Medical device tax could have big impact on Utah companies

Posted at 9:17 PM, Oct 05, 2013
and last updated 2013-10-05 23:17:14-04

SALT LAKE CITY – Politicians on both sides of the aisle are looking to one provision of the Affordable Care Act as a possible basis for compromise, and the compromise would impact an industry with a large footprint in Utah.

A tax on medical devices is one part of the ACA, also known as Obamacare, that may find compromise.

Fred Lampropoulos is the chairman and CEO of Merit Medical, which manufactures medical devices. He said they employ quite a few Utahns.

“We employ almost 3,000 people worldwide, 1,700 here in Utah, and this is our corporate headquarters,” he said. “But there are other companies, there are companies like Utah Medical, like Medtronics, Bard, Boston Scientific, I could go on and on and on.”

Lampropoulos said Merit Medical will end up paying an extra $7 million to $10 million annually due to the 2.3 percent excise tax included in the health care legislation. The tax applies only to medical devices, and it’s unusual in that it’s taken from all revenues, where most corporate taxes are taken from profits. That means a company could be taxed even while losing money.

“For whatever reason, we were picked out of the group, and we’re the guys that got taxed,” Lampropoulos said. “I actually had a conversation with the President of the United States, this far away, and his response when I said that this would hurt us, it would affect our profitability our investments in jobs in research and development,  he said ‘Fred, you guys have had it too good for too long, and somebody’s got to pay it, and I’ve chosen you.’ He said that to my face.”

The medical device tax is actually just one part of a group of taxes meant to help pay for Obamacare, and it would generate an estimated $29 billion while a new fee on insurance companies would generate $60 billion. Pharmaceutical companies would generate another estimated $80 billion.

Utah Congressman Jim Matheson is one of a small group of Representatives pushing for a compromise that includes repealing the medical device tax in exchange for passing a resolution to fund the government.