The medical device tax is an issue in the U.S. that has gained a lot of attention and exaggerated hype lately, underplaying how little focus is given to the many other important things going on in the health care industry today.
There is a lot of concern in terms of looking at the actual cost to the manufacturer, as well as the cost to the industry as a whole. However, I think that it is exaggerated by both the manufacturers and of course the politicians they support (medical device manufacturers made political contributions in excess of $2.2 million last year).
Repealing the device tax is going to be the number one priority on the agenda of a lot of the Republicans as they move forward in the coming year. The difficulty is going to be choosing how exactly they want to go about dismantling parts of Obamacare, or if they even could.
Many different manufactures have said the tax has caused them to fire a lot of employees and that it hurts their R&D. Supporters of the law argue it does not single out the device industry, but the reality of it is that smaller companies certainly will have more difficulty with the tax.
However, looking at the larger companies, some of these manufacturers make over $1 billion in sales yearly, spend less than 5 percent of revenue, and pay their executives millions of dollars a year. Further, a majority of medical device companies have continued to post impressive growth since the law was implemented. While the demand for cost-effective devices has risen and reimbursement continues to be a challenge, I don't believe the device tax is the industry's biggest problem.
When you start to look at it in the frame of the general health care problems that we face, it is not just fees like the medical device tax that are raising the prices. Instead, it is also other issues, like the fact that a lot of the ICD codes for reimbursement of these devices are outdated by 10 or 15 years, and some of the new devices aren't even listed for proper reimbursement.
Further, relationships between device brands and physicians have historically tainted the industry, but newer trends to keep physicians very distant from purchasing decisions are likely to be harmful to patient outcomes as well.
Diving deeper, increasingly complex intellectual property and licensing issues, combined with short patent timelines and a lengthy review processes, have made it extremely difficult for companies to make money, and as a by product, inorganic growth through acquisitions is how most companies develop products these days.
