring actual damage to our business and bottom line because ObamaCare has such terribly reasoned ideas as its foundation. It is no chicken little claim. People in the medical device industry are losing their jobs right now and the laws don’t even take effect until January. If you don’t think it’s bad now, wait.

    Bayh is spot on. The law of unintended consequences is at work and the density of Washington thinkers is mind numbing. You need to stop propagating this 50 million uninsured myth. It sounds great, but it’s just not true. It’s been broken down into distinctive groups by numerous sources and the actual group of people who are really uninsured because the system is “broken” is statistically speaking quite small. The system could always be improved, but it’s false to believe that 50 million people are running around uninsured with no recourse. Talk about a chicken little claim.