AdvaMed survey finds that medical device tax continues to cost jobs

 - Money Job Loss

The medical device excise tax continues to cost the medical device industry jobs, though at a declining rate, according to a report issued last week by the Advanced Medical Technology Association (AdvaMed).

The report is based on a survey of 55 of AdvaMed’s medical device company members taken during late 2014, and is a follow up to a similar survey conducted in 2013.

According to AdvaMed, two-thirds of the companies in the current survey said that they have decided to slow or halt job creation as a result of the tax. This has resulted in employment reductions of 14,000 in 2013 and another 4,500 in 2014, AdvaMed found.

AdvaMed also determined the industry will forgo hiring 20,500 workers over the next five years a a result of the tax, resulting in a total of 39,000 fewer jobs created. Taking into account the relationship between direct employment in the medical device industry and indirect employment among suppliers and in the general economy, AdvaMed calculated that the impact of the tax on indirect employment could be as high as 156,000, resulting in total job losses of 195,000 due to the tax.

In addition to the job losses, AdvaMed reported that 53% of respondents have reduced research and development as a result of the tax, and that three-quarters have taken one or more of these actions as a 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)
  • Reduced or deferred increases in employee compensation  

Also, about half of respondents (48%) said they would consider further reductions in employment if the tax is not repealed, while 71% said that they would reinstate those forgone jobs if the tax was repealed. At the same time 58 said they would consider more or first-time reductions in research and development if the tax isn’t repealed, while 85 percent would reinstate these projects if the tax is repealed.