House strips medical device tax from health-care law

Washington • The House moved Thursday to strike a new tax on medical devices before it goes into effect, the latest attempt in a persistent campaign to remove this funding source from President Barack Obama's signature health-reform law.

Utah's federal lawmakers oppose the 2.3 percent tax, arguing it would hurt innovation and could force jobs overseas if it is allowed to go into effect in January. It would also hit Utah harder than many states.

A Lewin Group study shows that Minnesota and Utah are the top states in medical device manufacturing jobs as a percent of their overall workforce. Utah has 120 medical device makers that employ about 10,000 people.

"I have concerns about adding an additional tax burden to this industry," said Rep. Jim Matheson, D-Utah, one of only 37 Democrats to support the tax repeal.

His district includes companies such as Dynatronics and Edwards Lifesciences, but also smaller ones that he believes would be unduly harmed by the tax. He also said he has a problem with taxes targeting one sector.

The 2010 health-reform law relies on a number of taxes, including ones on pharmaceuticals and tanning salons, to help pay for expanded insurance coverage. Supporters argue that those who profit from the new customers in the health-care system should help pay for the new law.

The medical-device tax is expected to raise $28 billion in a decade and goes into effect in January, unless Congress repeals it.

The House bill passed on a 270-to-146 vote, but it has little chance to become law. President Barack Obama has threatened to veto the legislation and the Senate is unlikely to bring it up for debate. The legislation also removes a restriction on buying over-the-counter medications with a flex-spending account.

Sen. Orrin Hatch, R-Utah, has been seeking other avenues to eliminate the medical-device tax. He was unsuccessful in a recent effort to repeal the tax as part of a broader Food and Drug Administration bill, though he cheered on the action in the House.

"It is difficult to overstate the damage to patients and our economy that this tax will wreak," Hatch said on the Senate floor Thursday.

The revived efforts on Capitol Hill come after medical-device companies have ramped up their lobbying efforts, largely behind the Medical Device Manufacturers Association.

The association's secretary is Kelyvn Cullimore, the CEO of Dynatronics, a Cottonwood Heights company that creates ultrasound devices. One of its board members is Fred Lampropoulos, CEO of Merit Medical, a South Jordan company that creates devices used to treat heart conditions.

Cullimore recently traveled to Washington to lobby Congress and he met with Utah's representatives.

"Once this tax is imposed it will do incredible harm," Cullimore said Thursday. "And it is going to lead to increased health care costs, which undermines the goal of health-care reform."

Cullimore said the tax would drop his company's profits by one-third and he argues he's unlikely to see a boost in customers, since many uninsured are now receiving care in emergency rooms and using medical devices already.

mcanham@sltrib.com

Twitter: @mattcanham

Reporter Steve Oberbeck contributed to this report.