Death and Taxes

We’ve heard it before: “There are two things certain in life: death and taxes.”

Right now, the medical device industry is feeling the pain of both of these things. We’re trying to fight death by improving our medical devices, and reducing morbidity and mortality, but we’re under tight pressure from the medical device excise tax to do this as inexpensively as possible.

Let’s talk taxes. A provision of the Patient Protection and Affordable Care Act is to impose a 2.3% excise tax on manufacturers and importers of certain medical devices. The tax is scheduled to go into effect in January 2013. See the article “Medical Device Tax 101” for a good background of what the tax means.

A majority of industry representatives (unsurprisingly) oppose this tax. This is a very hot topic and many manufacturers have already taken steps to budget and account for the new tax. We could debate all day about how the tax will affect the future of the medical device industry. How will it impact the bottom line? Will it force manufacturing to move overseas? Will headcount be cut from R&D? Will small businesses survive under the financial pressure? Will the tax make healthcare more accessible to those who can’t afford it today? Will competition increase? Is the medical device industry overreacting?

One thing that I think is clear, regardless of the tax, is that in order to survive, companies will have to reduce the costs of healthcare while simultaneously improving patient outcomes. Companies are being challenged to develop more efficient ways to bring innovative products to the market.

I wish I could have a clear answer for all of the questions I raised above, but my crystal ball is a bit cloudy on this. I’ll point you to a few articles (see below) with very different perspectives. My only advice on this is to keep reading and be informed. There are so many articles on the medical device tax and its implications, and each one presents a new angle.

How do you think the medical device tax will affect the industry?

Links:

• Indiana Companies Say Medical Device Tax will Stifle Innovation
• Excise Tax on Medical Devices Should Not Be Repealed