Surveys Illustrate Positive Results of Device Tax Suspension

Medical technology companies are leveraging the 2015 suspension of the medical device excise tax to expand their businesses and investments, according to a new survey from the Advanced Medical Technology Association (AdvaMed).
 
The study explored various impacts from the tax’s suspension—from job retention and creation to elevated R&D infusions—and suggests a broad range of strong economic activity. Industry analysts believe, however, greater economic growth would occur with permanent device tax repeal.
 
“Our members are bullish on future industry growth and job creation, as these numbers indicate,” said Scott Whitaker, AdvaMed president and CEO. “But the one factor that concerns every manufacturer—both large and small—is the continued uncertainty regarding the medical device tax. With congressional action now, we can take the necessary steps to give this economy the shot in the arm it really needs.”
 
Conducted primarily in the fall of 2016, AdvaMed surveyed member companies with employees in all 50 states, representing approximately 30 percent of the industry, and learned that, even with temporary suspension of the device tax, manufacturers have taken short- to medium-term steps to reinvest those resources. Yet the association and many forecasters predict greater growth would come with full repeal.
 
“It’s not enough to delay or further suspend this disruptive tax, even if for a longer period of time. It simply does not give industry the certainty and confidence it needs to make these critical long-term R&D investments,” Whitaker said. “The time is now. We stand ready to help this administration, Congress, and the nation get Americans back on the job.”
 
Highlights of the medtech company survey include:

• 73 percent of respondents increased or avoided reducing employment since the tax was suspended.
• 33 percent invested in a new research facility, lab, or research infrastructure.
• 83 percent reported increased R&D or avoided reducing R&D funding.
• 23 percent reported increasing investment in start-up companies.

 
In addition, a new survey conducted by the Medical Device Manufacturers Association (MDMA) shows that suspension of the medical device tax has led to significant increases in R&D investments and job creation, but that the temporary state of the policy is limiting innovation.
 
“Medical technology innovators have boosted patient care and spurred job creation as a result of the device tax suspension, and we need to make sure this punitive policy is fully repealed once and for all,” said Paul LaViolette, executive chairman of CardioFocus and chairman of MDMA. “The healthcare ecosystem desperately needs additional investments in the cures and therapies of tomorrow, and our nation needs more high-tech manufacturing jobs. A permanent repeal of the medical device tax will support both of these critical priorities.”
 
The survey included over 100 responses from senior executives at some of the United States’ most innovative and entrepreneurial medical device companies. 
 
Notably, three out of four innovators said that they would make additional investments in job creation and R&D if the device tax was permanently repealed, as opposed to a temporary suspension.
 
“Both the Senate and the House of Representatives have made it clear that there is broad, bipartisan agreement that the medical device tax needs to be repealed,” said Mark Leahey, president and CEO of MDMA. “While much of the damage caused when the device tax was in place cannot be undone, today medtech innovators are investing the additional resources in communities throughout the United States. Congress needs to put a permanent end to what they agree is a misguided and destructive policy.”
 
Other top findings of the survey include:

• 70 percent of companies increased hiring and created new jobs as a result of the suspension.
• 73 percent of pre-revenue companies noted that suspension of the device tax has improved the climate for raising capital and funding.
• When asked how much respondents have increased their R&D budget, the average increase was 19 percent.

 
In addition to the two-year suspension enacted in the 114th Congress, the House of Representatives overwhelmingly voted for a full repeal of the device tax by a veto-proof majority of 280-140. This built off of the 113th Congress where 79 Senators voted in support of repealing the medical device tax.