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OTC Manufacturers Nearly Included in Proposed Tax Legislation

In proposed legislation aimed at medical device manufacturers, Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, had thoughts about including manufacturers of over-the-counter products in new tax rules that would help fund comprehensive healthcare reform. According to the trade publication Adweek, the Senate committee decided against such measures for OTC products after receiving pressure from Republicans and industry members. Baucus did, however, leave a $4 billion-a-year tax on the medical devices industry in his proposal.

Opponents of the bill believed that with products costing $100 or less, such as condoms or home pregnancy tests, taxes on these items would likely result in higher prices for consumers. This then could be viewed as a stealth or middle-class tax. However, higher-priced items, such as insulin pumps or hearing aids, would still be taxed. The medical device industry has said it will pass along the costs to consumers.

• "One of the principal goals of health reform is to bend the cost curve, but there's no question that a significant portion of the tax is going to get passed on to consumers or providers of health care," Brett Loper, who represents industry trade group AdvaMed, told The Associated Press.

Loper said the tax on manufacturers would take effect immediately, before these companies would benefit from the expanded group of government-subsidized consumers in Baucus' bill, which is not set to take effect until 2013. Nevertheless, a spokesman for Sen. Baucus noted that he believes that it is fair to tax medical device companies. Other healthcare entities, including pharmaceutical companies and hospitals, have volunteered to make cuts to help pay for healthcare reform, and so should medical device companies.