Medical device tax could hurt medical app developers

By Brian Dolan

iBGStar Diabetes Manager App iPhoneIn an editorial published in The Wall Street Journal last week, former Senator Evan Bayh, a Democrat from Indiana, argued that at least one provision in the Affordable Care Act "threatens thousands of American jobs and our global competitiveness". Bayh was pointing to the 2.3 percent tax that the law requires medical device companies to tack on to each sale starting in January.

For the first half of his editorial Bayh extols the medical device industry before making his most provocative point:

"All of this is now threatened by the only law that is guaranteed to pass in Washington: the law of unintended consequences. A 2.3 percent tax on medical-device sales, not profits, was imposed under the theory that sales to medical device companies would surge after patients newly insured by the Affordable Care Act poured into the system. What the industry lost in margins, it was supposed to make up in greater volume. That calculation ignored the fact that the vast majority of medical-device consumers already are covered by Medicare, Medicaid or private insurance," Bayh writes.

Bayh also glancingly referenced FDA regulated medical apps, which, of course, are also medical devices:

"Especially hard hit could be the hundreds of small companies developing medical software applications. These apps promise to revolutionize the practice of medicine—for instance, by delivering blood-sugar test results for diabetics. The IRS is deciding now whether to treat apps as medical devices subject to the tax," he writes.

Bayh, who now works at a law firm that represents a number of medical device companies, points out that the House has already voted to repeal the medical device tax, but the Senate appears less likely to do so.

Quick Plug: The medical device discussion here on MobiHealthNews is largely centered on remote patient monitoring -- using converged medical devices and sometimes companion medical apps on mobile devices to provide care any place and any time. MobiHealthNews is excited to discuss this trend with the Mayo Clinic and their partner Preventice during a free webinar this Thursday at 2PM ET. Don't miss it! Register here for The Inevitable, Imminent Rise of Remote Patient Monitoring to join the discussion.