Why the Medical Device Tax Threatens Pennsylvania’s Economy

Updated on December 3, 2019

By Dennis Durmis

Despite recent warning signs of a U.S. manufacturing slow down, Pennsylvania’s economy is humming. September’s unemployment rate in our state was 4 percent and the question now isn’t how to create more jobs, but how to promote and protect the industries in our commonwealth that will continue to grow our economy and provide stable, long-term employment opportunities.

recent report highlighting the medical imaging industry’s impact on Pennsylvania’s economy is evidence of how important the medical technology sector is becoming to our state. It also shows how our lawmakers of all political stripes have come together in supporting legislation to permanently repeal the 2.3 percent excise tax on the sale of medical devices, from CT and MRI technology to pacemakers and insulin pumps. The tax, which was implemented as part of the Affordable Care Act (ACA), took effect January 2013. Though it has been suspended twice, the most recent moratorium is set to expire at the end of this year. 

Since the medical device tax was suspended in 2015, Pennsylvania’s medical imaging sector has thrived. In the Pittsburg area, including Beaver County and most of western and northern Allegheny county, for example, the industry 1,800 jobs and generates more than $2.5 billion in economic output each year, according to the medical imaging industry report. The sector accounts for roughly 12,000 direct jobs across Pennsylvania with average wages and benefits of nearly $98,000 annually.

If the device tax is re-imposed at the end of the year, I’m afraid the economic tailwinds helping propel the medical imaging industry and jobs it supports will dwindle. In fact, I’ve seen these devastating effects firsthand. When the levy was in effect from 2013 to 2015, it was responsible for the loss of approximately 22,000 jobs nationwide. Worse still, failing to permanently repeal the medical device tax before the clock strikes midnight unfortunately will only ensure that history repeats itself.

For an industry that generates over $10 billion in economic activity and touches thousands of jobs across our state, this would be a significant burden to shoulder and would undermine the industry’s ability to continue creating jobs that grow our economy.

Repealing the medical device tax isn’t just an economic issue– it’s also a matter of ensuring that patients have access to innovative diagnostics and therapies. By imposing taxes on critical research and development– as the ill-conceived device tax does – we are also slowing important innovations which help patients treat and overcome their disease.

The medical device excise tax is bad policy, plain and simple. It violates commonly held sound tax principles, harms job creation, and undermines patient access to important treatment innovations. I urge Pennsylvania’s congressional delegation to join a growing bipartisan group of lawmakers to finally and permanently repeal the medical device tax before it is imposed, once again, on our economy and creates undue hardship for workers and patients.

Dennis Durmis is Senior Vice President and Radiology Head of Americas Region, Bayer and Chair of the MITA Board of Directors.

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