A survey of member companies in the Advanced Medical Technology Association (AdvaMed) found that the companies are reporting the first year of the medical device excise tax resulted in a loss of jobs and restrained research and development.
Beginning on Jan. 1, 2013, a 2.3 percent excise tax on certain medical devices took effect as part of the Affordable Care Act. Proponents argued that the expansion of health coverage would increase demand for such devices, thus offsetting the effect of the tax.
After the first year, respondents to AdvaMed’s survey weren’t convinced. A total of 38 companies responded, accounting for approximately 40 percent of the domestic sales revenues of AdvaMed members, according to the trade association. Three-quarters of respondents said at least one of the following occurred as a result of the tax: deferment or cancellation of capital investments, new facilities or increases in employee compensation; reduction of investment in start-up companies; or difficulty in raising capital among start-up companies.
The report suggested the tax led to employment reductions of approximately 14,000 industry workers, a hold on hiring of 19,000 workers and an indirect effect on approximately 132,000 jobs.
More than 30 percent of respondents said they reduced research and development in response to the tax, and half said they would consider such a reduction in the future if the tax is not repealed.
“During a time when there is bipartisan support for growing high-technology manufacturing jobs, these results should serve as a wake-up call. As a result of the medical device tax, we have seen an unprecedented impact on jobs and key investments in R &D,” said Stephen J. Ubl, president and CEO of AdvaMed. “The findings of the report underscore the need to repeal this tax.”
Despite protests from industry representatives, the Center on Budget and Policy Priorities (CBPP) issued a report last fall claiming the concerns of those lobbying against the tax were exaggerated. It argued that since the tax applies equally to imported and domestically produced devices, there would be no overseas shift in production. The CBPP also said that health reform will spur medical device innovation by promoting cost-effective methods of care delivery, blunting the drag effect the tax would have on innovation.
Repealing the excise tax would cost $29 billion through 2022, according to the Joint Committee on Taxation.