Scoring a Win for Patients, Jobs, Innovation
Often undiagnosed, an estimated two to six million people in the United States have a serious heart condition called atrial fibrillation, or AFib. As those living with the disease know, complications from the irregular heartbeat caused by the AFib can be potentially devastating: The average person with AFib is five times more likely to suffer a stroke than someone with a regular heartbeat. Fortunately, there is innovative medical technology available today poised to make a real difference in the quality of life for a subset of people with AFib.
It can take up to ten years for the innovation lifecycle to run its course, meaning from initial concept to market, a new medical device conceptualized in 2007 is just becoming available to patients today. Because of this, medical technology companies need certainty to confidently invest in R&D for the long-term, including tax policies that are supportive of innovation so the industry can continue to realize its full potential.
Although the first version of the American Health Care Act flopped, there is at least one small piece of it that is worthy of immediate passage. The bill called for repeal of the medical device tax, a 2.3 percent excise tax on certain medical technology, enacted under Obamacare. Taxes are rarely a seductive conversation topic, but in this case, there is plenty of real-world evidence that this one is doing significant damage to patient health, technological innovation, and the job market.
The device tax, levied on sales and not on profits, has squeezed medical technology companies of all sizes, but has hit small, newer companies particularly hard. The result has been significant cuts to R&D, capital expansion, and hiring stagnation. The implant for atrial fibrillation made it to market in the face of this tax. But how many important innovations did not? We may never know. What’s more, nearly 29,000 jobs have been lost in our industry since the tax took effect, and we stand to continue losing thousands more every year.
Reduced R&D means that tomorrow’s medical breakthroughs may be put on hold indefinitely, and millions of patients with life-threatening conditions may not have the time to wait. Today, the United States is the global leader in this sector, but we risk losing our edge when our ability to innovate and develop new products is stifled.
Thanks to innovation, people with AFib now have access to technology that addresses the danger of long-term use of blood thinners reduces the threat of AFib-related stroke, and significantly improves quality of life for those living with the disease. Imagine the consequences if the concept for this groundbreaking technology had been put on hold or resources diverted away to pay the medical device tax.
Medical technology innovations like this have helped add five years to the average U.S. life expectancy since 1980, and have helped reduce the number of days spent in hospitals by 59 percent between 1980 and 2010. We have also contributed to a 25 percent decline in disability rates during a similar time frame, and have enabled many Americans to live longer lives disability-free. Behind every statistic is someone you know personally who has benefitted from these advances – our industry truly touches every American family.
This tax is different from other ACA-related taxes, and deserves separate consideration. It’s not grounded in any health care policy, it’s not linked to coverage, and it’s not in the best interest of patients. It’s such bad policy that in 2015 Congress passed a two-year suspension of the device tax, and we’ve seen positive effects as a result; Companies are investing back into research and valuable partnerships, and expanding their work force and capital. But in our industry, long-term certainty is paramount. Without permanent repeal, our companies will struggle a bit more to commit the resources necessary to see the innovation process through.
So as the larger debate over American health care continues, I encourage Congress to focus on this one, small piece of the puzzle. Repealing the device tax is a quick and easy win for patients, for business, and for the overall economy.
Scott Whitaker is president and CEO of AdvaMed, the world’s largest medical technology association. Prior to AdvaMed, Whitaker was chief operating officer of the Biotechnology Innovation Organization (BIO), and also previously served as chief of staff of the U.S. Department of Health & Human Services (HHS).