A new tax levied by President Obama’s health care law will likely hike veterinary bills for the nation’s pet owners as businesses pass their increased costs along to consumers.
The news comes as even Senate Democrats who voted for the law are demanding the tax in question be postponed.
The Internal Revenue Service will administer a 2.3 percent medical device tax as a means to fund the new law. According to a rule published in December in the Federal Register, the tax will hit some devices used in veterinary practices. The nation’s pet owners, who according to the American Pet Products Association already spend more than $12 billion on veterinary care annually, can expect the cost of caring for their pets to increase.
Devices used exclusively for animal care are not required to be listed as a “device” under applicable FDA regulations, so their manufacturers will avoid the tax. But the IRS decided “a device intended for use in human medicine is required to be listed as a device with the FDA even if the device may also be used in veterinary medicine.”
Such “dual use” devices can include “examination gloves, sterile catheters, [and] infusion pumps,” according to guidance offered on the FDA’s website.
Tax Likely to Raise Prices
Companies that manufacture devices used in both human and animal health care will have to pay the 2.3 percent tax on those devices. Many of those companies have already said they will raise prices as a means to cope with the new tax.
A majority of medical device manufacturers, in fact, said they plan to “pass along some or all of the increased cost [of the tax] to our consumers” in a recent survey by the Emergo Group, a medical device consultancy.
“Across the board there is bigger inclination among firms to raise prices and pass on costs to customers as a way to deal with the US tax,” the survey stated.
The device tax’s likely effects on the industry have many lawmakers who support the Obamacare law speaking out against the tax. Seventeen Senate Democrats recently wrote a letter to Senate Majority Leader Harry Reid (D-NV) asking him to support a measure delaying its implementation.
“With this year quickly drawing to a close, the medical device industry has received little guidance about how to comply with the tax—causing significant uncertainty and confusion for businesses,” the senators wrote.
Lachlan Markay ([email protected]) is a reporter for The Heritage Foundation.
Internet Resources:
Internal Revenue Service: Taxable Medical Devices
https://www.federalregister.gov/articles/2012/12/07/2012-29628/taxable-medical-devices#h-15
Senate Democrats: Letter to Harry Reid Regarding Medical Device Tax
http://www.scribd.com/doc/116298172/Device-letter
Emergo Group: 2012 Medical Device Industry Survey
http://www.emergogroup.com/files/2012-medical-device-industry-survey.pdf
