The medical device excise tax is having an impact on device companies and healthcare reform, according to GlobalData Analyst Rob Littlefield, MSc. And the new Republican Congress could be in a position to do something about it.
"Republicans in the U.S. Congress are expected to move quickly to revoke the medical device tax, which was imposed two years ago as part of a suite of fees on the healthcare industry to fund ObamaCare," said Mr. Littlefield. Many Republicans are eager to dismantle healthcare reform through repeal, eliminating funding and lawsuits.
The tax went into effect January 2013 and has had a noticeable impact on the industry. The tax was expected to raise an additional $29 billion over 10 years, with lawmakers arguing healthcare consumption would increase when previously uninsured patients received health plans with ObamaCare, which would lead to windfall profits.
However, everything didn't go as planned. The medical device industry did not have a seat at the table during negotiations over healthcare reforms before the tax was implemented. Some device companies are moving overseas, or at least their device development overseas, which could leave the United States behind.
"Many companies claim they have not seen profit growth with ObamaCare because most of their payments come through Medicare, which does not grow under health reform but continues to cover the exact same population it always did," said Mr. Littlefield. "That said, some experts argue that the device industry can easily afford the tax without compromising innovation, and that anticompetitive practices are what really drive up medical device costs unnecessarily. The belief is that the tax could be a distraction from reforms in the industry that are urgently needed to lower healthcare costs across the board."
The United States has one of the highest-costing healthcare systems in the world, driven by several factors including the confidentiality agreements that blind the actual price of devices and don't allow hospitals to share pricing information. Device company manufacturers also maintain personal relationships with physicians through their representatives. The Sunshine Act makes the financial aspect of these relationships transparent, and some are seeing the personal relationship dissolve under pricing pressures. In many places, physicians have influence over device purchases.
Mr. Littlefield suggests these tactics can help reduce implant prices and patient charges:
• Increased price transparency
• Discouraging physician conflicts
• Competitive selling
• Cost bundling
"However, pricing is still shrouded, cost-effectiveness research funding is lacking, device registries are non-existent in many cases and physician education for informed choices is limited," he said. "While the device tax may be on death row, only sweeping industry-wide changes would be likely to successfully drive device prices down significantly."