A bipartisan bill to repeal a tax levied on medical device manufacturers is gaining support in York County.

The 2.3 percent tax went into effect in January as part of the Affordable Care Act. It is expected to raise $30 billion during the next 10 years to help provide health insurance for millions of Americans who don't have it, according to the Congressional Budget Office.

Some lawmakers and officials in the manufacturing industry have said the tax hurts innovation and job creation. U.S. Sens. Bob Casey, D-Pa., and Pat Toomey, R-Pa., along with seven other Democratic and Republican senators, co-sponsored legislation last week to end the excise tax.

The bill is currently in committee.

"We have tens of thousands of jobs connected to the medical device industry," Casey said. "This is a common-sense measure to improve current law and ensure we are doing everything we can to encourage innovation and job creation."

Pennsylvania is poised to create tens of thousands of additional jobs, in which workers would create life-saving technologies and medical devices, Toomey said. But those jobs may be in danger because of the excise tax, he said.

He estimated Pennsylvania is the fourth-largest producer of medical devices in the country, with 576 medical device companies operating in the state. More than 50 of those companies are in York County, according to state data.

"This tax will have a big impact on companies right in our backyards," he said.


Advertisement

Reaction: The York County Economic Alliance is "real encouraged" by the bipartisan effort to rescind the tax, said Darrell Auterson, president and CEO of the alliance.

He said the organization intends, along with the Business Advocacy Council, to see how they can get behind the effort and support it.

"One of the things I found most problematic about the Affordable Care Act was this tax and its effect on an important sector in our community," Auterson said. "The medical device manufacturing industry is growing and emerging here. It's an important growth cluster in the county, and we don't want anything to hinder that."

But, so far, the tax hasn't had much of an impact on some of the medical device manufacturers based in the county, according to their executives.

Impact: At Dentsply, a York-based maker of

dental supplies, it's amounted to a small percentage of the cost of care, according to Derek Leckow, vice president of investor relations.

Most of what the company sells are called consumables, meaning they are put in the body before being taken out and thrown away. The materials are used for dental diseases, cleanings, root canals and more.

But the items account for about 10 percent or less of the cost of the procedure.

"So 2.3 percent in this case is a small amount of money," he said.

Large equipment sellers would face a much bigger impact from the tax. For example, a company selling a piece of medical machinery for $100,000 would feel the 2.3 percent tax a little more, Leckow said.

"There may be some impact from this tax, but it's not as big as it might be for others," he said. "It's a challenge, but it's not too steep to overcome."

Conewago Township-based Unilife Corp. has also been spared the brunt of the tax.

The company makes injectable drug-delivery systems.

Because Unilife supplies its pre-filled syringes in a sub-assembly format to customers, they only become a true product -- and subject to the tax -- when they are filled with the drug, said CEO Alan Shortall.

"So, for now, this is not a problem and does not adversely impact innovation capabilities or job creation at Unilife," he said.

Even though it hasn't had much of a negative impact on his company, Shortall is not in favor of the tax.

"Unilife is in support of a repeal of the tax, however, and is pleased with the progress being made to that end," he said.

-- Candy Woodall can also be reached at cwoodall@yorkdispatch.com.