Welch Allyn plans to slash 275 jobs, blames device tax

Welch Allyn CEO Steve Meyer said the company will cut 10% of its workforce over three years--courtesy of Welch Allyn

Another devicemaker is cutting its payroll to prepare for the 2.3% tax on medical devices. Welch Allyn plans to reduce its workforce by 10% over the next three years, laying off about 275 people.

The restructuring plan is designed to prepare the family-owned firm for the impending tax on device sales in the U.S.--"the new onerous U.S. Medical Device Tax," as Welch Allyn termed it. In addition to the job cuts, Welch Allyn plans to realign some of its business units, shuffling and consolidating departments between outposts in New York, Oregon, Singapore and Mexico.

All of the affected employees will be offered severance packages and outplacement services, Welch Allyn CEO Steve Meyer said in a statement, and the company will reimburse up to $4,000 for their continuing education.

"We firmly believe this restructuring program is the right thing to do for the long-term success of the business, however, we also fully recognize the hardship it will cause some of our colleagues in the short term," Meyer said.

Back in July, Meyer said the company was looking to do everything in its power to cut costs without passing the tax's effect down to customers. Welch Allyn apparently settled on layoffs, and it's hardly alone in doing so.

Last month, St. Jude Medical ($STJ) announced it will cut 300 jobs to save about $60 million a year, a move analysts said was likely motivated by the oncoming tax. Before that, Boston Scientific ($BSX) said it would trim an undisclosed number of employees from its ranks. Medtronic ($MDT) has been in the midst of cutting 1,000 positions by the end of next year.

Hopes for repealing the 2.3% charge, which is part of the Affordable Care Act, have all but dwindled after a bill to do just that passed the House, but remains untouched in the Democrat-controlled Senate. However, Rep. Erik Paulsen (R-MN), a vocal critic of the tax, said last week that there is a possibility of delaying when it takes effect. As of right now, the charge will kick in Jan. 1.

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