New Federal 2.3% Medical Device Excise Tax

Import_Excise_Tax

Considerations for U.S. Dentists and U.S. Dental Laboratories in Light of Increased Regulation

The new 2.3% Medical Device Tax will have certain beneficial effects on the dental industry both in the U.S. and abroad.

Domestically, it will reinforce the requirement of using FDA registered materials in medical devices, by requiring the foreign manufacturer and importer to provide documented proof of material composition and provenance. It is also an important next step toward global quality regulation of medical devices, already well established in many markets, through ISO quality standards and U.S. FDA regulation.

The low prices offered by foreign labs with lower operating costs are challenging the U.S. dental lab industry. With the new Medical Device Tax, the increased cost of regulating and importing medical products may help to balance the playing field. U.S. dentists may re-evaluate the benefits of choosing a full-service domestic dental laboratory, and using highly skilled U.S. technicians.

Defining the “Taxable Medical Device” under the 2.3% tax law

The IRS looked to the FDA for definition of a “taxable medical device”, and the key is FDA registration. All manufacturers, producers, and importers of medical devices must register with the FDA and submit a list of the medical devices that they manufacture, produce, or import. All “listed” devices are subject to the new 2.3% tax.

All imported dental devices are required to be listed. Each type of imported restoration receives a product code, and is taxable under the law.

Whoever imports as the initial owner of the device, whether it is a dental laboratory or a dentist, is responsible for paying the tax.

Dental laboratories are generally exempt from registering with the FDA, unless they import devices from foreign labs. With the exception of sleep apnea devices and snore guards, most domestically made crowns, bridges, dentures, veneers and retainers will not be subject to the tax. However, many materials and components used by dental labs will be taxable as medical devices.

The Dentist and Laboratory Relationship

In all countries, dentists benefit from working with full service local laboratories. They often know the technicians by name, the level of their skill, and can expect consistent quality work. They also know the quality of the materials used, and can rely on clear communication for difficult combination cases.

In the U.S. particularly, domestic laboratories are required to have an established quality management system in place to provide the required material and process control, and confidential patient history with full traceability for every case. U.S. labs are also subject to audit at any time to assure regulatory compliance.

Dental restorations are patient-specific medical prosthetic devices. With such a direct patient interface, dental restorations should not be marketed as a commodity. Until such time that global quality regulation is practicable, there will be measureable benefits for the dentist who works with the local dental laboratory.

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One response to “New Federal 2.3% Medical Device Excise Tax

  1. requiring the foreign manufacturer and importer to provide documented proof of material composition is very important for not only us device companies but also the consumer.

    great post guys

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