NEW YORK, July 6, 2015 /PRNewswire/ -- The "Protect Medical Innovation At" (H.R. 160) passed in the U.S. House of Representatives last month, representing the most serious attempt to repeal the 2.3% medical device excise tax passed as part of healthcare reform. Market research firm Kalorama Information notes that the US medical device industry has been hoping for repeal of the tax since the reform law was enacted. Among industry complaints is that the excise tax is on sales and is paid whether a device earns profit or not, and that it could limit R&D spending in an industry that spends a fair amount on research.
Kalorama Information estimates the U.S. Medical device industry is worth $165 billion dollars in its recent report, The Global Market for Medical Devices, 6th Edition. The latest sixth edition of the Global Market for Medical Devices also tracks medical device tax payments from the largest medical device companies, and is available here: http://www.kaloramainformation.com/redirect.asp?progid=87633&productid=8983360.
According to Kalorama, payments for major medical device firms reached the scores of millions of dollars in 2014: Johnson & Johnson was the largest single medical device taxpayer, with 180 million in payments, followed by Medtronic at 112 million. Covidien paid 60 million and Smith and Nephew 25. CR Bard paid 3.5 million.
"The amount companies pay will vary most notably with their revenues but also with the type of devices they make," said Bruce Carlson, Publisher of Kalorama Information.
Many devices, such as audiology devices and wheelchairs, are exempt from taxes under the statute. IRS rules have also added additional exempted devices. Oxygen concentrators, glucose monitors and other point of care tests, ileostomy bags, walkers, home medical beds and bandages are not specifically named in the original ACA statute, but were granted favorable IRS rulings.
"The actual tax burden is slightly less than most predictions before the tax was collected, because of these exemptions and other tax strategies, like writing off the tax payment amount from revenues on product sales and lowering burden that way," said Carlson.
Venture capital still flows into med device companies and R&D spending runs along expected percentages of revenue, according to Kalorama Information's analysis of bellwether companies.
"Impact measurement has been difficult because there are other factors, such as a declining relative US market, rising emerging nation device markets and investor interest in some innovative device categories, all of which can be difficult to parse," Carlson said. "For instance, it was said that companies might reduce R&D spending, but if they do that they damage their own competitive position and thus companies might strain to make those investments anyway. "
It is widely speculated that the tax is hitting smaller US device companies who need margin they'd otherwise have if not paid to tax.
The support for repeal has been bipartisan as many representatives of both parties have medical device firms in their districts. The White House has threatened a veto, indicating that repeal would take away a funding source for financial assistance that is working to improve coverage and affordability and would increase the Federal deficit. In the House, the bill passed a few votes shy of needed 2/3rds for an override.
More country markets, detailed company profiles and specific device markets can be found in the report, The Global Market for Medical Devices, 6th Edition, available from Kalorama Information: http://www.kaloramainformation.com/redirect.asp?progid=87633&productid=8983360.
About Kalorama Information
Kalorama Information, a division of MarketResearch.com, supplies the latest in independent medical market research in diagnostics, biotech, pharmaceuticals, medical devices and healthcare; as well as a full range of custom research services. Reports can be purchased through Kalorama's website and are also available on www.marketresearch.com and www.profound.com.
We routinely assist the media with healthcare topics. Follow us on Twitter, LinkedIn and our blog at www.kaloramainformation.com.
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SOURCE Kalorama Information