Section 9008 of the Senate’s versions of H.R. 3590 and amended in H.R. 4872, the Health Care and Education Affordability Reconciliation Act of 2010, imposes an annual fee on branded drugs. This fee is calculated by determining the ratio of a company’s branded drug sales to that of all branded drug sales to “covered entities” the previous calendar year, and then applying that ratio to $2.3 trillion in 2011, according to the bill signed into law.
The reconciliation bill, which President Obama called “improvements to the bill” during the March 23 signing ceremony, uses a comparison figure of $1.5 trillion in 2011, gradually increasing that figure to $4.1 trillion by 2018, before dropping to $2.8 trillion in 2019. This appears to be linked to the agreement negotiated by the Pharmaceutical Manufacturers’ Association in an attempt to gain protection from more onerous provisions that were discussed quietly last January, according to Ed Haislmaier, senior research fellow at the Heritage Foundation’s Center for Health Policy Studies.
A 2.3% percent tax on medical devices will be imposed beginning January 1, 2013. This will not apply to devices purchased at retail outlets. The reconciliation bill also may alter that figure. “Device companies run on a thin profit already—typically 5 to 9 percent,” according to John Collar, president and CEO of Colorado Biosciences Association.