The Internal Revenue Service recently issued its final rule on a new tax of medical device makers’ revenue set to go into effect Jan. 1, but industry lobbying organizations aren’t giving up their fight to repeal it.
The rules, which runs 58 pages, details how the 2.3% excise tax on device makers’ revenue will be collected. The tax is expected to raise $30 billion toward paying for healthcare reform.
Many devices are covered by the tax, but items such as eyeglasses, contact lenses and hearing aids are not affected.
“This final rule does nothing to prevent the loss of jobs and innovation that has already occurred as a result of the medical device tax, and will unfortunately continue if we do not repeal this bad policy,” said Mark Leahey, president of the Washington, D.C.-based Medical Device Manufacturing Association.
Joe Kiani, cofounder and chief executive of Irvine-based patient-monitor-maker Masimo Corp., is a past chairman of the association.
Leahey said there was “growing bipartisan support in Congress to repeal the medical device tax.” His group “remains committed to working with elected officials to fix a policy that was a bad idea when it passed, and is proving to be more harmful than imagined to our economy and patient care as it gets closer to implementation,” he added.
Industry groups have kept up a steady drumbeat of repeal action in recent months. Last month officials at several OC-based medical device makers, or those with large local operations, signed a letter urging Senate leaders to repeal the device tax.
More than 800 companies, patient groups, provider groups, venture capital firms, organizations and associations sent a letter to Sens. Harry Reid, D-Nev.; Richard Durbin, D-Ill.; Jon Kyl, R-Ariz.; and Mitch McConnell, R-Ky., to consider repealing the tax. They contend the tax puts many high-paying jobs in jeopardy.
“We continue to believe that implementation of what was to be a $20 billion excise tax—and is now estimated to collect over $30 billion in taxes—will adversely impact patient care and innovation and will substantially increase the costs of healthcare,” the industry officials wrote. “We respectfully request timely action on legislation to repeal this over $30 billion excise tax.”
Repeal legislation has passed the Republican-controlled U.S. House of Representatives but no action has been taken in the Senate, which is under Democratic Party control.
Some Democrats, particularly from states with a large sector of medical device firms, have said they would support repealing the tax.
The letter was signed by executives at Allergan Inc., Edwards Lifesciences Corp. and Masimo, all based in Irvine, and San Clemente-based ICU Medical Inc.
Peregrine Trial
Tustin-based Peregrine Pharmaceuticals Inc. struck a deal with the Food and Drug Administration for the design of a third-phase clinical trial of its Cotara brain cancer drug candidate.
The drug developer wants to compare two dose levels of Cotara in up to 300 patients who have glioblastoma, the most common and aggressive form of brain cancer. Peregrine said the proposed clinical trial would include interim analyses, so it could be stopped early if necessary.
Peregrine doesn’t have any approved drugs yet. Its bavituximab lung cancer candidate made news back in September when the company said patients who were treated with bavituximab lived twice as long as those who only received chemotherapy.
The company said a few weeks later that it had found problems with the reported bavituximab data and that its initial analysis couldn’t be relied on. Peregrine said the problems were traceable to an outside contractor.
The Peregrine-FDA announcement for Cotara is important, because it gives investors more information about the company’s strategy, Joseph Pantginis, a pharmaceutical analyst with Newport Beach-based Roth Capital Partners LLC, said in a research note.
But Adam Feuerstein, a writer for TheStreet.com, argued that the drug maker “shows desperation in dusting off [an] ancient brain tumor drug.” Feuerstein, a frequent Peregrine critic, noted that the drug maker made a similar announcement in December 2001 but that trial never happened.
Bits and Pieces
Irvine-based molecular diagnostic provider CombiMatrix Corp. said shareholders approved the sale of its Series A preferred stock associated with a second tranche of its equity financing announced in October. CombiMatrix said it planned to raise $1.45 million in this round. It previously received $1.05 million in gross proceeds from investors who bought in the first tranche. … Aliso Viejo-based drug maker Avanir Pharmaceuticals Inc. said in a federal filing that Stephen G. Austin resigned from its board. Avanir said Austin’s resignation wasn’t caused by a disagreement with the company.
