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Results Show Substantial Job Loss, Reduction in R&D

The Advanced Medical Technology Association (AdvaMed) has released new survey results examining the first-year impact of the medical device excise tax. The survey found a significant reduction in jobs, R&D, and U.S. investment.  

To provide information on the real-world impact of the tax in the first full year of implementation, AdvaMed conducted an online survey of member companies at the end of 2013. The survey responses were generalized to the industry as a whole based on the ratio of revenues of responding companies to revenues of the overall industry.

“During a time when there is bipartisan support for growing high-technology manufacturing jobs, these results should serve as a wake-up call. As a result of the medical device tax, we have seen an unprecedented impact on jobs and key investments in R&D,” said Stephen J. Ubl, president and CEO of AdvaMed. “The findings of the report underscore the need to repeal this tax.”

According to the report, the tax has led to employment reductions of approximately 14,000 industry workers and foregone hiring of 19,000 workers. The total job impact of the tax on industry employment was approximately 33,000.

Independent estimates of the relationship between direct employment in the industry and indirect employment among suppliers and in the general economy found a ratio of four indirect jobs for each direct job. Applying this ratio to jobs lost or foregone suggests that the impact of the tax on indirect employment would be approximately 132,000 jobs, for a total job loss due to the tax of as many as 165,000 jobs.

The report also found that almost one-third of respondents (30.6 percent) said they had reduced R&D as a result of the tax. Almost ten percent of respondents said they had relocated manufacturing outside of the U.S. or expanded manufacturing abroad because of the tax.

In terms of investment dollars, three-quarters of respondents said they had taken one or more of the following actions in response to the tax:  deferred or cancelled capital investments; deferred or cancelled plans to open new facilities; reduced investment in start-up companies; found it more difficult to raise capital (among start-up companies); and, reduced or deferred increases in employee compensation.

“Medical technology provides tremendous value to patients and the U.S. health care system,” said David C. Dvorak, president and CEO of Zimmer, Inc., and Board chairman of AdvaMed. “Americans deserve policies that encourage strong investment in medical devices in order to make advances that will help improve even more lives.”

Dvorak continued, “We look forward to sharing the results of this new study with members of Congress and other policymakers as the fight to repeal this devastating tax continues.”

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