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Update: Device Tax Stays as Late-Night Budget Deal Passes

After 16 days of a government shutdown and teetering the United States on the brink of default, both houses of Congress finally voted late Wednesday night (Oct. 16) to reopen federal agencies, call hundreds of thousands of civil servants back to work and raise the $16.7 trillion debt limit with one day to spare.

An agreement struck by Senate Majority Leader Harry M. Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.) ended a stalemate created last month, when far right-wing conservatives pushed GOP leaders to use the threat of shutdown to block a landmark expansion of the Affordable Care Act (ACA).

While the news of the deal is music to the ears of thousands of furloughed government employees, the recipients of many government-sponsored programs, and nervous financial markets, the medical device industry still faces the 2.3 percent tax that went into effect on Jan. 1 this year as part of the ACA. The topic of the device tax went from “Inside Baseball” industry albatross to the popular media mainstream. It didn’t attract much attention at first—at least not outside the world of medical device manufacturers.All that changed in the last few weeks.

As budget negotiations heated up, repeal and then a two-year delay of the medical device tax had been floated by Republicans among their conditions before passing a budget deal. Repeal of the tax has had growing bipartisan support, so industry was optimistic that there would finally be some movement. At the end of the day on Wednesday, bipartisan negotiation delivered a temporary budget deal both sides in the upper chamber could live with—but without the device tax as well as other conditions. Click here for more details.

Battered and divided Republicans in the House of Represented quickly passed the Senate’s version late on Wednesday evening.

“We’ve been locked in a fight over here, trying to bring government down to size, trying to do our best to stop Obamacare,” House Speaker John A. Boehner (R-Ohio) told a Cincinnati radio station. “We fought the good fight. We just didn’t win.”

The Senate overwhelmingly ratified the deal 81 to 18, with more than half of Senate Republicans voting yes. A few hours later, the House of Representatives approved the measure 285 to 144, with 87 Republicans voting to approve the measure.

President Obama signed the proposal soon after.

Enforcement of the debt limit would be suspended until Feb. 7, setting up another possible battle over the national debt sometime in March. Meanwhile, federal agencies would be funded through Jan. 15, when they might shut down again unless lawmakers resolve a continuing dispute over deep automatic spending cuts known as the sequester.

Senate Budget Committee Chairman Patty Murray (D-Wash.) and her House counterpart, Rep. Paul Ryan (R-Wis.) are meeting Thursday morning (Oct. 17) to start a new round of talks aimed at averting another crisis.

Though disappointed about the lack of repeal, the Advanced Medical Device Association (AdvaMed), the industry’s largest advocacy group vowed to keep fighting.

“We are heartened by the strong and growing bipartisan support for repeal of the medical device tax in both the House and Senate, and we appreciate the commitment from many members of Congress to keep this issue front and center during the budget debate moving forward,” said Stephen J. Ubl, president and CEO of AdvaMed. “Repealing this tax is critical to job creation and increased investments in R&D that will drive the next wave of medical progress. We are strongly committed to full repeal of this tax, and we will continue work to that end.”

Ubl recently told Medical Product Outsourcing that the association would continue to look for “any avenue” that “makes sense” for repeal, including corporate tax reform.

Realistically, Ubl added: "We need a legislative vehicle that will make its way to the president’s desk."

That "vehicle" may still be waiting with the engine running. And while it may seem like a defeat, there was a tremendous amount of progress made on the repeal—giving industry hope for results beyond this most recent budget battle.

Talk of the medical device tax repeal has been a no-go out the White House, which up until now has been relatively unwilling to carve out bits of the ACA piecemeal. But during the last few weeks, the administration has seemed to show willingness to negotiate the tax's fate.

In a meeting with the president at the White House late last week, Sen. Orrin Hatch (R-Utah), who has long been a voice for repeal, told reporters that the president conceded that the tax is "not part of the core program" of the Affordable Care Act after a face-to-face meeting with Obama last week.

And this week, in response to multiple budget deals being debated in the House and the Senate, Jay Carney, White House press secretary said: "What we have always said is, [regarding] discussions of the medical device tax or ACA that lawmakers want to talk about, is that we are willing to have those discussions, but not as ransom to fund the government effort or to buy votes. The issue of the medical device tax has been in the air for the last several weeks. We would be willing to talk about [the tax] with lawmakers who wanted to address that provision."

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