New Year, New Taxes for Medical Device Manufacturers

On New Year’s Eve, as many people in the United States watched Congress struggle to come up with legislation to avoid the so-called fiscal cliff, medical device manufacturers had taxes of their own on their mind.

Manufacturers monitored Congress’ negotiations closely, hoping for a delay in a 2.3% excise tax for the medical device manufacturing industry set to kick in Jan.1. By the time the ball dropped in New York, NY, their hopes dwindled.

The tax is here, leaving companies such as Cook Group Inc., based in Bloomington, IN, to figure out how to deal with the extra cost. The company has already announced it will put off any U.S. expansion plans because of the tax.

Congress implemented the tax to help pay for the cost of the Affordable Care Act, also called Obamacare, but industry officials say the new tax will force layoffs and research and development cutbacks.

Proponents for the tax, such as President Barack Obama, say that’s not true, arguing that the new Affordable Care Act will bring new revenue to the industry.

“The health care bill is going to provide those health care companies 30 million new customers,” the president told a Minnesota news station in December. “It’s going to be great for business, and they’re doing really well right now, and they’re going to get 30 million more customers as a consequence, so this additional tax essentially comes back to them as new customers.”

According to the Kansas City Star, the tax will generate $1.8 billion in 2013, and about $20 billion through 2019.