PPACA's Impact on Medical Device Manufacturers

by Parks Associates | Sep. 14, 2011

Passed in the spring of 2010, The Patient Protection and Affordable Care Act includes provisions that almost certainly will harm the medical device industry. The most immediate and harmful provision of the Affordable Care Act is a medical device excise tax of 2.3% on medical device revenues, scheduled to go into effect in 2013. The tax is estimated to generate $20 billion in tax revenue annually and is to be levied on the total revenues of a company, regardless of whether the company is profitable.

Unlike care providers and health insurers, the medical device industry is not likely to experience a boon in new demand due to expanded coverage resulting from the Affordable Care Act. The majority of previously uninsured consumers who will now be covered due to the Act's requirements do not fall within the demographics traditionally requiring medical devices. Older consumers already covered by Medicare or by private insurance are the primary users of medical devices.

Even if the trade agreement is passed, it is unlikely that the amendment to repeal the tax would be included in the final language, as the Senate Finance Committee, which has jurisdiction over both the trade agreement and S.17, is currently chaired by Sen. Max Baucus, who championed the tax in the PPACA.

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