New Tax on Medical devices
A new tax on device manufacturers that is included in healthcare reform might be one of many factors that could drive outsourcing of medical devices. The new tax, which could put pressure on margins, will be one more factor in growing the $60 billion market for outsourcing medical devices and device parts.
Congress has levied a new tax to help pay for the just-enacted $940 billion health care overhaul.
To partially subsidize healthcare financing, the Patient Protection & Affordable Care Act (PPACA) institutes a 2.3 percent excise tax on “taxable medical device” sales beginning Jan. 1, 2013. Excise tax which was embedded in the final version of the health care package and is expected to raise $20 billion over the next 10 years.
The tax applies to Medical devices intended for human use, but exempts eyeglasses, contact lenses and hearing aids, as well as devices that are “generally purchased by the general public for retailer individual use.
Treasury Department will decide which products are exempt.
The Medical Device Manufacturers Association (MDMA) and other groups fought to reduce the target size of the tax as well as the rate, but even in its revised form there will be an impact.
The tax would not take effect until 2013, but is a consideration now for many in the industry, and will be for the next few years as they await any further action on healthcare reform. The tax does not include a blanket exemption for class I devices, so a wide range of medical devices, including low-risk hospital and physician office supplies, will be subject to the new tax.
Sen. Scott Brown has introduced a bill in Congress to repeal an upcoming tax on medical devices.
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