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Stryker, DePuy, Smith & Nephew, Zimmer Biomet and the Medical Device Excise Tax

For more information, please contact The Ahearne Law Firm, PLLC for an initial consultation and case evaluation. Call nationwide at (845) 763-4100.

As reported in our recent blog, Global Orthopedic Medical Device Market Revenue to Grow More Than $44 Billion by 2022: Zimmer Biomet, Smith & Nephew, DePuy (Johnson & Johnson) and Stryker to Lead, global revenue from the global orthopedic device market will reach $44 Billion by 2022.

DePuy Synthes, DJO Global, Medtronic, Stryker, Smith & Nephew, and Zimmer Biomet are recognized as the key players in the global orthopedic device market, with other prominent manufacturers including 4WEB Medical, aap Implantate, Acumed, Advanced orthopedics, Aesculap Implant Systems, AlloSource, Alphatec Spine, AMEDICA, Anika Therapeutics, Arthrex, Arthrosurface, Baxter, BBS-Bioactive Bone Substitutes, Barkeley Advanced Biomaterial, Bioretec, bioventus, Bone therapeutics, camber Spine technologies, ConforMIS, CONMED, Corin, DGIMED Ortho, Emerge Medical, Exactech, Flower orthopedics, Graftys, Hip Innovation Technology, Integra LifeSciences, Intelligent Implant Systems, Internal Fixation Systems, ISTO Biologics, K2M, Keramat, LDR Holding, Medartis, MicroPort Scientific, Nextremity Solutions, NovaBone, NuTech Medical, NuVasive, Orthofix International, orthogem, OsteoMed, Paragon 28, RTI Surgical, SHOULDER INNOVATIONS, Spinal Analytics & Geometrical Implant, Tyber Medical, Vilex, Virak Orthopedics, and XTANT Medical.

Medical Device Excise Tax

Excise taxes are taxes paid when purchases are made on a specific good, and are often included in the price of the product. Section 4191 of the Internal Revenue Code imposes an excise tax on the sale of certain medical devices by the manufacturer or importer of the device.

On December 5, 2012, the IRS and the Department of the Treasury issued final regulations on the new 2.3% medical device excise tax (IRC §4191) that manufacturers and importers began to pay on their sales of certain medical devices starting in 2013. On Dec. 5, 2012, the IRS and the Department of the Treasury also issued Notice 2012-77, which provides interim guidance on certain issues related to the medical device excise tax.

The Consolidated Appropriations Act, 2016 (Pub. L. 114-113), signed into law on December 18, 2015, included a two-year moratorium on the medical device excise tax imposed by Internal Revenue Code section 4191. The medical device excise tax did not apply to the sale of a taxable medical device by the manufacturer, producer or importer of the device during the period beginning on Jan. 1, 2016, and ending on Dec. 31, 2017.

H.R. 195 (Pub. L. 115-120), signed into law on Jan. 22, 2018, extends for an additional two years the moratorium on the medical device excise tax imposed by Internal Revenue Code section 4191. Because of the moratorium, the medical device excise tax does not apply to the sale of taxable medical devices by the manufacturer, producer or importer of the device during the period beginning on Jan. 1, 2016, and ending on Dec. 31, 2019.

Johnson & Johnson made a payment of $180 million as medical device sales tax in 2014. Medtronic, the legacy Covidien and Smith & Nephew paid $112 million, $60 million and $25 million, respectively in 2014. In 2015, Stryker reported net earnings of $1.14 billion and paid approximately $229 million for the medical device excise tax.

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