Survey Evaluates Real-World Impact of Medical Device Tax

February 18, 2014—The Advanced Medical Technology Association (AdvaMed) released new survey results examining the first-year impact of the medical device excise tax. The survey found a significant reduction in jobs, research and development (R&D), and United States investment in the device industry.  

To provide information on the real-world impact of the tax during its first full year of implementation, AdvaMed conducted an online survey of member companies at the end of 2013. The survey responses were generalized to the industry, as a whole, based on the ratio of revenues of responding companies to revenues of the overall industry, AdvaMed stated.

“During a time when there is bipartisan support for growing high-technology manufacturing jobs, these results should serve as a wake-up call. As a result of the medical device tax, we have seen an unprecedented impact on jobs and key investments in R&D,” said Stephen J. Ubl, President and CEO of AdvaMed. “The findings of the report underscore the need to repeal this tax.”

According to the report, the tax has led to employment reductions of approximately 14,000 industry workers and foregone hiring of 19,000 workers. The total job impact of the tax on industry employment was approximately 33,000.

Independent estimates of the relationship between direct employment in the industry and indirect employment among suppliers and in the general economy found a ratio of four indirect jobs for each direct job. Applying this ratio to jobs lost or foregone suggests that the impact of the tax on indirect employment would be approximately 132,000 jobs—a total loss of as many as 165,000 jobs due to the tax, the report stated.

AdvaMed also found that nearly one-third of respondents (30.6%) reported reduced R&D as a result of the tax. Approximately 10% of respondents said they had relocated manufacturing outside of the United States or expanded manufacturing abroad because of the tax.

In terms of investment dollars, three-quarters of respondents said they had taken one or more of the following actions in response to the tax: deferred or cancelled capital investments, deferred or cancelled plans to open new facilities, reduced investment in startup companies, found it more difficult to raise capital (among startup companies), and reduced or deferred increases in employee compensation.

“Medical technology provides tremendous value to patients and the US health care system,” said David C. Dvorak, President and CEO of Zimmer, Inc. and Board Chairman of AdvaMed. “Americans deserve policies that encourage strong investment in medical devices in order to make advances that will help improve even more lives. We look forward to sharing the results of this new study with members of Congress and other policymakers as the fight to repeal this devastating tax continues."