AHCA, Obamacare Repeal, and the In Vitro Diagnostics (IVD) Industry

AHCA, Obamacare Repeal, and the In Vitro Diagnostics (IVD) Industry

Make sure to visit our In Vitro Diagnostics page, Kalorama's all-in-one resource covering the IVD market. 

Obamacare Repeal & the IVD Industry 

Kalorama Information notes mixed opinions on the AHCA, the senate bill for Affordable Care Act repeal, and that there are greater priorities for the IVD (in vitro diagnostics) industry, covered in The Worldwide Market for In Vitro DiagnosticsThe tax repeal is attracting bipartisan and IVD industry support, but there is concern over continued healthcare insurance provision.

Diagnostics companies seek to resolve these main policy issues, according to IVD industry interviews and public statements: 

Medical Device Tax and ACA Repeal 

The MDDI and IVD industries prioritize completely repealing the suspended medical tax, which put a 2.3% excise tax on medical devices sales (not simply profits), except for certain medical devices sold at retail. If the AHCA passes, the excise tax would not apply to medical device sales after Decemebr 31, 2017. The 2016 Consolidated Appropriations Act provided a two-year moratorium on the tax, which expires on December 31, 2017. 

The IVD industry has other routes to eliminate the suspended medical device tax aside from repeal. Medical device industry advocate group AvaMed said it'd use any ‘moving vehicle’, be it a repeal bill or separate effort.  

Insured Increase and ACA Repeal

The IVD industry and healthcare suppliers worry about declining healthcare use as millions lose healthcare coverage with partial ACA repeal. Spending on core lab systems and consumables demonstrably rose among clinical laboratories between 2013 and 2015 in anticipation of ACA implementation. Positive effects on core lab test demand or the volume of tests ordered as part of routine care and treatment episodes could lessen or disappear if enough Americans lose healthcare. 

In the MDDI (medical device & diagnostics industry), declining U.S. healthcare use is not a large concern. Medical device companies have been ambiguous about ACA proposal impacts on medical device market performance, as interviews with medical device and diagnostics players Medtronic and J&J executives seemed to indicate.  

Medtronic, a large-scale medical devices manufacturer, saw its product cycles and new introductions as stronger sales growth indicators than market changes. J&J was more optimistic about ACA proposals surrounding the new insured, but as of 2017, didn't seem to notice an impact on their sales. 

Kalorama noted after Obamacare’s passage that the IVD industry cares about preventative testing. The fate of the ACA's preventative care service provisions, including insurers' obligation to pay for USPSTF-recommended services without co-pay, is uncertain. The ACA's preventative care services have buffered certain IVD markets and suppliers with higher patient volumes and more routine care increasing demand for select screening tests. The AHCA would maintain preventative services requirements for private plans, but would repeal the requirements for the Medicaid expansion population. Preventive services for adults are covered at state option for other beneficiaries. States could opt to roll back coverage of preventive services for this group.

Issues that IVD & Device Companies Might Value Over Obamacare Repeal 

The IVD industry has priorities besides health care reform:

  • The Protesting Access to Medicare Act,  requiring applicable U.S. clinical labs to submit payment rates for corresponding volumes for lab tests ordered by private payers. Payment and volume data will be used by CMS to calculate the weighted median payment rates to be paid by Medicare for lab. Kalorama predicts a downward effect on revenues from this.  
  • Lab-Developed Tests (LDTs), which are not, unlike IVD kits,sold as products, and do not fall under immediate DFA regulation. LDTs are performed by labs using broadly used test reagents and FDA-approved instruments. The IVD industry is concerned that LDTs will not be subject to full FDA regulation and approval.
  •  Harmonized Test Results,recommended by The American Association of Clinical Chemistry as EMR systems make patient data more accessible.
  • Medical Device User Fees,  which have had decreased performance in recent years. The FDA set up medicle device user fees in the 2000's to collect and review medical device sponsors' user fees. 

Kalorama Information notes several sources to watch as the AHCA develops: