WASHINGTON — The medical device excise tax, part of the Affordable Care Act, is hurting jobs, investment and research in the health-care industry, a new survey suggests.
Since the beginning of 2013, medical companies have fired 14,000 workers and declined to hire an additional 19,000, according to projections drawn from a survey by the Advanced Medical Technology Association. About one-third of companies reduced research and development as a result of the tax and almost 10 percent relocated manufacturing overseas, the survey found.
The poll results make a case for continuing to press for the tax’s repeal, AdvaMed officials said at a news conference Tuesday.
“This tax is bad for patients, it’s bad for jobs and it’s bad for innovation,” said Stephen Ubl, president and CEO of AdvaMed, a trade association that represents medical technology groups. .
The tax, which was applied to devices sold after Dec. 31, 2012, represents 2.3 percent of the sale price of taxable medical devices. The tax is paid by the manufacturing companies and importers, with little impact on the price consumers pay.
The value of medical technologies in the United States totaled more than $110 billion in 2012, according to federal numbers. The Congressional Budget Office estimates the new tax will generate $29 billion for the government over a decade.
A repeal of the tax was one of two Republican demands on Capitol Hill during the government shutdown at the end of last year, the other being a one-year delay of the enactment of the new health care law.
AdvaMed officials said partisan politics and disagreements over the implementation of the Affordable Care Act prevented the excise tax from being repealed. The association affirmed its commitment to rolling back the tax as a part of comprehensive tax reform discussions.
“While there was definitely strong momentum for repeal, the politics of the budget resolution ultimately precluded any repeal of the device tax in the final budget deal,” said David Dvorak, CEO and president of Zimmer Holdings and chairman of AdvaMed’s board.
AdvaMed officials also disputed the notion that expansion of insurance coverage under Obamacare has led to more patients and higher demand for medical devices. Proponents of the tax say higher demand will help manufacturers compensate for revenue losses.
“We’ve seen no uptick in patients,” Dvorak said.
Thirty-eight companies responded to AdvaMed’s electronic survey between Nov. 14 and Dec. 9 of last year. Surveyed companies represented 22.3 percent of industry revenues, with 55 percent having sales revenue of more than $100 million annually. Survey responses were expanded to reflect national employment.
According to the survey, 75 percent of respondents acknowledged actions like deferring or reducing investments and trimming employee pay in response to the tax, among others. More than half said they would consider cutting jobs and research if the tax remained.
However, another recent survey of industry leaders portrayed the tax in a more positive light. Last month the Emergo Group compiled feedback from nearly 4,000 members of the medical device industry worldwide and found that the majority were optimistic about future sales. Almost 85 percent were confident about their own company’s performance and 75 percent expected the entire industry to do well this year.
Despite a positive outlook, respondents still identified a “changing regulatory environment” as the top challenge they would face in 2014.
“It’s clear that the tax is taking a heavy toll that will only grow over time,” Ubl said.
