Survey: Medtech startups respond to the medical device tax

There are few surprises in the medtech industry’s outlook on the impact of the medical device tax, but the burden weighs heavier on the industry’s startups.

Most of the startup executives surveyed by Silicon Valley Bank said that the tax will affect their long-term growth, including delaying profitability and hampering fundraising efforts, but it has also hurt their morale.

Startup executives in the medtech industry were less optimistic than their peers in other industries about their general business environment, translating to lowered hiring and growth expectations, according to a survey conducted by Silicon Valley Bank.

"Foster incentives, not taxes for medical devices," an anonymous participant responded to the survey. "This is one industry where the U.S. used to lead the world and this position is eroding and at significant risk."

The survey depicted the tax yest another headwind the industry is facing, adding to regulatory uncertainty, delays and rising costs. Device makers have also had to content with an 11-year low in capital investments, further exacerbating an already stressed market, according to SVB.

The survey included the responses of 98 executives at U.S. medical device startups, who responded to questions about the current and projected impact of the medical device tax.

"Our team wants nothing more than to change the world for our patients. In the process this creates well paying jobs and prosperity," another respondent said. "It baffles me that the US government adds to the slope of the hill we have to climb with an unpredictable FDA process, uncertainty with regard to investment tax rates and pre-profitability corporate taxes."

The survey largely confirmed results gathered in other studies, noting the industry’s shift overseas and intention to pass most or all of the cost of the medtech tax on to customers.

The study queried 98 executives at U.S. medtech startups, finding that 30% expect to shift the cost of the tax, 25% will focus on expanding overseas rather than in the U.S. and 22% plans to spend less on R&D.

The wild card remains the handful of companies that don’t expect to feel much of a pinch as a result of the tax. Two in 10 survey respondents said they don’t believe the tax will affect their long-term growth.

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