U.K. device giant Smith & Nephew ($SNN) cut about 100 jobs in the U.S. this week, and the company told The Memphis Daily News that its hand was forced by the 2.3% medical device tax.
The layoffs come from S&N's surgical devices facilities in Tennessee and Massachusetts, the paper reports, and Senior Vice President Joe Metzger said the overseas devicemaker is hardly insulated from the new excise tax, which affects U.S. sales of devices no matter where they were manufactured or shipped.
"(The tax) has impacted a number of companies across the U.S.," Metzger told the Daily News. "Smith & Nephew is not immune from this added expense burden."
S&N joins a growing list of medical device giants cutting jobs and blaming the Affordable Care Act-supporting tax. Last week, Boston Scientific ($BSX) announced plans to lay off up to 1,000 workers this year, and CEO Mike Mahoney told FierceMedicalDevices the company's estimated $75 million device tax bill played a roll in that decision. Same goes for Stryker ($SYK) in its 2012 decision to slash its workforce by 5%.
But since the tax kicked in Jan. 1, there's a new wrinkle in the debate: Hospitals and group purchasing organizations say devicemakers are passing the burden down to them through added fees and surcharges. While none of the big-time device outfits have been accused of shunting costs, many in the healthcare world figure they'll weave compensatory charges into their next supply contracts.
All that supply-chain hand-wringing brings up a few questions: Are all these job cuts really necessary? Or are companies using the device tax as a no-fault way of trimming operations rendered overgrown by some bad business bets?
- read the Daily News story
Special Report: 5 Things You Need To Know About the Medical Device Tax