Medical device tax to cost Medtronic about $125M to $175M annually

It appears that Medtronic (NYSE: MDT) is assuming that all the efforts to repeal the medical device taxare not going to amount to much and that companies will have to pay it.

In a conference call with analysts Tuesday morning to discussMedtronic’s quarterly earnings, Goldman Sachs analyst David Roman asked details about the impact of the medical device tax given that Medtronic would be the first company including its effect in its financial guidance for fiscal 2013, which ends at the end of April next year. In response, CFO Gary Ellis said that the net impact of the tax will probably be between $125 million to $175 million per year after taxes.

“So you can assume that in FY2013 it could be about $40 million to$60 million impact,” Ellis said.

He added that there is still only draft regulation on this but the company is assuming that this is a cost it has to cover in the future.

“It’s just going to be a cost of doing business here in the U.S. and we are going to have to make the trade-offs,” he said. “There’s probably going to be things that we can’t do as a result of that, but our assumption is that this is a cost we are going to have to cover.”

He noted that Medtronic is also looking at how much of the cost, if any, can be passed on. That might be a far trickier question given how cost-sensitive hospitals have become in the U.S.

The U.S. government is looking to collect $20 billion over a decade by levying a 2.3 percent excise tax on medical device companies.


Josh Sandberg

Josh Sandberg is the President of Ortho Spine Partners and Partner for The De Angelis Group. He also serves as Co-Founder and Editor of OrthoSpineNews.

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