A new report released last Thursday provides three core
points for medical device companies on the impact on the
medical device industry of last year's landmark healthcare
reform.
1. Weakened Tax Rationale. The report from ROTH
Capital Partners, an Orange County, California-based investment
bank, discredits the theory that medical device companies will
realize a windfall from the large number of new patients that will
enter the healthcare system as a result of the Patient Protection
and Affordable Care Act. This large windfall has been the rationale
behind the newly established 2.3 percent medical device tax levied
on U.S. sales of medical equipment, also contained in the Patient
Protection and Affordable Care Act. Discounting the windfall that
medical device companies were to realize under the healthcare
reform severely weakens the rationale behind the 2.3 percent
medical device tax.
2. Underperformance in Massachusetts. The
report analyzed the performance of nine medical device companies in
Massachusetts, where universal healthcare reform passed in 2006, as
the basis of its findings. The report finds that eight out of nine
medical device companies did not see any sign of a windfall when
universal healthcare was implemented in Massachusetts. In fact, the
report finds that most companies "saw relative
underperformance" in Massachusetts.
3. Unlikely to See Growth. Although no
independent study has been conducted on the impact of Massachusetts
healthcare reform on the medical device industry, internal audits
have been performed. In an internal audit by the Kaiser Family
Foundation, the Massachusetts healthcare reform has been found to
have successfully reduced the number of uninsured to 6.3 percent in
2010, a 5 percent reduction from 2006 and more than two-thirds
lower than the national average, which jumped 7 percent to 18.4
percent in 2010. Such increases in patients have not translated to
growth for Massachusetts-based medical device companies.
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