Cook Medical is very disappointed but will not be giving up the fight to delay or kill a new tax on medical devices that is part of the Affordable Care Act after failure to have it included in the “fiscal cliff” deal that was squeezed out of Washington this week.
The tax of 2.3 percent on sales of all medical devices sold in the U.S. went into effect Tuesday, the first day of the year.
David McCarty, director of global communications for Cook, said estimates are that the tax will cost the company an extra $20 million this year.
Company president Kem Hawkins told Inside Indiana Business on Thursday that as costly as it will be for bigger manufacturers such as Cook, many smaller companies’ continued viability might be endangered.
McCarty expanded on that point, saying that many device manufacturers are either start-ups with hardly any profits or companies of 50 or fewer employees. The tax is collected on total sales, not profit. That means small companies that are struggling to stay afloat while working to develop new products will suffer, with the result that research will lag.
“There are actually components of the Affordable Care Act that we support,” McCarty said, and Cook sees a real need for health care reform.
But “taxes
have consequences — we just don’t think Congress looked very hard at the consequences” of this particular tax, he said.
have consequences — we just don’t think Congress looked very hard at the consequences” of this particular tax, he said.
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McCarty said that as talks on the budget continue in Washington, the company and industry remain hopeful they can get their point across.
And with new Democratic Sen. Joe Donnelly on the majority side in the Senate, a powerful advocate has been added to the cause.
It could easily cost up to $20 million to bring a new device through development, testing and final approval by the federal government, McCarty said.
As it stands now, this new tax could “prevent us from bringing the next breakthrough product to market.”
