Medical Device Tax – What is It?

The medical device tax is a 2.3 percent excise tax on the sales price of taxable medical devices.  The tax applies to almost all FDA registered devices.  Those devices range from hip implants to tongue depressors.  The medical device tax has been compared to excise taxes on tobacco and alcohol products.

Who is paying this tax? The manufacturer or importer, with limited exceptions.  Thus, companies are losing 2.3 percent off the top of their margins.  Commentators argue that the tax will thwart invention. Others argue that the tax will eat up the only profit some start-up companies can muster. Many believe that manufacturers will be forced to increase their product’s cost to make up the difference.

The 2.3 percent tax on medical devices generates funds that are kept within the healthcare system.  However, it is so controversial that there is significant support against it and the House is considering repealing the law.

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