Medtronic, a healthcare products manufacturer based in Minneapolis, Minnesota, announced that it overestimated the impact of the 2.3 percent medical device tax, a part of the Affordable Care Act.
Gary Ellis is the chief financial officer at Medtronic. During a conference call with investors, he said that the tax would cost the company an estimated $20 to $25 million for the current fiscal year. This is approximately half of what Medtronic had previously forecast.
The company originally forecast a $50 million cost based on non-finalized IRS guidelines. Once the final guidelines for the medical device tax were released, the company lowered its forecast. Several new rules in the tax guidelines shield medical device companies from paying a sales tax on their existing inventories. While the tax rate will increase as current inventory is depleted, medtech companies have been spared a high initial cost.
Other companies have lowered their tax cost forecasts in recent months. In October of 2012, Zimmer Holdings stated that the medical device tax would not impact it as significantly as it had believed. Boston Scientific also announced in early February that it had revised its forecasted medical device tax cost to $75 million from $100 million.