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| John Carney: so what if a medical excise tax of prosthetic legs and hospital beds drives the companies that produce them out of business? |
One of the twenty-some taxes in the Affordable Care Act (Obamacare) is a Medical Device Excise Tax. It sounds innocuous until you think about hospital beds, oxygen tanks, EKG monitors, prosthetic limbs, etc, etc, and then you begin to realize this is a MAJOR tax. It is, in fact, an onerous tax, as the Wall Street Journal reports:
The tax, which applies to sales beginning Jan. 1, 2013, has already taken a toll on some manufacturers."Few companies will be able to pass all or even a portion of the tax onto hospitals or distributors, so a number of companies have started to put cost-cutting plans in place," wrote JP Morgan stock analyst Michael Weinstein in a note to investors Thursday. Medtronic inc., the nation's largest device maker, estimates the tax will cost it as much as $150 million in 2013, a spokeswoman said. Stryker Corp. said in a statement Thursday that the $130 to $150 million in will owe next year could consume one-third of of its research and development budget.Smaller companies will take the worst hits, Mr. Weinstein wrote of the tax, which applies to sales rather than earnings. Small device makers could see earnings per share fall by 10% he estimated.Medical-supply firm Zimmer Holdings, hospital-bed maker Hill-Rom Holdings and other device makers have also attributed planned layoffs to the tax. Mr. Scott warned that more companies could follow. Because the tax is on total sales, rather than profits, companies with the smallest margins, such as unprofitable start-ups, will face the deepest impact, Mr. Scott said.
There was a piece of bipartisan legislation in the House of Representatives (HR 436) this past January to repeal that tax.
John Carney voted against the repeal of that tax.
And, as we find out from Knoxville TN, the fears of device manufacturers are coming true:
As a follow up to some comments in another discussion, we asked DeRoyal President and COO Bill Pittman to comment on rumors of layoffs related to the medical device excise tax implemented by the health care reform bill. Here's the response we received by way of DeRoyal's VP of HR:
"The medical device tax constitutes the largest cost increase DeRoyal has experienced in its 40-year history. We are working to mitigate this impact in a number of ways from both a revenue and cost perspective. Even in the face of this challenge we are doing everything within our power to preserve US jobs in this incredibly difficult economic environment."(signature)
Bill Pittman, President & COODeRoyal
DeRoyal Industries, based in Powell, is a manufacturer and worldwide distributor of health care equipment and products. DeRoyal has over 2000 employees in 26 states and five countries, with approx. 300 employees locally.
Your votes have consequences, Mr. Carney.
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