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Survey: Smaller Medical Device Firms Plan to Increase Prices and Lower Costs to Offset US Excise Tax

Thu, 02/09/2012 - 4:34am
AUSTIN, Tex.-According to a new industry survey conducted by global consultancy Emergo Group, medical device manufacturers plan to increase prices for their products in order to offset the effects of a proposed 2.3% excise tax on all device sales in the US set to take effect in 2013.

The annual survey queried 180 medical device industry CEOs, Presidents and Managing Directors about their business challenges and plans to deal with the coming excise tax. Nearly 75% of the respondents lead companies with fewer than 50 employees, which constitute the vast majority of medical device firms.

When asked which changes they plan to implement at their firms before the excise tax goes into effect, nearly 53% of survey participants stated they would pass along some or all of any increased costs associated with the tax to their customers. Roughly 37% of participants also plan to lower production costs without reducing staffing, according to survey results.

In recent months, industry advocates have warned that implementation of the US excise tax would lead to mass layoffs. However, results of the 2012 Medical Device Industry Survey suggest that manufacturers would consider reducing staff as a last resort. Less than 17% of respondents indicated they would reduce headcount to absorb the excise taxs impact. Increasing prices, lowering production costs and investing less in research and development all ranked higher than layoffs as options for dealing with the tax.

Chris Schorre, VP of Global Marketing for Emergo Group notes: "Clearly, the results show that CEOs feel the tax will have a negative impact on their business. However, most seemingly plan to deal with it not by eliminating employees, but by cutting costs and passing along increased costs to their customers. That may be due to the fact that many smaller medical device companies are already running a very lean operation with little room to cut headcount."

Biggest Business Challenge: Regulatory Changes

Asked to identify their biggest business challenges over the past year, more than half of participants cited changing regulatory environments as their top concern. Other key challenges included access to capital and credit (41% of respondents), new product development (39%) and pricing pressures (39%).

Regulatory concerns were more pronounced among chief executives of North American and Asian firms. Most European executives, on the other hand, cited new product development as their biggest challenge.

Full results of Emergo Groups 2012 Medical Device Industry Survey are available at: http://www.emergogroup.com/research

About Emergo Group

Emergo Group is a global medical device regulatory consulting firm providing a wide range of services for device registration, QMS compliance, clinical trial management, in-country representation, reimbursement and distributor search consulting.

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