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Contact:
Wanda Moebius
202-434-7240
wmoebius@advamed.org
December 18, 2012

New Survey Highlights Cost of Implementing Medical Device Tax

 

WASHINGTON, D.C. – The medical technology industry will have to spend as much as $667 million just to implement the medical device tax, and 62 percent of companies say they are planning layoffs or reduced hiring to help offset the tax, according to a new survey of 81 members of the Advanced Medical Technology Association (AdvaMed).

“This is more proof that the medical device tax will do real damage and it ought to be repealed,” said Stephen J. Ubl, president and CEO of AdvaMed. “Congress needs to take action before this tax takes effect January 1 so medical technology companies can go back to doing what they do best:  hiring great workers and making life-saving, life-changing innovations, instead of diverting resources to helping the government collect a job-killing tax.”

The full survey can be found here. The respondents were companies of all sizes, from small (less than $1 million in annual revenue) to large (greater than $1 billion).

Based on the survey, the device tax will cost the industry between $400 million and $667 million just to implement. Sixty-two percent of the companies said they would have to deal with the cost of the tax by imposing layoffs or reducing hiring.

Ninety percent of companies said their current technology capabilities were insufficient to comply with the reporting and other record-keeping requirements of the tax, and more than 50 percent indicated they would need either completely new systems or major changes to their existing systems in order to properly comply. The Internal Revenue Service earlier this month released final regulations about how to collect the tax. The survey was done before the final regulations were released.

The vast majority of those surveyed are not expecting increased revenue because of the Affordable Care Act in amounts that would help offset the tax. The survey found that 80 percent of respondents anticipate sales growth of one percent or less due to the expected increased number of insured Americans, and 90 percent anticipate growth of two percent or less.

“While Washington talks about a fiscal cliff, this tax could push us off an innovation cliff, costing jobs and hurting our industry’s ability to find tomorrow’s treatments and cures. It should be repealed,” Ubl said.

 

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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.