ANALYSIS: Big players bear the brunt of medical device tax

March 23, 2010 by Brad Perriello

The 10 largest medical device makers would have generated 86 percent of the $1.87 billion in excise taxes last year, had the healthcare reform law been in effect.

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Image: iStock

President Barack Obama signed the landmark healthcare reform bill into law March 23, initiating a monumental series of changes to the way healthcare is delivered and paid for in the U.S.

Not least among those changes, at least from the perspective of medical device makers, is the 2.3 percent excise tax on revenues contained in the law.

Unsurprisingly, the industry's reaction to the tax ranged from dire predictions of mass layoffs to fears of its impact on medical technology innovation. A MassDevice poll showed that most of our readers despise the healthcare reform act, with 55 percent of the 130 respondents reporting "I hate this bill. I hate the idea," and only 32 percent saying "The bill isn't perfect, but the spirit is right."

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But the exact impact of the reform's excise tax provision on medical device manufacturers' balance sheets is unclear. We wanted to try to get a rough sense of its impact, using revenue and profit data from fiscal 2009. Results from our preliminary investigation follow, but first a few caveats:

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