Feb 28, 2014 - 4:45pm

Medical Device Tax Forces Children’s Orthopedic Company to Cut R&D


Senior Editor, Digital Content

Last week, I wrote about an AdvaMed report that found that as many as 165,000 jobs have been lost because of the health care law’s medical device tax.

If the job losses aren’t enough, proponents of repealing the medical device tax—like me—have a new argument: “Do it for the children!” Patrick Howley at The Daily Caller reports:

The world’s only company specializing in making orthopedic equipment for children is slashing its product development budget and freezing hiring as a result of Obamacare’s medical device tax.

“We are a company that is not yet profitable. We’ve only been in the market for 5 years. This is a very burdensome tax because it is based on sales, not profits, and the only way we can pay a tax like this is to cut expenses,” OrthoPediatrics CEO Mark Throdahl told The Daily Caller.

“In terms of magnitude, [the tax] is about the size of our entire product development budget,” Throdahl said. “We have had to reduce our development budget. We’re developing less products than we otherwise would. It has cut into our development expenses. The only way we can trump up the money to pay this tax is to reduce expenses.”

OrthoPediatrics isn’t alone. In January, Utah-based BD Medical said it had to cut back on research and development (R&D) because the medical device tax cost the company $55 million.

What’s more, the longer the medical device tax is in place, the longer innovation will be hindered. The AdvaMed report found that 30% of surveyed companies cut research and development (R&D) in 2013, and 50% could cut their R&D budgets in the future if the tax isn’t repealed, resulting in fewer new medical devices for patients of all ages.

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About the Author

About the Author

Sean Hackbarth
Senior Editor, Digital Content

Sean writes about public policies affecting businesses including energy, health care, and regulations. When not battling those making it harder for free enterprise to succeed, he raves about all things Wisconsin (his home state) and religiously follows the Green Bay Packers.