House votes to kill Obama's medical device tax

Opponents of Obama health care legislation rally on the sidewalk during the third and final day of legal arguments over the Patient Protection and Affordable Care Act at the Supreme Court in Washington, March 28, 2012. Two years after President Barack Obama signed into law the healthcare overhaul, the Supreme Court is taking up a historic test of whether it is valid under the country's Constitution.

WASHINGTON (Reuters) - The Republican-led House of Representatives voted on Thursday to strike down a 2.3 percent tax on medical devices and other parts of President Barack Obama's healthcare law, although the effort is likely to hit a wall in the Democratic-led Senate.

More than three dozen Democrats sided with Republicans to repeal the provisions, including the tax that the medical device industry has fiercely opposed. The vote was 270-146.

The Obama administration has said it would veto the bill, arguing the device industry will benefit from the 2010 healthcare law as a whole, which aims to add tens of millions of Americans to the health insurance rolls.

Democrats said the industry did not fight the tax when the 2010 law was being crafted because manufacturers knew their sales would rise with more people getting insurance coverage.

"This is a PR (public relations) stunt for the election. The Republicans are helping the device industry back out of a deal they made," Democratic Representative Jim McDermott said.

Republicans cited industry-funded studies that concluded the new medical device tax would lead to lost jobs. Medical device makers have been lobbying for repeal of the tax.

"This tax will increase the effective tax rate for many medical technology companies, threatening higher costs, job loss and reduced investment here at home," Republican Dave Camp said.

The 2.3 percent excise tax, to take effect in 2013, applies to the sale of medical devices by manufacturers and importers.

Although the bill is unlikely to pass the Senate, healthcare investors are watching the device tax repeal votes, said Ipsita Smolinski, who watches Washington for investors for the firm Capitol Street.

"Not because they think the bill can pass the Senate, but because they are keeping a running list of provisions that could be repealed if the healthcare reform law is slowly dismantled post-election," Smolinski said. Presumptive Republican presidential nominee Mitt Romney has vowed to repeal Obama's healthcare law if he wins November's election.

The fight could become moot depending on the outcome of a Supreme Court ruling expected in late June on the law's constitutionality. The court could overturn the entire reform package or eliminate selected provisions, including a mandate that requires individuals to have health insurance.

The House legislation also repeals a part of the healthcare law preventing consumers from buying over-the-counter products with funds from specialized health savings accounts.

Among the backers of repealing the devices tax are lawmakers from states with big medical device companies, including Massachusetts, Minnesota, Pennsylvania and Michigan.

There is also support to repeal the tax among some Senate Democrats, but not in the form the House bill takes. The fate of that effort was unclear.

Minnesota-based Medtronic and Massachusetts-based Boston Scientific are two of the biggest medical device companies in the United States.

(Additional reporting by Donna Smith and Patrick Temple-West; Reporting by Kim Dixon; Editing by Kevin Drawbaugh and Peter Cooney)