Medical device maker, Covidien Plc saw their stock rally recently in reaction to their announced plans to close a South Carolina plant. By laying off 595 employees, and taking their plant to Costa Rica, they are looking to become more efficient. Their rationale is the cost of doing business in the United States is going up, particularly under the Affordable Care Act. Here is why. The law included a 2.3 % excise tax on Medical Device Manufacturers. Many have been slowing expansion like Cook Medical in Indiana.
This is troubling for our economy because these are high paying jobs, often in the rust-belt states, Our country desperately needs stronger manufacturing numbers. The looming fiscal cliff and expiring tax provisions compound matters making it difficult for businesses to plan, and thus creating uncertainty in the market. Healthcare costs will continue to squeeze bottom lines.
A former colleague of mine at the Senate Finance Committee, Tom Novelli, joined me America’s Healthcare Challenge to discuss this issue and others. Tom is the Vice President of the Medical Device Manufacturers Association which is the trade association representing medical device businesses all over the country. For what you really need to know about this tax and its impact on this sector of the economy, listen to my interview with Tom Novelli from the Medical Device Manufacturers Association on the Medical Device Tax.