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Obamacare’s Tax on Medical Devices: Cuts R&D by $2 Billion a Year

Benjamin Zycher, Ph.D has written a new policy brief published by the Pacific Research Institute. He summarizes it with these key points:

  • The Patient Protection and Affordable Care Act (“Obamacare”) imposes an excise tax of 2.3 percent on medical equipment and supplies, effective in 2013.
  • Regardless of the past and recent profitability of investment in the research and development of new and improved medical devices, this tax will reduce such investment.
  • A conservative estimate of this adverse investment effect is about 10 percent annually through 2020, or about $2 billion per year.
  • Based upon the peer-reviewed literature on the relationship between investment in medical technology and improvements in life expectancies, this investment decline can be predicted to yield an annual decline of about 1 million expected life-years for the U.S. population, concentrated upon particular population subgroups.
  • The economic cost of that reduction in expected life-years would be at least $100 billion per year, a sum substantially greater than the entire U.S. market for durable medical equipment and other medical products.
  • Accordingly, the excise tax on medical devices should be repealed

Read the policy brief here: Obamacare’s Tax on Medical Devices: Cuts R&D by $2 Billion a Year.

Via John R. Graham.

Update, June 3, from the Wall Street Journal’s op-ed on the medical device tax:

As even the liberal papoose Elizabeth Warren recently put it, the device tax “disproportionately impacts the small companies with the narrowest financial margins and the broadest innovative potential.”