Impact of Tax Levied on Medical Devices Directly Affected R&D Expenditure, finds a New Study

Impact of Tax Levied on Medical Devices Directly Affected R&D Expenditure, finds a New Study

An assistant professor of Human Development And Family Studies, Daeyong Lee, has examined how provisions of the federal health care reform law have had an impact on phones and families alike. In his latest research report, he has analysed that ever since the 2.3% tax which has been imposed on the medical devices from the year 2013, there has been a significant reduction in sales revenue, investment in research and development, gross margins, as well as overall earnings. The study is one of its first to look for the actual cost of the manufacturers as well as calculate the tax which has affected the marketing and operating cost.

The tax applied by the federal government was applied on all the medical devices including coronary stents, syringes, needles, is radiation equipment, and defibrillators. However, hearing aids, contact lenses, and eyeglasses were exempted. As medical device sector is one of the key areas, in fact one of the top five areas which requires extreme research and development, this decline in the investment in R&D is having and will have long-term consequences. The medical sector is in dire need for highly advanced equipment so as to cater to critical and crucial aspects of medical care. Many devices such as coronary stents research investment and if firms refuse to invest further for the development of advanced coronary stents or any other device, the world will stop to see better and improved versions of these equipment which can help decrease the complications in surgeries and procedures.

Lee has looked into the various scenarios when he was calculating the tax impact. In order to reduce the impact of taxes, companies could have increase the prices of equipment and passed the burden of the tax with the consumers but this did not happen since the customers of medical devices are not individuals but clinics and hospitals. Lee feels that the negative impact of taxes can be reduced if there is a broader tax base. The government should raise the revenue so as to cover the cost of the Affordable Care Act and this can be done without harming the research and development sector.

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