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Repeal of medical devices tax unlikely

Mass. officials have vowed to reduce or undo the levy

By D.C. Denison
Globe Staff / April 3, 2010

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Massachusetts’ most prominent elected officials are paying a lot of attention to the multibillion dollar tax on medical devices included as part of the federal health care overhaul, but it may be tough for them to deliver on their vows to repeal or reduce the levy.

Senator Scott Brown, a Republican, wants to repeal the 2.3 percent tax, which takes effect in 2013 and is intended to raise $20 billion over 10 years. Governor Deval Patrick, a Democrat, says he is looking at ways to reduce the impact of the tax, and Senator John F. Kerry, also a Democrat, and other members of the state’s congressional delegation worked to reduce the tax when the bill was being negotiated on Capitol Hill.

The politicians’ opposition to the measure has strong support — at least among the state’s 225 medical device makers. But observers say it is unlikely that Congress will soon move to remove the tax from the newly minted law. After months of wrangling over the bill produced a slim victory for President Obama, revisiting pieces of the legislation now would probably start sparks flying again.

Last week, Brown cosponsored an amendment to “strike the medical device tax.’’ It was defeated the following day. Undeterred, he reiterated his intention to fight for repeal during a visit Wednesday to Dielectrics Inc., a Chicopee company that manufactures plastic components for medical devices.

On the same day, Patrick hosted more than a dozen representatives from the Massachusetts medical device industry at the State House. They told him the tax could stifle innovation, drive jobs overseas, and force them to raise prices.

“The meeting was very productive,’’ said Kimberly Haberlin, Patrick’s spokeswoman. “The governor understands the medical device industry is a vital part of the Massachusetts economy and is committed to working with them to ensure the industry continues to grow jobs in the Commonwealth.’’

Richard A. Packer, chief executive of defibrillator maker Zoll Medical Corp., based in Chelmsford, has met with Brown and Patrick to discuss the issue. “I think the medical device bill is ill-conceived, and is not a good part of the legislation,’’ he said. “I’m in favor of repealing it in total, or going in and seeing how it can be adjusted.’’

Supporters of a national health care overhaul say the tax is justified because medical device firms will benefit as more people become insured and seek medical care. Packer doubts that it will make a significant difference to his company.

“Brigham and Women’s Hospital has all the defibrillators it needs. They won’t suddenly need more, just because more people are insured,’’ he said.

Packer added that Massachusetts companies will “coordinate with other states that have large medical device industries, like California and Minnesota.’’

At Covidien PLC, which has its US headquarters in Mansfield, spokesman Eric Kraus said the company is “committed to health care reform, but we feel the medical device tax is inappropriate.’’

Kraus said Covidien worked with Kerry and Representative Richard Neal “to reduce the original, proposed tax, which was significantly higher.’’ The tax was initially set at 2.9 percent. By the time it reached Obama’s desk, it had been reduced to 2.3 percent.

D.C. Denison can be reached at denison@globe.com.