The Patient Protection and Affordable Care Act implemented in 2013 included a medical device excise tax which imposed a 2.3% tax on domestic sales of medical devices. The tax, paid for by the manufacturers or importers, was expected to generate billions of dollars to support healthcare but the revenues fell short and the tax took its toll on manufacturers and the industry.
The tax was suspended in December with the signing of the Consolidated Appropriations Act 2016 and a 2-year moratorium on the tax is in effect from January 1, 2016 to December 31, 2017. Now that the tax is on hold, how will the industry react?
Research and consulting firm GlobalData took a look at this and believes that small and mid-sized companies will benefit greatly from the suspension. The tax was very costly to smaller companies who cut research and development efforts, laid off workers, and reduced plans for expansion. Funds companies would have invested into product development and innovation were redirected to pay the tax.
Now that this issue is on hold, the industry is already seeing investments being put back into product portfolios and building businesses back up to pre-tax levels. Medical device companies in all sectors are looking to hire new workers to fill newly created jobs.
The money manufacturers would have paid to the tax is now an investment in adding jobs, improving product research, and increasing sales. With additional money being directed to Research & Development, the industry and the consumer benefit. To develop life-saving medical technologies, companies require operating revenue to grow and advance new technologies.
The positive reaction from industry leaders and government officials may lead to a permanent repeal of the tax once the suspension period is over. With additional funds available, we can expect to see medical device companies returning to the business of innovation and technological advancements that benefit us all. At Techprint, we are looking to take advantage of this by providing custom products for OEMS in the medical device market. Medical device customers account for 40% of our business so we are glad to see this tax suspended for our customers. Take a look at our website for our full capabilities.