| April 18
April 18 Raising prices and cutting spending are
among the steps medical device makers are considering to offset
the impact of a new U.S. excise tax on the devices, set to take
effect in 2013, according to a survey by global accounting and
audit firm KPMG.
In a poll of financial executives for device manufacturers,
40 percent said their companies were contemplating actions such
as price hikes, headcount reductions or changes in manufacturing
processes to stay competitive, KPMG said in a report released on
The 2.3 percent tax on the sale of products ranging from
pacemakers to elastic bandages, to be paid by the manufacturer
or importer, was enacted as part of the healthcare reform law.
The Internal Revenue Service and Treasury Department issued
regulations for the tax in February.
"Companies are of the mindset that they are going to do
everything possible to pass the impact of this tax along," said
Adam Uttley, a KPMG tax partner.
But companies could find it tough to raise prices in the
current economic climate, he said. Prices are falling for many
products, such as stents used in treating clogged arteries and
artificial hips and knees.
"There's a lot of uncertainty about how successful their
efforts will be, because of the competition in the market, but
that's not going to stop them from trying," Uttley said.
Some device makers have already announced layoffs ahead of
the tax, which takes effect in January 2013 and is meant to help
pay for the healthcare law's goal of expanding health insurance
to millions of Americans.
The U.S. medical device industry trade group AdvaMed has
argued the tax will stifle innovation and send jobs overseas,
and some lawmakers have called for its repeal.
In the KPMG survey, conducted in March, 61 percent of 190
financial executives polled said the tax will hurt their
companies' bottom lines. Sixty percent said it will increase
their tax compliance costs.
Half of the executives said they were unsure what actions
their companies might take.
Uttley said some companies are waiting to see if the U.S.
Supreme Court will overturn the healthcare law or some of its
provisions. The court is expected to issue decisions in the
challenge to the law by late June.
"There's a whole plethora of medical device companies that
are hoping the device tax is going to go away and are postponing
decisions until they see whether the tax is going to survive,"
If the tax remains the law, there will likely be renewed
calls in Congress for it to be repealed, he said.