EMERGO SUMMARY OF KEY POINTS:

• The US Medical Device Excise Tax (MDET) will come back into effect in 2018.
• Manufacturers and importers of taxable medical devices will be subject to a 2.3% tax on US sales.
• Years-long MDET repeal efforts by industry and Congressional allies have so far not succeeded.

Despite multi-year efforts to fully repeal the Medical Device Excise Tax (MDET) on device sales in the US, the tax appears set to come back into force in early 2018.

Originally implemented in 2013 as part of the US Patient Protection and Affordable Care Act (ACA, or Obamacare), MDET imposed a 2.3% excise tax on manufacturers and importers of “taxable medical devices” sold in or imported to the US. Campaigns by industry trade groups as well as many US legislators to repeal MDET began even before the 2013 implementation; although those efforts did not succeed, the US government did place a moratorium on MDET whereby medical device companies were not liable for the tax from January 2016 to December 2017.

Now, medical device manufacturers and importers will have to report sales of taxable devices to the US Internal Revenue Service (IRS) for the first quarter of 2018 no later than April 30, 2018.

Review of MDET requirements

Manufacturers that registered with the US Food and Drug Administration during the MDET moratorium as well as those companies needing a refresher on the tax may refer to Emergo’s original MDET report from 2013 as well as the IRS MDET FAQ to examine how they will be impacted in 2018.

Manufacturers should determine whether their devices fall under the FDA’s taxable medical device definition, and thus under MDET compliance requirements:

• Any instrument or in vitro reagent recognized by the US National Formulary or the US Pharmacopeia
• Any device intended for use in diagnosing, treating or preventing a disease
• Any device intended to affect human or animal bodily structures or functions in a non-chemical manner

Furthermore, any listed medical device that has a three-letter FDA product code falls under MDET requirements. Devices that currently have no FDA product codes assigned to them are not subject to the tax.

MDET opponents will continue pushing for full repeal of the tax, but for the near term manufacturers and importers selling in the US will be on the hook.

Related US FDA regulatory resources:

• US FDA regulatory consulting for medical device and IVD companies
• FDA medical device classification consulting and support
• FDA medical device regulatory process chart