Zimmer: We're not pushing the device tax down the line

January 8, 2013 by Arezu Sarvestani

Orthopedic giant Zimmer Holdings won't push the cost of the medical device tax down the line to its distributors, according to CEO David Dvorak.

Zimmer logo

Medical device company Zimmer Holdings (NYSE:ZMH) is well-prepared to weather the burden of the new medical device tax, chairman & CEO David Dvorak told an audience at the J.P. Morgan healthcare conference in San Francisco today.

The company has spent many years streamlining its operations and looking for ways to cut costs in order to prepare for the tax, which took effect Jan. 1.

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"We were very forward-looking about the effects of the tax," said Dvorak, who's chairman of the anti-medtech tax lobby AdvaMed. "The operational excellence program going back several years was designed in anticipation that, unfortunately, this thing may go around and bite us."

Zimmer's "operational excellence" initiative is among the company's 3 pillars of success, which also includes growth strategies capital allocation.

The medical device maker has been targeting about $400 million in savings by 2016, among other initiatives, in pursuit of hitting 8-12% earnings-per-share growth, Dvorak said today.

Zimmer was also among the 1st to publicly blame the medical device tax for cuts to its workforce. Last year the company announced outsourcing initiatives and layoffs for its Warsaw, Ind.-based headquarters, cited as efforts to offset part of the burden posed by the levy.