Medical Device Tax to Impact Wireless Networking?

Published on September 19, 2012

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Welch Allyn®, one of the top medical device makers (MDMs) in the U.S., recently announced a 10 percent reduction in its workforce and blamed a 2.3 percent medical device tax set for the beginning of 2013. The tax, which will be enforced on all sales of medical devices, is one way in which the Obama Administration plans to fund the expansion of health care under the Affordable Care Act.

Other MDMs such as St. Jude Medical, Inc.®, Medtronics®, and Covidien® also have announced plans to cut jobs over the next few years, citing the tax as the main reason for the cuts.

Congresswoman Ann Marie Buerkle reacted to the Welch Allyn announcement by asking President Barack Obama to repeal the tax. "Medical device manufacturing, a field which is one of the few manufacturing sectors to experience growth over the last few years, will be affected across this nation and subsequently disadvantaged around the world," said Buerkle.

Some fear that the tax will slow innovation in the medical device space. "The medical device excise tax could put more strain on the U.S. innovation ecosystem for medical technology and affect the willingness of investors to back start-up companies seeking to commercialize new technologies," stated Yair Holtzman, Director and Global Life Sciences Practice Leader at WTP Advisors®.

Others argue that Obama Administration healthcare policies will lead to an increase in the number of medical devices within hospitals and improve the technology in those devices. As an example, they cite the Health Information Technology for Economic and Clinical Health Act, signed into law in 2009. That act provides $27 billion in financial incentives for hospitals to shift to the use of digital or electronic medical records (EMRs); hospitals that do not comply will face monetary penalties starting in 2015. EMRs will improve patient safety, improve quality of care, and lower costs for hospitals.

The push for EMRs is causing many MDMs to consider adding wireless networking capabilities to their devices. With potential staff cuts looming, MDMs may be reluctant to do all wireless networking design and development in-house. Savvy MDMs recognize that not all wireless radios are the same and that choosing the right wireless networking partner is a strategic decision.