The 2.3% medical device excise tax that was imposed as part of the Affordable Care Act has cost the medical device industry approximately $34 million in R&D expenditures and $568 million across sales revenue, gross margins and earnings since its implementation, according to a new study.
Results from the study, performed at Iowa State University by Daeyong Lee, were published in the journal Research Policy.
The study aimed to explore changes in R&D investment, performance and marketing strategy in the US for the medical device market after the tax was imposed in January 2013.
Lee reportedly examined a number of different scenarios when analyzing the tax effect, and tried to control for economic factors outside the tax that could also affect investments.
Results indicated that gross margins took the largest hit, at $375 million, while sales revenue fell $188 million. Earnings fell $68 million, according to the report, while R&D spending dropped $34 million, according to a Science Daily report.
The reduced investments in research and development could have long term effects, Lee suggested.
“Some devices such as coronary stents require high-research investment. If medical device firms stop or reduce that investment, we won’t have better equipment and devices for complicated surgeries or procedures,” Lee wrote, according to the report.
Findings from the report suggest that medical device firms didn’t directly pass the burden to consumers, and instead diversified customer bases, increased global market sales and reduced operating costs for selling, as well as general and administrative expenses, according to Science Daily.
Study author Lee goes on to recommend alternatives for generating extra funding that wouldn’t target a single industry, including taxing health insurance companies which have also benefited from the health care expansion, according to the report.