A 2.3 percent excise tax on medical device manufacturers went back into effect Jan. 1 after a two-year suspension. According to an Associated Press article, industry groups estimate the tax will cost $20 billion over the next decade.
The tax was originally imposed in 2013 as part of the Affordable Care Act to help pay for expanded health insurance. Congress voted to suspend the tax for 2016 and 2017 and there was a “widespread expectation” the tax would be permanently abolished, according to the AP. But that didn’t happen.
“What we have seen from past experience is that it comes out of funding for product development, research and the jobs associated with those things,” J.C. Scott, head of government affairs for the Advanced Medical Technology Association (AdvaMed), told the AP. “We fear we will see employment freezes or reductions and a slowdown in the pipeline for medical innovation.”
The tax is applied to sales rather than income, meaning it will be a greater burden to smaller companies and startups that aren’t yet profitable.
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Daniel joined TriMed’s Chicago editorial team in 2017 as a Cardiovascular Business writer. He previously worked as a writer for daily newspapers in North Dakota and Indiana.