AURORA | One of Colorado’s fastest-growing industries could see a major uptick over the next year due to the possible repeal of a tax on medical devices.
The U.S. House of Representatives voted 280-140 on June 18 to nix a tax on medical devices purchased and used by healthcare professionals, marking the first, bipartisan step on the road to nullify the fees this year. Previous congressional attempts to axe the tax have failed.
“The medical device tax is burdensome for our medical device sector and impacts innovation, competitiveness and economic growth in the state,” said April Giles, CEO and president of the Colorado Bioscience Association, in a statement. “We applaud representatives (Ken) Buck, (Doug) Lamborn, (Scott) Tipton and (Mike) Coffman, who voted in favor of repeal.”
The 2.3-percent revenue tax was first levied two years ago as a mechanism to fund the president’s healthcare expansion program. Despite threat of veto, the tax next heads to the U.S. Senate, where it faces favorable odds in the Republican-controlled chamber. The Senate voted 79-20 to scrap the tax in 2013, though the outcome was non-binding.
What the repeal could mean for Aurora and Colorado as a whole is more jobs, more companies and an enhanced ability to keep research dollars in the state, according to Giles.
“Anecdotally, the tax has caused a lot of companies here to decrease the number of job opportunities and it really hinders innovation,” she said. “We’re really trying to keep that growth in Colorado and not move it to the international sector.”
Colorado is now home to the sixth-largest medical device community in the nation, boasting nearly 600 bioscience companies that employee more than 28,500 people, many of whom are based at the University of Colorado Anschutz Medical Campus in Aurora, according to Giles. She added that last year alone, 302 medical devices were approved by the Food and Drug Administration and 126 devices were in the investigational phase in the state. Colorado companies have produced 630 FDA-approved medical devices since 2006, according to a recent Colorado Bioscience Association study on the state of the industry.
Spectranetics Inc. in Colorado Springs was the state’s top producer in terms of investigational and approved devices last year, according to the CBSA study. But the device tax means that lofty production numbers don’t translate to financial health or immunity, according to Austin Byrd, vice president and chief compliance officer of Spectranetics.
“For us, the tax is about a $4 million annual burden — that’s money we would otherwise spend on research and development of new products and engineering and manufacturing jobs here in Colorado,” Byrd said. “There are many projects on our to-do list that we would engage in immediately if we could deploy that $4 million on R&D. Really, the tax means fewer jobs in Colorado, less innovation and an inability to produce products that could help patients.”
With more than 830 employees worldwide, Byrd said that Spectranetics exports thousands of devices to 65 countries with an emphasis on emerging markets such as South Korea, India and Brazil. He added that the tax has given device companies cause to reevaluate where they want to establish a headquarters.
“Most device companies do not expect to make a profit in the first phase of their existence because they’re reinvesting in additional technologies or very expensive clinical trials to get FDA approval,” Byrd said. “So this tax causes some companies to rethink where they’re going to set up shop and manufacture. It’s a significant burden on dollar one of revenue.”
Giles said that a lack of other facilities along the Front Range could set Aurora and the Anschutz Medical Campus up for absorbing additional companies, device ventures and resources, given a device tax repeal.
“In Boulder there really is not a true incubator, but there’s a huge need for incubator-type space up there,” Giles said. “So the ability for Anschutz to bring other companies from there onto its campus I think is high.”
The Senate is expected to vote on the device tax later this summer.
— The Associated Press
contributed to this report.