The Advanced Medical Technology Association (AdvaMed) says the 2.3% medical device excise tax implemented on January 1, 2013, has cost America as many as 165, 000 jobs.
The association conducted an electronic survey of all its members between November 14 and December 9, 2013. Approximately 15% (38 companies) responded. Those companies, according to a February 18, 2014 press release, account for approximately 40% of the domestic device sales revenues. Respondents were almost evenly divided between large and small companies, with 45% having sales below $100 million and the remainder with sales above this amount.
Of the responding companies 40% were currently not operating at a profit.
According to the report, the tax has led to direct employment reductions of approximately 14, 000 industry workers and foregone hiring of 19, 000 workers. Then adding in the indirect jobs tied to each industry job, the total climbs to the 165, 000 job loss estimate.
The report also found that almost one-third of respondents said they had reduced R&D as a result of the tax. Almost 10% of respondents said they had relocated manufacturing outside of the U.S. or expanded manufacturing abroad because of the tax.
In terms of investment dollars, 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)
- Reduced or deferred increases in employee compensation.
“Medical technology provides tremendous value to patients and the U.S. health care system, ” said David Dvorak, president and CEO of Zimmer, Inc., and Board chairman of AdvaMed. “Americans deserve policies that encourage strong investment in medical devices in order to make advances that will help improve even more lives.”
MassDevice reported on February 18, that the results paralleled some findings from a recent Emergo Group survey that similarly reported lowered R&D spending and job losses in 2013 as a result of the medical device tax. “The Emergo survey, however, also found that fewer medtech executives reported negative effects overall than had been expected. An increasing percentage reported that the tax had no impact on their company in 2013.”
“Overall, the impact of the [medical device excise tax] is being felt by industry, but the impact seems to be less severe than depicted by the media and industry organizations, ” according to Emergo.
“Contrary to the claims of some of the proponents of this tax, companies are simply not able to pass the tax on and are not anticipating a windfall from expanded coverage, ” AdvaMed President & CEO Stephen Ubl said in a conference call with reporters.
Finding $30 Billion
Repealing the tax has been a challenge for AdvaMed because repealing the $30 billion in anticipated tax revenues must be made up somewhere else.
When asked about that issue during the call with reporters, MassDevice reported that Dvorak said the association was ambivalent about the funding source for repeal. “This is a new year and potential pay-fors are yet to be identified. We, frankly, believe that it’s a matter that policy-makers ought to take on.”
Former President Bill Clinton reportedly reiterated the importance of finding a pay-for, telling an audience last month that efforts to repeal the medical device tax must come with a strategy to make up the lost funds.
“You’ve got medical device people, they hate the tax, ” Clinton said during January’s Patient Safety, Science & Technology Summit. “If you want to get rid of it you’ve got to say how you’d replace it.”
The political will to repeal the tax is there as a large bipartisan group of lawmakers has signed up to sponsor such legislation. However, no one is volunteering to take cuts.
