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Schumer Says, At A Time When The Federal Government Is Working To Promote Investment In U.S. Industries Of The Future, It Was Inconsistent That A Tax Of This Magnitude Was Placed On The Medical Device Industry

High Tax Put U.S. Companies At A Competitive Disadvantage With Companies Overseas & Has Been Seen As Innovation Deterrent By Industry Leaders 

Schumer: Medical Device Tax Freeze Will Help Make Glens Falls The Center Of Medical Technology

Standing at AngioDynamics in Glens Falls, NY, U.S. Senator Charles E. Schumer today announced that the recently passed government funding bill included a two-year freeze in the medical device tax, which is expected to greatly help companies like AngioDynamics in the Capital Region. Schumer explained the medical device tax is a 2.3 percent excise tax on the sale price of medical devices and has been seen by companies in the industry as an economic deterrent and hindrance to medical technology innovation. Schumer said the two-year freeze will provide a temporary reprieve for companies like AngioDynamics, as they will be able to more easily invest money, which would have otherwise been paid in taxes, into their companies, hiring more workers, developing life-saving medical equipment and more. Schumer said that while this is great news, he will be fighting tooth and nail in Washington to bring members of both parties to the table to develop an alternate, more permanent, bipartisan solution, before this freeze period ends.

“This tax has imposed a heavy financial burden on U.S. companies, like AngioDynamics right here in the Capital Region, by making it harder for them to compete with companies overseas that are able to manufacture and import medical devices at lower costs. While this temporary freeze on the medical device tax is good news for American companies looking to once again invest in innovation, develop cutting-edge medical technologies, hire more workers for good-paying jobs and compete on a level playing field, we need to find an alternate, more permanent, bipartisan solution, over these next two years before this tax kicks back in and puts companies at a disadvantage,” said Schumer. “So I will be working overtime with my colleagues in Congress to ensure we are boosting, rather than hindering, the companies that are working every day on breakthrough treatments and equipment to improve the lives of patients and further innovate the medical device industry.”

Schumer explained that the medical device tax is an excise tax on the sale of medical devices. The tax was first enacted in January 2013 and imposed a tax on both the manufacturers and importers of medical devices. Schumer said this means any company that either produced a piece of medical equipment or imported one was required to pay this tax. For this reason, the tax – which is 2.3 percent of the sale price of the medical device – has been controversial. Schumer said many companies in the medical industry have labeled this a “tax on innovation,” as it has resulted in companies putting financial resources toward paying the tax rather than hiring more workers, expanding their product lines, reinvesting profits into the research and development of more potentially life-saving medical equipment and more.

Because this tax has been contentious in nature, Congress voted just last month, in December 2015, to temporarily freeze the tax. The measure was passed as a part of the must-pass government funding bill (called the “omnibus”). Schumer voted for the omnibus and, therefore, this two-year freeze on the medical device tax, citing that the temporary freeze might allow Congress to develop a more permanent, alternative, and bipartisan solution to the tax, as well as provide relief to manufacturers across Upstate NY, like AngioDynamics, Inc. in the Capital Region, in the meantime. 

Schumer hailed the temporary freeze in the medical device tax during his visit to the Capital Region today. During his visit, he toured the AngioDynamics facilities in Glens Falls and vowed to continue working hard in Washington to find a more permanent solution to the medical device tax during this temporary reprieve. According to AngioDynamics President and CEO Joseph DeVivo, this tax has required the company pay approximately $11.6 million in taxes since 2013. The company has said that, instead of putting this money toward the tax over the last two years, it could have used it to hire more local workers, conduct more research and development or reinvest in the company. In 12 months, ending in May, the company has paid more than $4 million in taxes for medical equipment it has produced. 

AngioDynamics employs approximately 900 people in the Capital Region between its headquarters in Latham and its other two facilities in Glens Falls and Queensbury. AngioDynamics manufactures a variety of minimally invasive medical devices, including market-leading ablation systems, fluid management systems, vascular access products, thrombolytic products and venous products used by professional healthcare providers for vascular access, surgery, peripheral vascular disease and oncology. Therefore, Schumer said it is important companies like AngioDynamics and other medical device businesses throughout Upstate NY, like Welch Allyn in Syracuse, can expand and put their resources toward developing innovative medical equipment and technologies that could revolutionize the industry and improve the lives of patients.

Schumer was joined by Joseph DeVivo, President and CEO of AngioDynamics; Glens Falls Mayor John Diamond; and Warren County Economic Development Director Ed Bartholomew.

“First, I would like to thank Senator Schumer for his leadership in both the temporary suspension of the medical device tax and his commitment to seeing it permanently eliminated,” said DeVivo. “This tax has had a significant impact on our business over the past two years and has caused us to limit the amount that we could invest in growth initiatives and jobs. Immediately following the announcement that this tax was suspended, we were able to invest in a new R&D initiative that will bring a novel technology to the market six to twelve months sooner than expected, and improve patient lives around the world. That investment is the first of multiple efforts that AngioDynamics will undertake in the coming months and years to reinvest back in the Capital region.

According to a letter written by companies in the medical device industry – who banded together to form the Device Tax Repeal Coalition – the implementation of the medical device tax is estimated to have collected approximately $25 billion since its inception. In addition, the letter – signed by dozens of companies nationwide – states that the excise tax has been “adversely impacting patient care and innovation, and will compromise patient access to cutting edge medical technologies.” Now that the freeze has been passed, the Congressional Budget Office estimates the temporary reprieve will save those companies about $3.4 billion. Schumer said this temporary freeze will allow companies to continue innovating and putting their resources toward medical device development and creating more high-paying, high-skilled jobs in areas like the Capital Region.

According to the coalition, the industry already pays high prices for employment, medical innovation and research each year. In the letter, industry leaders state that “the industry employs more than 400,000 workers nationwide; generates approximately $25 billion in payroll; pays out salaries that are 40 percent more than the national average ($58,000 vs. $42,000); and invests nearly $10 billion in research and development (R&D) annually. The industry is fueled by innovative companies, the majority of which are small businesses with 80 percent of companies having fewer than 50 employees and 98 percent with fewer than 500 employees.” Schumer explained that companies have argued this tax is deterrent to innovation and something that has stalled a critical economic engine for Upstate NY and areas like the Capital Region. As a result, Schumer said during his visit that he will be fighting tooth and nail over this two-year freeze to find and alternate, and more permanent, solution to this excise tax so that patients continue to receive the best possible care and companies like AngioDynamics in the Capital Region can thrive.

In addition, during his visit, Schumer also vowed to fight to reauthorize the Medical Device User Fee Act (“MDUFA IV” as it is called). Schumer explained that this legislation has been reauthorized every five years since its inception in 1992 as the Prescription Drug User Fee Act (PDUFA). The bill was last reauthorized in 2012 and will need to be reauthorized again in 2017. According to the federal Food and Drug Administration (FDA), medical device companies pay fees to the FDA when they register their establishments and list their devices with the agency, whenever they submit an application or a notification to market a new medical device in the U.S. and for certain other types of submissions. These fees help the FDA increase the efficiency of regulatory processes, with a goal of reducing the time it takes to bring safe and effective medical devices to the U.S. market.

In 1939, David Sheridan, a Brooklyn native and transplant to the Glens Falls area, got an idea that changed medical science. Back then, medical drainage devices were considered to be somewhat crude instruments that were mostly made in France. However, Sheridan was convinced that the brewing war in Europe would upset the supply of these devices and that, furthermore, he could invent a better, cheaper, and disposable version of the device. He began tinkering, and wound up inventing the disposable catheter. The device proved revolutionary and, over the years, he built four catheter companies. This created over 1,000 jobs in the Glens Falls region, creating what has now become “Catheter Valley.”  One of his employees was a man named Phil Morse, who broke off to create a company called Namic in Glens Falls in the 1970s. Namic was then sold to Pfizer, and then to Boston Scientific. It ultimately to AngioDynamics.