As of this month, the US Medical Device Sales tax has become a reality. Many device companies have braced for the impacts of the tax, and we’ve covered the topic at length in anticipation for the changes ahead. An early observation that has been buzzing around the industry is that hospitals are bearing the brunt of the tax burden from the raising rates.
According to an article on Fierce Medical Devices, “hospital supply chain giant Novation claims at least one device maker has been passing the charge down to tis customers, which flies in the face of the tax’s intent.” Which in essence means the 2.3% tax hike could be passed down to the hospitals and patients. Many industry leaders are still hard at work trying to repeal the tax. Stephen Ubl, president and CEO of the Advanced Medical Technology Association, said the effort has bipartisan support "premised on the recognition that the tax is costing jobs and threatening patient care."
The tax’s intent was not to increase the costs or impose tax on hospitals and the question remains- Who ultimately will bear the tax burden?
Per Stone Carlie’s blog, Q&A’s on New Medical Device Excise Tax, manufactures can either:
- Absorb the tax or
- Add the tax to sales invoices as a line item, similar to sales tax
The author reminds, “if you decide to do the latter, consider if any contractual restrictions may apply. Also, keep in mind that competitors may not choose do this which will give them a cost advantage.”
Do small med-tech firms really have a choice? It seems the tax will effect them the most and many have concerns over the ability of smaller companies to overcome the impact of the tax. Cook Chairman Stephen Ferguson states, "One thing they may have is fewer products, but they also don't have the resources to apply and figure this out. Plus, if you don't make any money, the tax is still due. That'll be quite an awakening for them."
With just about a month under our belts since the 2.3% sales tax has become reality, do you believe this will be a process trend? Will companies continue to “pass the tax down to providers”? We want your point of view, post below.
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