• by Bruce Carlson
  • January 8 2018
  • ACA

$185 Billion-Dollar U.S. Medical Device Industry Reckons With Return of Tax

$185 Billion-Dollar U.S. Medical Device Industry Reckons With Return of Tax

Congress and President Obama suspended the Medical Device tax within the ACA for 2016 and 2017, and the device industry breathed a collective sigh of relief.  Surprisingly, the suspension was never renewed nor was the device tax included in any of the administration's bills to reduce healthcare costs.  The tax bill was not included in the recent Tax Cuts and Jobs Act nor did any larger repeal pass.  Large manufacturers with resources are currently lobbying to remove the tax.    This could impact the industry in a number of ways.   Short term, it’s just a bad month.  Long term, there could be R&D effects and less interest from investors. 

  A bipartisan two-year suspension of a medical device tax in the Affordable Care Act (ACA) has expired, forcing companies will to pay that tax as there was no legislation reversing it.   This has sparked concerns from several members of the device industry and its leading association, AvaMed.  Kalorama Information, in its latest report on the size of world device industries, The Global Market for Medical Devices, Kalorama said The United States is the largest medical device market in the world with over $180 billion dollars in revenue.    The tax is an excise tax, so it is paid on sales of most FDA-regulated non-consumer items whether there was profit made on the device or not. 

There could also be greater marketing efforts outside the U.S.  Sales of medical devices by U.S. firms to Europe are not subject to the recently renewed medical device tax, one more reason for a positive outlook on medical device sales there. This according to healthcare industry research firm Kalorama Information. Kalorama says The European market for medical devices was estimated at $104 billion in 2017. With average 3.4% growth over the next five years. This per Kalorama Information's other market study,  European Medical Device Markets (Germany, France, United Kingdom, Italy, Spain, Switzerland, Sweden, Poland, Other Markets) .

 The 2.3%  medical device tax will took effect on January 1.

There are bright sides for the U.S. industry from Kalorama Information’s report.   The use of technologically superior devices combined with a steady replacement rate to remain competitive in the industry will be significant factors for growth.  Also, the U.S. has shifted many of its reusable devices for single-use devices due to risk mitigation strategies to reduce healthcare acquired infections

Kalorama notes progress of a bill from the House “Problem Solvers Caucus” a bipartisan group of House Members to repeal the tax.  As of Dec 20th it had been Referred to the Committee on Energy and Commerce, and in addition to the Committee on Ways and Means, for a period to be subsequently determined by the Speaker.