Year of the Pink Slip 2012: The medical device industry traditionally has been a source of unconstr

Year of the Pink Slip
2012: The medical device industry traditionally has been a source of unconstrained growth, due mostly to innovative technologies that treat an aging world population. But the cost pressures, flat sales, debt crises and pecuniary doldrums of recent years have weakened the sector’s immunity to economic ebbs and flows, endangering its long-term growth. To get back in the black, device manufacturers have cut both spending and jobs, and funneled existing resources into emerging markets. Though device makers have downsized before, the pace at which they sacked employees last year seemed unusually high—a Reuters report found that publicly-traded medtech firms trimmed their payrolls by 7,000 jobs, or 1.6 percent of the industry’s U.S. workforce. Companies blamed the cuts on various factors, including divestitures, increased efficiency and revamped priorities, but the top motivator clearly was the 2.3 percent excise tax. Stryker Corp., Hill-Rom, Welch Allyn, Zimmer Holdings Inc. and St. Jude Medical Inc. are sacrificing workers to the tax, while Cook Medical Inc.—the nation’s largest privately owned device manufacturer—is surrendering five additional production plants.

2013: Chances are high for a fresh batch of layoffs: Accuray Inc. and Hologic Inc. executives began the new year by announcing restructuring plans that will leave hundreds of workers without jobs. The 13 percent reduction in Accuray’s global workforce is part of a “strategic transformation” designed to save the Sunnyvale, Calif.-based radiotherapy device maker about $40 million annually. Hologic, meanwhile, is closing its Breast Biopsy Solutions facility in Indianapolis, Ind., to consolidate its Interventional Breast Solutions businesses. The move will trim 141 positions from the company’s payroll. Further evidence of the year’s future misery is supported by the results of a survey AdvaMed conducted late last year. The poll found that nearly two-thirds (62 percent) of device manufacturers plan to reduce staff in the next 12 months to offset the levy, and more than 80 percent of firms generating between $5 million and $50 million in annual revenue will downsize. Survey respondents estimate the tax to cost the industry between $400 million and $667 million. “This is more proof that the medical device tax will do real damage and it ought to be repealed,” AdvaMed President and CEO Stephen J. Ubl said. “…This tax could push us off an innovation cliff, costing jobs and hurting our industry’s ability to find tomorrow’s treatments and cures.”