Medical Device Tax Suspension . . . now what?

Posted by Anna Bolan

By Anna Bolan – Medical Market Manager

Many of Polo’s valued customers received a special “present” right before the Christmas holiday. Congress voted to suspend the Medical Device Tax during their December 18th session after it was determined that this tax generated only 60% of the anticipated $30 billion in funds. Medical device manufacturers were given a two year reprieve from the 2.3% domestic sales tax leveraged on the industry as part of the Affordable Care Act.

So what are medical device manufacturers doing with the windfall? Several online sources report that companies are reinvesting in their business rather than passing the savings onto shareholders. Many large manufacturers have reinstated their R&D budgets to pre-excise tax levels as well as revived M&A initiatives. Small medical device manufacturers stand to benefit the most from this tax suspension as most rely on domestic sales of their medical devices. Now that small manufacturers no longer have to accommodate this additional cost, most are following the large manufacturers and reinvesting in R&D plus they are adding back jobs that were eliminated because of the medical device tax.

Many are optimistic that the medical device tax will be permanently repealed. Industry lobbyists continue to influence lawmakers to make the tax suspension permanent however, the reality of a permanent repeal largely lies with the presidential election later this year. If not repealed, the Medical Device Tax will be reinstated on January 1, 2018.