Reform Law May Force Device-Makers to Move, Study SaysWritten by Leigh Page | April 19, 2011
A new report shows medical device companies, faced with a new tax and regulatory burdens under the healthcare reform law, could substantially cut costs by moving to a new location within the United States, according to a report by Mass High Tech.
The report noted that device makers have profit margins of a 5-6 percent and can take advantage of a wide range of costs for a hypothetical production facility in 55 different U.S. markets, from a high of $30.7 million in San Jose, Calif., to a low of $22.6 million in Sioux Falls, S.D. The study noted such differences as state sales taxes, income taxes and right-to-work laws.
The report noted device-makers face a 2.3 percent tax on sales under the reform law starting in 2013 and new 510(k) approval initiatives from the FDA. The companies can't control these factors, "but they can control geographic variability," said John Boyd Jr., a principal at the Boyd Co. in Princeton, N.J., which conducted the survey. "Production is shifting to lower-cost areas."
Read the Mass High Tech report on healthcare reform.
Read more coverage of the medical device tax under the healthcare reform law:
- Letter Shows Concern Device Tax Could Be Passed on to Hospitals
- Efforts Intensify to Eliminate Healthcare Reform Tax on Medical Device Manufacturers
- Massachusetts Medical Device Companies Plan Job Cuts Due to Healthcare Reform Tax
© Copyright ASC COMMUNICATIONS 2011. Interested in LINKING to or REPRINTING this content? View our policies here.