First do no Harm: the impact of the aca on medical device companies.

• Position: Techknowledge

With legal fights, implementation delays and a massive online meltdown, the launch of the Affordable Care Act has been anything but smooth. Despite the rocky rollout, eight million Americans eventually used the new online exchanges to purchase health insurance--and millions more have benefitted from the ACM mandated benefits. Some of these new benefits--like the removal of preexisting conditions and extended coverage for young adults--have been lauded by those on both sides of the ACA debate. But they don't come free.

So who's footing the bill?

It's not fast food chains, tobacco companies or other industries linked to deteriorating health or rising healthcare costs. Buried in the 20,000 pages of ACA regulations is an excise tax on medical devices like pacemakers and defibrillators. According to the Congressional Budget Office, the 2.3 percent tax on the sale of medical devices is projected to raise close to $30 million to help fund the ACA. It's no surprise that not everyone is pleased with this arrangement.

In support of the 100-plus medical device companies in Utah, Sen. Orrin Hatch pushed a budget resolution to repeal the tax. "This tax on medical devices simply must go." Hatch says. "It is a drain on innovation, on job creation and on our ability to provide ground-breaking medical technologies to patients." Despite bipartisan support, Hatch's amendment has never reached the Senate for a vote.

What's the Big Deal?

Why are Hatch and others spending so much energy on such a small tax? Though the medical device tax is only 2.3 percent, it is levied against the sale price, not the profit. That means a company with a 20 percent profit margin--typical for many small device companies--could see a reduction of 50 percent in profit.

Larger companies with higher profit margins, like Salt Lake City-based Merit Medical, are also feeling the sting. "In my case, it's taking about 25 percent of my net income away," says Merit CEO Fred Lampropoulos. "Think about losing 25 percent of your paycheck. Imagine what type of pressure that would put on you. It's had a huge impact on our business."

In addition to the tax itself, companies are also faced with a hefty administrative burden. The tax must be reported and paid every two weeks--a major undertaking for smaller companies.

Passing on the Cost

Though the tax is targeted at the device industry, it seems likely that the cost will eventually trickle down to consumers. "The feeling I've gotten from the people...