Raise a Glass to a Dumb Medical Device Tax Brewed in DC
A prominent politician goes before his constituents in a tough re-election campaign. He’s introduced by the local mayor, and strides to the stage, waving and smiling to enthusiastic applause.
“It’s great to be here with you tonight. I love [fill in the blank] state. Erica and I miss being here, especially when we’re stuck in that snake pit called Washington, D.C.”
The crowd laughs and the esteemed incumbent goes on. “Now, as you know, we’ve got to find news ways to pay for Obamacare. Well, I’ve got a great one: A brand-new 2.3 percent consumer tax on medical devices.” The crowd gasps.
What are his re-election chances now?
Well that’s what happened in Washington in 2010. In this instance, we can’t focus on a single lawmaker, but a gaggle have gotten together and imposed a new Medical Device Excise Tax (MEDT) on medical device manufacturers.
So far, so good. Medical device manufactures should pay more taxes, many citizens would agree.
Problem is, this new tax on companies is going to be passed straight to consumers, according to surveys and actions by many device companies. A new website created by the Health Supply Chain Association (HCSA), lists a (growing?) number of companies apparently on record saying they will dump the MDET on their customers.
This unintended consequence comes on the heels of a new survey from The Emergo Group, which finds 64 percent of medical devices companies believing the MDET will be harmful to their business. Given that many will let customers foot the bill, it sounds like they are more afraid it will hurt sales — and maybe their PR reputations.
Emergo got survey responses back from 667 senior medical device company execs, mostly in the US and Canada, telling how they’d handle the MDET. Nearly 42 percent said they’d pass it on to consumers. Just over 10 percent said they’d reduce staff because of the MDET, according to Emergo’s “Outlook For The Medical Device Industry in 2013” survey.
Prohibition, making alcoholic beverages illegal in the US, began in 1920. The idea was to lead the nation to a higher moral ground by removing demon rum and the other evil drinks.
How’d that work out? Our wise friend, historian Ken Burns via PBS tells us, “the unintended consequences proved to be a decline in amusement and entertainment industries across the board. Restaurants failed, as they could no longer make a profit without legal liquor sales. Theater revenues declined rather than increase, and few of the other economic benefits that had been predicted came to pass.
Sound familiar? Well, at least today we can legally raise a glass filled with our favorite cocktail and toast another great idea not thought through by lawmakers in D.C.