New tax on medical device makers, part of health care legislation, could push small companies into red
The national trade group for the medical device industry is calling for a restructuring of a tax on his industry that will be implemented in 2013.
The tax, a 2.3 percent excise tax on sales of medical devices, would help fund expansion of the U.S. health care system.
Mark Leahey, president and CEO of the Medical Device Manufacturers Association, told me that he's worried the tax will push smaller device makers into the red.
"There are a lot of small companies that have $50 million in sales, but aren’t running a profit yet," Leahey said. "They’re going to have to lay off employees and cut R&D budgets."
To prevent that possibility, Leahey is suggesting that lawmakers consider tweaking the tax to exempt a company's first $100 million in sales. For sales between $100 million and $150 million, Leahey said he'd like the tax applied at half the rate. The full rate could be applied for sales above $150 million, he said.
"They (lawmakers) need to structure it in a way that dampens the impact on small businesses," Leahey said.
Earlier this week, a blogger said that the tax would hurt Kalamazoo-based Stryker Corp., which makes and sells a variety of orthopedic implants, hospital and surgical equipment.
But Stephen MacMillan, CEO of Stryker, told CNBC that larger companies in his industry would find a way to deal with the extra taxes.
MassDevice, an online medical device publication, released an analysis this week that suggests the 2.3 percent tax would significantly cut into the profits of smaller companies and even could push some of those companies from profit to loss.
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