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.

About the author

Josh Sandberg

Josh Sandberg has been recruiting specifically in the musculoskeletal industry since 2004. Throughout this time, he has been able to have a positive impact on his client’s businesses. With an educational background in Business Management, Josh is adept to discern which people will be the best fit for the company he is searching for by understanding how candidates will incorporate with the company’s culture and operational nuances. His experience as an executive in a start-up business has granted him the ability to understand what is takes to thrive in a hands–on environment, where desire and dedication are paramount for success.

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