New Report Expects Minimal US MDET Impact on Medical Device Industry
Recent findings by a nonpartisan US Congressional research agency suggests the much maligned Medical Device Excise Tax will have a “negligible” impact on overall health care costs in the US.
The Congressional Research Service report anticipates MDET will impact consumer pricing in the US more so than medical device company profits. Furthermore, researchers do not believe negative impacts of MDET on medical device firms in terms of decreased output and employment will prove substantial; manufacturing output and employment will decrease at most by a fraction of one percent, according to their analysis.
Three key reasons are cited for the minimal expected impact of MDET on the industry:
- The small size of the MDET rate (2.3% of gross sales)
- Exemptions of roughly half of manufacturing output from MDET
- Consistently high demand for health goods and services including medical devices
Assuming that MDET’s impact will indeed prove minor, CRS doubts that new challenges will develop for innovative or small- to mid-sized manufacturers. (Results from Emergo’s own industry survey in early 2014 suggested similar conclusions, with a majority of small- and mid-sized respondents reporting little to no negative impact of MDET on their operations in 2013.)
FY 2013 results
CRS illustrates its findings by citing MDET collection and enforcement data from the 2013 fiscal year, the first full year in which the tax was in force. The report cites estimates that the tax raised $1.7 billion, which totaled less than one and a half percent of US medical device sales that year.
A moot point?
Despite CRS analysis showing minimal to negligible effects on medical device firms’ bottom lines, product development and hiring practices, the tax’s days may nonetheless well be numbered. MDET has drawn sustained opposition not just from industry but also US lawmakers who have made several attempts to repeal the tax. Now that Republicans have retaken both houses of Congress, the push for MDET repeal will become more intense—and more likely—once the new Congress convenes in January 2015.