CVS Comments on Excise Tax on Medical Devices
CVS Comments on Excise Tax on Medical Devices
- AuthorsCorrigan, Terence M.
- Institutional AuthorsCVS Caremark
- Cross-ReferenceFor Notice 2010-89, 2010-52 IRB 908, see Doc 2010-25771
or
2010 TNT 233-19
. - Code Sections
- Subject Area/Tax Topics
- Jurisdictions
- LanguageEnglish
- Tax Analysts Document NumberDoc 2011-4524
- Tax Analysts Electronic Citation2011 TNT 45-19
From: Clark, Jeffrey E. [Jeffrey.Clark2@CVSCaremark.com]
Sent: Wednesday, March 02, 2011 6:23 PM
To: Notice Comments
Cc: Corrigan, Terence M.
Subject: Notice 2010-89
Importance: High
Douglas H. Shulman
Commissioner of Internal Revenue
CC:PA:LPD:PR (Notice 2010-89), Room 5203
Internal Revenue Service
P.O. Box 7604
Ben Franklin Station
Washington, DC 20044
Re: Notice 2010-89; IRC § 4191
Dear Mr. Shulman:
Effective January 1, 2013, IRC § 4191 will impose a new 2.3 percent excise tax on sales of taxable medical devices as defined by the Food and Drug Administration (FDA). This tax is imposed upon any "manufacturer, producer or importer" of the device. CVS Caremark does not currently manufacture any medical devices, although it does import devices registered with the FDA that we believe should be exempted from this excise tax.
To avoid the inappropriate imposition of this tax on medical devices that retailers such as CVS Caremark purchase and resell to the general public, we offer our comments to assist the IRS to draft and promptly issue clear and unambiguous guidance describing the tax exemption contemplated by the sponsors of this legislation. The inappropriate imposition of the excise tax on retailers such as CVS Caremark or their suppliers will increase the country's overall health care costs. See Note 1, below.
Exempted from such excise tax are eyeglasses, contact lenses, hearing aids, and any other medical device determined by the Secretary to be of a type which is generally purchased by the general public at retail for individual use. We strongly recommend that this exemption be drafted in the form of general guidelines, and certainly not as an all inclusive list of individual items or categories of items (which would need to be perpetually updated). Any list of items or categories should be for illustrative purposes only.
To avoid confusion and unintended consequences regarding the Secretary's determination of medical devices that are generally purchased by the general public at retail for individual use; we suggest:
1. Reference to Widespread Public Sales of Individual Items. A medical device should be exempted under § 4191(b)(2)(D) if such medical device is available for sale to the general public at a retail, internet, or mail order location including a pharmacy, medical/health clinic, medical supply store, doctor's office or other business providing similar services or products, and where the majority of such sales are sales of individual items (i.e., sales other than "bulk purchases" by hospitals, medical offices, physician practices or other health care providers).
2. Reference to Devices Commonly Prescribed or Recommended for Home Medical Care. Exempt medical devices should include medical devices provided by health plans to their participants for home medical use, medical devices provided by employers to their employees for home medical use, medical devices prescribed by doctors for home medical use by their patients, and all other medical devices intended for home medical use.
3. Examples Illustrating Operation of the General Exemption. The list of examples should include not only smaller items, such as asthma inhalers, electronic hand sanitizers, bath safety items, canes, walkers, crutches, and neck braces, but also larger items, such as portable oxygen systems, wheelchairs, and home care beds. Importantly, this list should simply illustrate the operation of the general exemption, and not be an exclusive list (unlike the statute's exclusive references to "eyeglasses, contact lenses, and hearing aids").
4. General Notice, and Prospective Regulations. Guidance supporting a general exemption from this excise tax should be published as promptly as possible. Even before final regulations are issued however, taxpayers should be permitted to draw reasonable conclusions as to the types of medical devices sold to the general public for individual use, based upon the above-cited legislative history outlining the intended application of this excise tax. Moreover, any taxpayer that provides a reasonable basis for its conclusion that a particular medical device is exempt under § 4191(b)(2)(D) should not be subjected to any excise tax on any sales occurring before the 90th day after final regulations are published by the IRS providing more detailed rules governing this exemption. See note 2, below.
We appreciate your consideration and hope that you will act quickly to provide the guidance as requested.
CVS Caremark's mission is to provide expert care and innovative solutions in pharmacy and health care that are effective and easy for our customers. CVS Caremark is the leading pharmacy health care provider in the United States. Through our integrated offerings across the entire spectrum of pharmacy care, we are uniquely positioned to provide greater access, to engage plan members in behaviors that improve their health and to lower overall health care costs for health plans, plan sponsors, and their members. As one of the country's largest pharmacy benefit managers (PBMs), we provide plan sponsors and participants access to a network of approximately 64,000 pharmacies including more than 7,100 CVS/pharmacy stores.
We employ more than 200,000 colleagues in 41 states, the District of Columbia, and Puerto Rico. As of September 30, 2010, we operated 7,152 retail stores, 569 MinuteClinic locations, 44 retail specialty pharmacy stores, 18 specialty mail order pharmacies, five mail service pharmacies, and our CVS.com and Caremark.com Web sites.
Notes:
1. During the debates over this provision, Speaker Nancy Pelosi explained in a "myth and fact sheet" that "Sales of wheelchairs and other medical devices to individuals are exempt from the tax; the tax only applies to sales of medical devices to health care institutions, such as hospitals." http://www.speaker.gov/newsroom/factcheck?id+0133
2. See, e.g., Francisco v. Comm'r, 119 T.C. 317 (2002), aff'd, 370 F.3d 1228 (2004), (concluding that the IRS's failure to issue regulations outlining the operation of a particular tax exemption cannot bar application of a "beneficial tax statute," but instead taxpayers would be permitted to make reasonable assumptions as to how the exemption should operate, based on the provisions in the legislative history and, where applicable, analogous regulations.
Should you have any questions or comments, please contact me via email at TMCorrigan@cvs.com or by phone at (401) 770-2483.
Terence M. Corrigan
Vice President -- Tax
CVS Caremark
Woonsocket, RI
- AuthorsCorrigan, Terence M.
- Institutional AuthorsCVS Caremark
- Cross-ReferenceFor Notice 2010-89, 2010-52 IRB 908, see Doc 2010-25771 or
2010 TNT 233-19. - Code Sections
- Subject Area/Tax Topics
- Jurisdictions
- LanguageEnglish
- Tax Analysts Document NumberDoc 2011-4524
- Tax Analysts Electronic Citation2011 TNT 45-19
