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U.S. Medical Device Excise Tax

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posted on Dec, 6 2012 @ 07:33 AM

The U.S. Internal Revenue Service on Wednesday released final rules for a new tax on medical devices, products ranging from surgical sutures to knee replacement implants, that starts next year as part of President Barack Obama's 2010 healthcare law.

The horse's mouth:

A few things come to mind. One, this is a hidden tax that will transmit to the recipient of the medical device. For that matter there is uncertainty as to what objects may be defined as a medical device for purposes of this new tax (e.g. latex gloves). Two, this tax has the potential to crowd out existing medical device manufacturers & hamper growth.

Perhaps 2.3% is a paltry number, yes? Perhaps not. I have yet to find an explanation as to whether medical device replacement parts and diagnostic equipment used to validate operation of medical devices will not fall under this excise tax as well.

This is potentially "big" in the sense that medical device manufactures will often sell a sophisticated device at a low rate with the understanding that a medical device's design requires usage of specific replacement parts and items that the manufacturer of a specific medical device will provide for the duration of the medical device's life. In this sense the manufacture recoups the sold-at cost and makes a profit in the long run. So an interesting question is this: Will these replacement parts and items also fall under this new excise tax?

Hope not. Consumers will pay the difference, and it is not unreasonable to speculate that the quality of healthcare services may decline in an effort to cut costs.

edit on 6-12-2012 by Kovenov because: Corrected title


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