The proposal by Senate Finance Committee Chairman Max Baucus (D-MT) for a $4 billion annual, $40 billion over ten year period user fee on medical device manufacturers to help pay for health care reform has sucked all of the oxygen out of the discussion surrounding device regulation.  Even movement on guidance documents from the Office of Combination Products has taken a back seat.

Baucus circulated his proposal as part of a framework for the Senate Finance Committee’s health care reform proposal, over Labor Day weekend, which was then introduced on September 16.  Under Baucus’s proposal, each company’s annual contribution to the $4 billion total would be determined based on the company’s share of total U.S. sales of qualifying devices in the previous calendar year.  To ameliorate the effect on start-ups, manufacturers’ first $5 million in sales would not be counted towards market share determinations, and sales between $5 million and $25 million would only be counted at half of their value.  Sales of Class I devices would be exempt.

AdvaMed and others have been critical of the proposal, and many have expressed concern about the effect on innovation.  Both republican and Democratic Senators from various states already have weighed in with Grassley.  As an aside, Senator Richard Durbin (D-IL), has already indicated that the Senate HELP Committee’s counterpart to the food safety bill passed by the House in July probably will not contain the user fees that are part of the House bill.  Durbin said that he did not believe bipartisan support existed for user fees.

Reform is a two-sided coin.  While the fees are onerous, overall revenue would increase as a function of millions more insured customers.  There is some speculation that expanded coverage could increase industry revenues by as much as 7%.

The Senate clearly is very sensitive to the fees issue, but the President wants a bill and betting against him has proven to be a sucker’s wager in the past.  This is especially the case given how invested he and Democrats are in the issue of health care reform.  As is so often the case, the parties are probably going to have to meet somewhere in the middle.  Everyone will be asked to pony up for the trillion dollars, give or take a few hundred billion, that this bill will cost.  The betting here is that no one will get off without paying something.

Mark Mansour is a partner in the firm, Bryan Cave, LLP