Report: New tax could accelerate medical device outsourcing
A new tax on device manufacturers that is included in healthcare reform might be one of many factors that could drive outsourcing of medical devices, according to a new report by Kalorama Information.
The new tax, which could put pressure on margins, will be one more factor in growing the $60 billion market for outsourcing medical devices and device parts, according to the New York City-based life sciences market research firm.
To partially subsidize healthcare financing, the Patient Protection & Affordable Care Act (PPACA) institutes a 2.3 percent excise tax on “taxable medical device” sales beginning Jan. 1, 2013. The tax applies to medical devices intended for human use, but exempts eyeglasses, contact lenses and hearing aids, as well as devices that are “generally purchased by the general public for retail or individual use,” as determined by the Secretary of the Treasury.
The Medical Device Manufacturers Association (MDMA) and other groups fought to reduce the target size of the tax as well as the rate, but even in its revised form there will be an impact, Kalorama stated.
The tax would not take effect until 2013, but is a consideration now for many in the industry, and will be for the next few years as they await any further action on healthcare reform, according to the publisher. The tax does not include a blanket exemption for class I devices, so a wide range of medical devices, including low-risk hospital and physician office supplies, will be subject to the new tax.
“Device manufacturers will make outsourcing decisions in the coming year, and the future tax will be a factor on their minds,” Kalorama concluded.
The new tax, which could put pressure on margins, will be one more factor in growing the $60 billion market for outsourcing medical devices and device parts, according to the New York City-based life sciences market research firm.
To partially subsidize healthcare financing, the Patient Protection & Affordable Care Act (PPACA) institutes a 2.3 percent excise tax on “taxable medical device” sales beginning Jan. 1, 2013. The tax applies to medical devices intended for human use, but exempts eyeglasses, contact lenses and hearing aids, as well as devices that are “generally purchased by the general public for retail or individual use,” as determined by the Secretary of the Treasury.
The Medical Device Manufacturers Association (MDMA) and other groups fought to reduce the target size of the tax as well as the rate, but even in its revised form there will be an impact, Kalorama stated.
The tax would not take effect until 2013, but is a consideration now for many in the industry, and will be for the next few years as they await any further action on healthcare reform, according to the publisher. The tax does not include a blanket exemption for class I devices, so a wide range of medical devices, including low-risk hospital and physician office supplies, will be subject to the new tax.
“Device manufacturers will make outsourcing decisions in the coming year, and the future tax will be a factor on their minds,” Kalorama concluded.