Region's medical device industry anticipates ripple effects from new tax

Tuesday January 8, 2013

PITTSFIELD -- Local medical device manufacturer Apex Resources Technologies is waiting to feel the thump following the fiscal cliff agreement.

Medical device makers will immediately start paying a 2.3 percent excise tax as part of the federal tax agreement to help pay for President Barack Obama's federal health care overhaul.

Pittsfield-based Apex Resources, which has about 50 employees, won't be directly taxed, owner Don Rochele said.

However, the dozens of clients it has likely will be. Rochele expects the tax will be passed along to manufacturers, such as himself, and buyers.

Medical device companies employ nearly 24,000 people in Massachusetts.

The 2.3 percent tax will be applied to any medical device maker selling in the United States, regardless of what country it operates from, Massachusetts Medical Device Industry Council President Tom Sommer said.

The tax will be due on Jan. 18.

Larger companies that will be impacted are Boston Scientific, and other medical device manufacturers, such as Johnson & Johnson.

Sommer said that after receiving a notice about the tax on Dec. 5, the industry asked for additional time to meet compliance, but the effort was unsuccessful.

Everyday-use products, such as eyeglasses, diabetes care systems, home blood pressure tests, and "anything that would be available at CVS or a drug store" would not be taxed, according to Sommer.

"This industry is one of the few left where we are a global leader," Sommer said. "We manufacture and design in the United States. The tax would require [these companies] to make a decision whether to cut in research or development, reduce the workforce, or continue to produce in the U.S. or not and go offshore," Sommer said.

Rochele, of Apex Resources, also said that higher costs will make businesses examine additional ways to save funds, which could include looking into contracting manufacturers overseas.

Apex Resources specializes in implantable manufacturing, which includes screws that could be inserted in the body. The specialized field should prevent the company from losing business, Rochele said.

Rochele expected to meet with customers before March to learn what kind of an impact it will have on his company.

Springfield-based Pioneer Valley Orthotics, which also has a satellite office in Pittsfield, would not be affected, office manager Debbie Lamoureux said.

Orthotics companies were also exempt from the tax, she said.


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