Don’t look now, but Medtronic has quite possibly just become the poster child of the opposition against the Medical Device Tax. During a call with analysts in February, the med-tech giant said that it expected to pay up to $175 million in costs because of the tax.
When the news broke, Medical Device Daily, as well as other media outlets, picked up the story, and rightly so. Outside of regulatory issues with the FDA, the Medical Device Tax is the biggest concern that keeps device makers up at night.
Right now device makers are struggling to find a way they can pass the cost on. It’s going to be tricky – especially since many hospitals have more spending constraints and are being very conservative and cost conscious with their budgets.
The device makers have to look toward another approach and that’s going to be layoffs. Stryker did this late last year, pretty boldly when it said that it was cutting about 5% of its workforce or about 1,000 jobs. And most recently Hill Rom said that it would lay off about 3% of its workforce because of the med-device tax.
Analysts expect more of this sort of thing to happen which is why a lot of device makers have asked lawmakers to repeal the tax.
The only thing that’s different now, is that device makers no longer have to speak in the abstract about what could be harmful effects of the tax. Thanks to Medtronic’s announcement – those who oppose the tax now have a powerful tool to use in the argument against the measure.