Medical Device Excise Tax Program May Require Surgery to Meet its Goals

The Treasury Inspector General for Tax Administration (TIGTA) has issued a report revealing inadequacies in the Internal Revenue Service’s (IRS) current strategy for ensuring compliance with the medical device excise tax created by the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). According to the TIGTA press release, the current IRS protocol for processing the Form 720, Quarterly Federal Excise Tax Returns that manufacturers, producers, and importers are obligated to file, is not sufficiently ensuring compliance and reporting of the new ACA tax.

Excise Tax

The ACA, through amendment to the Internal Revenue Code (IRC) (26 U.S.C. 4191), implemented an excise tax of 2.3 percent on the sale of certain medical devices. The tax, set out in regulations at 21 C.F.R 807, was projected to produce $20 billion in revenue for Fiscal Years (FYs) 2013 through 2019. The IRS has issued final regulations and the Department of Treasury has issued notices that are designed to provide guidance and ensure compliance with the new tax.Despite the agency outreach, the TIGTA investigation and report revealed that the number of Forms 720 filed and the amount of revenue reported was lower than had been projected.


The TIGTA Report identified $117.8 million in medical device excise tax discrepancies between the amount of tax collected by the IRS through the Form 720 process and the amount TIGTA calculated as proper. The TIGTA investigation revealed 219 “failure to deposit” penalties totaling $706,753 that were incorrectly assessed by the IRS. The IRS reversed 133 of those penalties and the remaining 86 were reversed by IRS management after TIGTA identified the errors. A significant fault in the present system that TIGTA identified is the inability of the IRS to determine the medical device manufacturers that are registered with the FDA, which are required to submit a Form 720. Without the ability to identify the tax paying population, TIGTA believes the IRS will be unable to form an effective strategy to ensure businesses are remaining compliant.


TIGTA’s primary recommendation is for the IRS to develop a protocol for identifying non-compliant manufacturers. Another recommendation is for the IRS to review tax returns that resulted in improper payments so the IRS can identify the appropriate amount owed. TIGTA also suggest that the IRS develop a correspondence mechanism so that IRS can obtain information about missing taxable sales and tax amounts.

Mobile Health Apps Bridge Doctor-Patient Divide

Among the top-rated iPhone and Android apps, according to, are programs that allow users to track the distance they walked or biked for the day, keep a personalized log of prescription drugs and relevant medical information, record recurring symptoms, and even monitor their sleep cycles, so a programmed alarm clock will go off when the users are at their lightest sleep period and ready to be awakened. Recent reports have indicated that these apps are not just being used by consumers, but are also being touted by physicians as tools used in patient treatment. As the “convergence of medical and consumer apps” becomes more apparent, newer, more highly-functioning apps are expected, yet, will those apps overload our collective hard drive and prove to be more hassle than helpful?


A article explored the notion of the converging paths of medical and consumer health apps, stating that recent reports have shown that, “in the future, experts see the integration of consumer apps and devices into ‘a comprehensive healthcare and wellness information system,’ that could enable medical professional to help patients manage their health…” Specifically, the piece mentions the use of mobile apps at the cardiac rehabilitation program at the Mayo Clinic of evidence that, as one expert stated, “physicians are embracing the trend.” Additionally, four large app-building projects are underway at the Center for Digital Health Innovation at the University of California, San Francisco that would, if turned into products, be available to consumers to collaborate with physicians on health issues.

Recipe for Disaster?

While some are optimistic about the future of professional- and consumer-based usage of apps, others have raised questions about the future mobile app industry’s propensity for unwieldiness. In particular, an expert opined that the massive amounts and breadth of data that could be collected by these apps could present a regulatory nightmare while another claimed that “too much data could stifle physician productivity.”

On the Horizon

Regardless of the potential issues raised by the merging of mobile apps for consumers and physicians, it appears that innovation is already pointing in that direction, as one analysis finds that health care management apps are following in the footsteps of (and working in conjunction with) wearable fitness tracking devices. The report acknowledges certain apps that are “worth a look” including: Samsung S Health, which allows the consumer to track nutrition, fitness, and wellness; WebMD Healthy Target, which was designed as a tool for diabetics, hypoglycemic individuals, and those struggling with obesity to monitor weight and blood sugar; and Apple Health, which “displays personal biometric data- heart rate, calories consumers and burned, blood sugar and cholesterol – from the fitness apps that actually collect the data and from devices such as JawBone and IBGStar Blood Glucose Meter.”

An article published on the online Business Insider, however, states that while the new innovations in health care apps are popular, they are not necessarily effective. That source refers to a 2013 report issued by the IMS Institute for Healthcare Informatics that found “most consumer-oriented health apps are severely lacking when it comes to functionality or what they actually allow users to do.” Indeed, “…increased usage doesn’t necessarily correlate with quality.” Specifically, the author of this piece points out that while these health care supporting apps are plentiful, their functionality is limited. In turn, the source predicts, the real revolution is not in the convergence of consumer and medical professional usage of health apps but in the merging of wearable trackers that also function, as apps do, to compile and analyze tracked data. “The real killer app probably won’t be an app at all. It will be whatever device successfully combines the limited functionality that so many apps have into an integrated platform that can actually change people’s health and habits in a holistic way.”

This proposition begs the question, will these combined function devices take over the health care app game? If so, will these devices face similar regulatory and data administration and use challenges that health care apps potentially face? Regardless of the direction of this industry, the bridge between patient care by medical professionals, consumerism, and technology has been forged and consideration of its implications must be undertaken in order to cross it.

Breast Cancer Detection Rates Show Improvement with 3D Mammography

Researchers at 13 participating institutions have reported in The Journal of the American Medical Association that use of tomosynthesis, also referred to as 3D mammography, in conjunction with digital mammography screening was associated with an increase in cancer detection rates and decrease in the recall rate for additional imaging. The research was sponsored and funded by Hologic, Inc. of Massachusetts, manufacturer of the Selenia Dimensions 3D System,  which was approved by the FDA in 2011. The device takes many low-dose X-rays at different angles to create a three-dimensional cross-sectional image of the breast. The total radiation dose when tomosynthesis is added is approximately twice the current digital mammography dose but remains well below the limits defined by the FDA.

The study, “Breast Cancer Screening Using Tomosynthesis in Combination with Digital Mammography,” was led by Sarah M. Friedewald, MD of the Caldwell Breast Center, Advocate Lutheran General Hospital in Park Ridge, Illinois. A total of 454,850 examinations (281,187 conventional mammograms compared to 173,663 3D mammography exams) from March 2010 through December 2012 were analyzed in the study. Mammography plays a key role in early breast cancer detection and single-institution studies have shown that adding tomosynthesis to mammography increases cancer detection and reduces false-positive results. The new study analyzed the records from 13 U.S. mammography centers before and after they added tomosynthesis; comparisons were made of the cancer detection rate, how often women had to be called back for more scans to check on suspicious findings, and what proportion of the callbacks and biopsies actually found cancer.

Significantly the study observed use of 3D mammography with digital mammography  resulted in a: (1) 41 percent increase in the detection of invasive breast cancers; (2) 29 percent increase in the detection of all breast cancers; and (3) 15 percent decrease in women recalled for additional imaging. Cancer was detected in 4.2 of every 1,000 scans with digital mammography alone, but in 5.4 when the tomosynthesis was added. The researchers were encouraged by the increase in detection of invasive breast cancers, noting that tomosynthesis was “picking up the ones we want to be picking up.” In addition, the reduction in recalls of women for additional imaging was important to alleviate the associated concerns expressed upon reimaging.

While the studies bode well for other device manufacturers to market the device as a screening method in the United States, further studies are needed to assess the relationship of 3D mammography to clinical outcomes.

DNA Sequencing Grows Faster and Stronger

Doctors have taken a massive step forward in diagnostic methods by using existing DNA sequencing techniques in a novel way. A New York Times report details the complex symptoms that put a 14 year old boy, Joshua Osborn, in an induced coma while doctors searched for a diagnosis. When other tests were unsuccessful, Joshua’s parents agreed to have their son enrolled in a research study for pathogen detection and discovery. The study used next-generation DNA sequencing to scan patients’ DNA for pathogens. In Joshua’s case, the sequencing identified the culprit responsible for his failing health, an obscure species of bacteria called Leptospira. The diagnosis led doctors to a simple antibiotic treatment that had Joshua back on his feet in a few weeks.

DNA Sequencing

The researcher’s method was published in the Journal of Genome Research. In that publication, researchers detailed what makes their version of next-generation sequencing special: speed and scope. Usually, DNA sequencing is too cumbersome and time consuming to be used in a lifesaving scenario, as it was in the case of Joshua. The new approach, which is the start of a future the FDA has predicted since at least 2011, seeks to use an enormous collection of data, stored on cloud servers, which can be rapidly accessed and cross referenced with a patient’s DNA to detect harmful pathogens. Joshua’s case is somewhat of an outlier from the typical DNA sequencing diagnosis because of the method employed. Instead of looking for a particular gene or genetic marker, the researchers scanned Joshua’s DNA to look for anything that didn’t match. When they found something that wasn’t Joshua’s DNA, they were able to identify it as bacteria and begin treatment.


The FDA has approved some sequencing devices, however it has yet to approve any of the type that were used to diagnosis Joshua. Most sequencing devices are specific in their focus. For example, in 2013, the FDA approved two DNA sequencing devices that were designed with the specific goal of identifying the transmembrane conductance regulator gene which can result in cystic fibrosis. While the technology is similar, those approved devices have a narrower application. The FDA has approved some universal sequencers, for example, the Illumina MiSeqDx instrument platform and the Illumina Universal Kit reagents, which allow sequencing of any part of a patient’s genome. However, none of the approved devices have the speed or data collection to make them effective for timely regular diagnostic use. Yet, with all the fervor surrounding DNA sequencing and the success stories of patients like Joshua, a comprehensive cloud-based diagnostic sequencing device is likely to be knocking on the FDA’s door in the coming years.

Other Uses

DNA sequencing has seen success in other areas as well, specifically with disease outbreaks. With the development of more rapid sequencing procedures, researchers have studied applying sequencing to infectious disease outbreaks in order to identify and isolate disease carriers. For example, one case, reported in the New England Journal of Medicine, looked at the feasibility of using sequencing in real time to identify and control a methicillin-resistant Staphylococcus aureus (MRSA) outbreak in a hospital. The researchers determined that the technology could be effective in real time to strengthen responses to outbreaks of diseases like MRSA. In other words, sequencing is quickly gaining traction and the trend suggests it will soon be an integral or even an everyday part of biomedicine.