At yesterday’s Bay Area Biomedical Device Conference held at San Jose State University, an audience member asked a panel of three medtech executives how harmful the medical device tax would be to their business. The 2.3% tax is scheduled to go into effect next year.
|Image from Flickr user 401k.|
There is a lot of price pressure in the medical device sector, acknowledged Adam Elsesser, CEO and founder of Penumbra Inc. (Alameda, CA). “But we have more than enough leeway. So, of all the things I worry about, I am not that worried about the [medical device tax]. Elsesser went on to say that, of course, he rather not spend money on the tax but called it “utterly irrelevant.” Penumbra would continue to have enough to spend on R&D, clinical trial work, and so forth, he said.
Julian Nikolchev, founder of Pivot Medical (Sunnyvale, CA), agreed with Elsesser’s assessment. “There are a lot of things that are going on in the industry that are putting pressure on the medical device [companies]. [The device tax] is only one aspect to it,” he said. “I would rather see more-rationalized decision making at the FDA level than worry about the tax.” Nikolchev said that he did not think that venture investors were making decisions based on the device tax, adding that it is “really not a concern.”
Darin Buxbaum, CEO and cofounder of Hourglass Technologies (Redwood City, CA) chimed in, stating that he completely agreed with the other two panelists’ assessments. He, however, acknowledged that the tax “is one of those topics that can really rile people up. How many industries get taxed on their top-line sales rather than their profits?” But the medtech industry is often a high-margin business he said, so the tax is “less impactful” for medtech than it would be for other industries. “Our focus is on making our top line growth grow so fast that this 2.3% device tax is a rounding error.”
Brian is the editor-at-large at UBM Canon's medical group. Follow him on Twitter at @brian_buntz.
For a different take, check out what ExploraMed CEO Josh Makower, MD had to say about on the tax, which he described as being "horrible for small companies."
Correction: An earlier version of this story incorrectly attributed Adam Elsesser's quotes to Julian Nikolchev and vice versa.