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US Medical Device Makers Condemn New Tax

by Mike Godfrey, Tax-News.com, Washington

24 February 2014


US employment, research and development spending, and investment fell after the introduction of the federal medical device excise tax from the start of 2013, according to a survey by the Advanced Medical Technology Association (AdvaMed) of its members.

The medical device excise tax was included in the Patient Protection and Affordable Care Act of 2010 to finance part of President Barack Obama's healthcare reforms, and went into effect on January 1, 2013. It is levied on the gross sales receipts in excess of USD5m of medical device manufacturers, importers, and producers. Receipts from sales of eyeglasses, contact lenses, hearing aids, and other retail devices are exempt.

The tax has already attracted much opposition, both from the industry, and also in Congress, where bipartisan lobbying has been launched for its repeal. While it has been projected that nearly USD28.5bn in additional revenue will be raised over the ten years to 2022, it is also feared that it will represent a heavy burden for the 8,000 companies in the USD140bn medical devices industry.

AdvaMed's survey of its members found that almost one in third (30.6 percent) had reduced research and development spending, and almost 10 percent said they had relocated manufacturing outside of the US or expanded manufacturing abroad because of the tax.

In terms of investment, three-quarters of AdvaMed's members had deferred or cancelled capital investments; deferred or cancelled plans to open new facilities; reduced investment in start-up companies; or found it more difficult to raise capital (among start-up companies).

"During a time when there is bipartisan support for growing high-technology manufacturing jobs, these results should serve as a wake-up call. As a result of the medical device tax, we have seen an unprecedented impact on jobs and key investments in R&D," said Stephen J. Ubl, President and CEO of AdvaMed. "The findings of the report underscore the need to repeal this tax."

"Medical technology provides tremendous value to patients and the US health care system," said David C. Dvorak, President and CEO of Zimmer, Inc., and Chairman of AdvaMed. "We look forward to sharing the results of this new study with members of Congress and other policymakers as the fight to repeal this devastating tax continues."

TAGS: tax | business | excise duty | health care | manufacturing | United States | research and development

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