Dealing With the “Tongue-Depressor Tax”

by Todd McDonald on January 25, 2012

In his recent Bloomberg News article “Tongue –Depressor Tax Will Harm Jobs, Innovation”, Ramesh Ponnuru begins by reporting, “A year from now, the federal government will start collecting a new tax on medical devices from tongue depressors to imaging machines…”

While there is some debate as to the influence this may have on the medical device industry as a whole (ranging anywhere from loss of US jobs to rising health care costs to reduced research and development efforts), the consensus seems to be that while the original rationale for targeting this industry was the expected increased demand for medical devices due to health care reform policy, the affect is most certainly going to be a negative one.

In fact, according to Steven Ferguson, chairman of the leading medical technology company Cook Medical, they are predicting a 15% loss in profits, which “creates tremendous pressure for us to move manufacturing to Europe and other parts of the world.” (Cook Group chairman Ferguson: Medical device tax will kill 15% of our med-tech profits.)

As a result, finding ways to improve efficiency and control costs has never been more important for the medical device manufacturing industry.

It’s for reasons such as this, at TEQ, with each new project we make sure to take a step back to re-examine the entire workflow process and supply chain. Not content to just do things because that’s how they have always been done, we are constantly looking for new ways to streamline workflow processes and increase efficiencies – whether that means creating custom tools or providing value engineering by developing and implementing innovative supply chain solutions or designing and managing on-location modular clean room solutions. (We have the proven ability and expertise to build an ISO 13485:2003 Registered clean room facility in any location in less than six months.)

We think these are essential steps to take before considering moving industry operations abroad – because, as Ferguson explains, “it will be nearly impossible to get it back.” – begging the questions, how do you see your company being affected by this levy and what steps have you taken to prepare for these changes?

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