Device tax: Jobs, R&D likely sacrifices in the face of tax burden, survey shows

March 14, 2012 by MassDevice staff

A small survey of Massachusetts medical device makers finds that jobs and research funding are likely targets for cost-cutting in the face of the 2.3% medical device excise tax set to take effect in 2013.

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Massachusetts medical device executives forecast job losses and budget-cutting for research & development efforts, as the industry nears the launch date of a 2.3% medical device excise tax.

Half of the 42 senior executives surveyed in the Bay State said they would slash R&D budgets and 25% said they would cut jobs at home and outsource manufacturing to lower-cost areas.

"We warned 2 years ago that medical device companies would be forced to deal with this tax by preparing for job cuts and reductions in R&D spending," MassMEDIC president Tom Sommer said in prepared remarks. "The U.S. leads the world in developing and manufacturing medical products, it doesn't make sense that on 1 hand the government is promoting exports and manufacturing jobs, while on the other hand it is implementing policies that will cut jobs in this sector and harm its competitive advantage – the development of innovative medical technologies."

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Only a quarter of respondents said they had a plan in place to comply with the tax, which goes into effect in 2013. Moody's Investor Services estimates that the levy could have a net impact of more than $650 million on the 20 med-tech companies it covers.

Nearly 45% of survey participants said they plan to pass on the cost of the tax to their customers by raising prices. Nearly 40% said they would assume the costs internally, according to a press release.