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Wanda Moebius
January 28, 2015

Device Tax: New Data Confirms Costly, Negative Impact

Results Reflect Lost Jobs, Foregone Hiring, R&D Cuts

WASHINGTON, D.C. – The Advanced Medical Technology Association (AdvaMed) today released the results of a new survey that details the negative and costly impact of the medical device tax, reflecting the tough choices companies are making to address it including reducing jobs, R&D and other financial investments.

As a follow up to a survey completed in November 2013, AdvaMed conducted a survey of member companies at the end of 2014 to assess the ongoing effects of the medical device tax. The responses to the survey were generalized to the industry as a whole based on the ratio of revenues of responding companies to revenues of the overall industry.

“In the two years since the implementation of the medical device tax, our member companies have experienced significant job losses and damaging reductions in R&D,” said Stephen J. Ubl, president and CEO of AdvaMed. “The findings of this report, spanning two years of the tax’s effects, reaffirm the need for swift action to repeal this harmful tax on innovation.”

According to the survey, the tax has led to employment reductions of approximately 18,500 industry workers and will lead to forgone hiring of 20,500 additional employees over the next five years. The total impact of the tax on medical technology industry employment is approximately 39,000 jobs. Additional jobs will be lost in companies providing supplies or services to the industry. Forty-six percent of respondents said they would consider further employment reductions if the tax is not repealed. On the positive side, 71 percent of respondents said they would reinstate forgone hiring if the tax were repealed.

The report also found that more than one half of respondents (53 percent) said they had reduced R&D as a result of the tax, and 58 percent said they would consider further or first-time reductions in R&D if the tax stays in effect. Eighty-five percent, however, said that they would reinstate R&D projects or make new investments in R&D if the tax were repealed.

The damage from the tax goes beyond job cuts and reduced R&D. Three-quarters of respondents said they had taken one or more of the following actions in response to the tax:  deferred or cancelled capital investments; deferred or cancelled plans to open new facilities; reduced investment in start-up companies; found it more difficult to raise capital (among start-up companies); or reduced or deferred increases in employee compensation.

“The reduction in R&D is especially troubling as investments in research today are the cures and treatments of tomorrow. The effects of this tax could have a damaging ripple effect for decades to come if left unaddressed. This tax is not just a tax on medical technology companies. It’s a tax on medical progress. We applaud recent efforts by members of Congress to reintroduce bipartisan legislation in the Senate and the House to repeal the medical device tax,” said Ubl. “We look forward to sharing the results of this new study with all members of Congress as the fight to repeal this onerous tax continues.”

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AdvaMed member companies produce the medical devices, diagnostic products and health information systems that are transforming health care through earlier disease detection, less invasive procedures and more effective treatments. AdvaMed members range from the largest to the smallest medical technology innovators and companies.