Devicemakers eye outsourcing to limit hit from Obama tax

The medical device industry has waged war on a new tax on devicemakers as part of President Obama's healthcare reform, and companies have begun talking up plans to outsource manufacturing work overseas as a result of the tax.

Amid lobbying efforts to get the tax repealed, a device industry group known as MassMEDIC took the pulse of angry executives who are planning a variety of moves to keep the 2.3% excise tax, which takes effect at the beginning of 2013, from hurting their bottom lines. A quarter of the 42 executives surveyed plan to ship manufacturing of devices to contractors in low-cost countries overseas. Also, 25% of the executives are planning to ax workers as a result of the tax, and half of them expect to cut R&D.

Presumably, U.S. lawmakers can prevent all of this industry carnage if they back a bill that Rep. Erik Paulsen (R-MN) has spearheaded in Congress to repeal the excise tax on medical products sales. As MassDevice reports, the measure could hit the floor this year for a vote. Minnesota, like Massachusetts, has a significant stake in the medical device industry with thousands of jobs in the sector tied to medical products.

"We warned two years ago that medical device companies would be forced to deal with this tax by preparing for job cuts and reductions in R&D spending," MassMEDIC president Tom Sommer said in a statement Wednesday. "The U.S. leads the world in developing and manufacturing medical products, it doesn't make sense that, on one hand, the government is promoting exports and manufacturing jobs, while on the other hand it is implementing policies that will cut jobs in this sector and harm its competitive advantage--the development of innovative medical technologies."

Meanwhile, the industry group AdvaMed has mounted a campaign to make sure medical device companies don't have to bear additional burden for funding healthcare reforms via the tax, MassDevice reported.

- here's MassMEDIC's release
- see MassDevice's report