Amid conflicting agency regulations, contract manufacturers of
device components and finished devices may be subject to the new
medical device excise tax. The Health Care and Education
Reconciliation Act (Act), part of the March 2010 healthcare reform
legislation, imposed a 2.3 percent excise tax on the sale of any
"taxable medical device." However, the definition of
"taxable medical device" remains unclear. Under the Act,
a "taxable medical device" is defined according to
Section 201(h) of the Federal Food, Drug and Cosmetic Act (FFDCA),
but specifically excludes products generally purchased by the
public at retail outlets for individual use. The general
understanding was that the tax applied to manufacturers, producers
and importing manufacturers, but would not apply to contract
manufacturers of device components and finished products.
The IRS attempted to clarify the definition of a "taxable
medical device" in its proposed regulations by narrowing
Section 201(h)'s applicability to Section 510(j) of the FFDCA
and specific FDA regulations (21 CFR 807 et seq.). However, a
recent amendment to the relevant FDA regulations may broaden the
definition of "taxable medical device" to apply to
contract manufacturers of device components and finished devices.
Beginning Oct. 1, 2012, contract manufacturers of device components
and finished devices must list with the FDA the devices they
manufacture. This amendment broadens the range of manufacturers
needing to list their products with the FDA. Crucially, this
amendment would include contract manufactures and device components
under the IRS's proposed definition of a "taxable medical
Until the release of the IRS's final regulations, expected
at the end of 2012, contract manufacturers of device components and
finalized devices should consult with professionals on tax and FDA
regulatory matters to discuss specifically how they are impacted by
the medical device tax.
While some may consider improper multiple dependent claims as failing to comply with a mere formality, this case serves as a reminder that a court may consider any statutory requirement when assessing patent validity.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
While at first pass the case focuses on a small set of insurance policies, this decision could have broader implications on the individual market and further threaten the sustainability of the risk pools.
The Centers for Medicare & Medicaid Services and the Office of Inspector General have reviewed the use of Modifier 25 to unbundle payments for evaluation and management services when a procedure is performed.
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