Medtech companies across the US are understandably upset because of the looming medical device tax that was signed into law in 2010 as part of the Affordable Care Act. Under this act, companies will be required to pay a 2.3% tax on their total revenues starting in 2013. Many industry leaders have spoken out against the tax, saying that it will stifle innovation this tax could be particularly detrimental to smaller companies looking to bring new innovations to the US. Furthermore, the tax does not take into account whether or not a company is profitable. As a result, associations such as the Medical Device Manufacturers Association (MDMA) argue that this tax could weaken the US position as a global leader in medical device innovation a fear that has already been brought up due to claims that the approval process in the US is already very strict, lengthy, and expensive.
This tax will force manufacturers to face two unappealing choices: absorb the cost themselves or pass it along to already cash-strapped facilities. In an industry faced with an increasing number of group purchasing organizations and fears of a second recession, neither option is particularly attractive.
On the flip side, policymakers argue that the tax will support procedure volumes because the money from the tax would go directly to funding health care. For example, parts of the Affordable Care Act already in effect have extended basic health care insurance to tens of millions of Americans who were not previously covered (more details on the Affordable Care Act that can be found here ). This in turn will boost demand for procedures and the relevant devices.
Nonetheless, medtech companies remain focused on the downside of the tax and the MDMA has said that it will continue to lobby to eliminate it, although no headway on this front had been made as of October 2011. It is worth noting, however, that the tax has already been reduced from 2.6% to 2.3% in an attempt to appease manufacturers.