October 20, 2019

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With Government Funding Deal, Medical Device Tax Delayed For Another Two Years

On January 22, 2018, President Trump signed legislation delaying implementation of the medical device excise tax for two years.  This delay was included as part of a resolution to fund the federal government until February 8 of this year.  With broad bipartisan support, the bill passed the Senate (81-18) and the House of Representatives (266-15).

The device tax, enacted as part of the Affordable Care Act (ACA) in 2010, imposes a 2.3 percent tax on many medical devices.  The tax applies broadly to a variety of products, including pacemakers, surgical gloves, and artificial joints, and affects both imported and domestically-produced devices.  While enacted to offset costs from the ACA, many in the medical device industry have argued that the tax presents a significant barrier to innovation.

Congress first imposed the tax for devices sold after January 1, 2013, but the Consolidated Appropriations Act of 2016 (Pub. L. 114-113), enacted December 18, 2015, instituted a two-year moratorium.  Under the moratorium, devices sold from January 1, 2016 to December 31, 2017 were not subject to the tax.  The first post-moratorium tax payments were due at the end of this month.  The January 22 spending deal amends the Internal Revenue Code and retroactively delays the tax beginning on December 31, 2017.

The medical device industry had advocated for and appears further committed to pushing for the complete repeal of the device tax.  We will continue to monitor further developments related to the tax.

Grant Dixon also contributed to this post.

© 2019 Covington & Burling LLP


About this Author

Chris Hanson, Food and Drug Attorney, Covington Law Firm

Christopher Hanson advises international and domestic clients on regulatory strategies and compliance for medical devices, pharmaceuticals, biological products, cosmetics, animal products, and radiation-emitting electronic products. His broad range of clients include large multinational companies, venture capital firms, industry associations, clinical laboratories, and development-stage companies.

Mr. Hanson has extensive experience counseling clients on interactions with state, federal, and foreign regulatory agencies, including the Food and Drug Administration (...