Clinton vs Trump – who's the winner for medtech?
With the results of the US election hours away, what would a Trump or Clinton win mean for medical device companies and medical plastics suppliers?
Trump or Clinton? Each one has a different approach to business and innovation. From tax rates to encouraging medtech companies to keep their expertise inside the US, it will be interesting to see how this affects the medtech and healthcare industries.
A recent Commonwealth Fund reports highlighted the impact of Clinton and Trump health reform proposals.
According to Rand analysis Clinton’s plans to enhance the Affordable Care Act (ACA) would cut the number of uninsured; Trump’s repeal-and-replace plan would increase uninsured. The report says that elements of both candidates’ proposals could add to federal deficit.
Hillary Clinton and Donald Trump have two distinct approaches to health reform: Trump proposes to repeal and replace the ACA, while Clinton wants to maintain and modify it. Two new Commonwealth Fund reports find that some of Clinton’s proposals would increase the number of people with insurance by between 400,000 and 9.6 million in 2018, while some of Trump’s proposals would decrease the number of people with insurance by between 15.6 million and 25.1 million.
Medical device tax
A Trump win could significantly affect the medical device tax. According to former Republican HHS secretary Tommy Thompson, ‘A Donald Trump administration would repeal the medical device tax’.
The Advanced Medical Technology Association (AdvaMed) has argued that the tax harms job creation, deters medical innovation and increases the cost of healthcare.
AdvaMed had previously put forward an argument that the tax should actually be scrapped. Senator Chuck Schumer from the Republican party called it “a tax on innovation.”
Trump has previously spoken about his desire to eliminate ‘job-killing- regulations. This 2.3% medical device tax which came into force in 2009, has been the cause of much concern within the medtech sector with many citing its negative effect on the industry. It was suspended during 2016 and 2017 but is planned to be re-instated in 2018, although probably not if Trump wins.
According to Bloomberg BNA Aneesh Chopra, the former US chief technology officer for president Barack Obama, said Hillary Clinton officially has no comment on repealing the device tax. However, she is no stranger to negotiating with congress and “everything will be considered while she and her transition team determine how to pass health-care legislation in 2017 and beyond”.
Business tax
News reports of US businesses leaving the US to supposedly take advantage of more favourable tax regimes overseas have hit the headlines over recent years.
In September 2015 Jeanne Whalen wrote in The Wall Street Journal: “In a sign of how Medtronic PLC is benefiting from moving its headquarters to Ireland from the US, the medical-device company said it is paying $500 million in US income tax on $9.8 billion of cash and investments that it has transferred to the US from its overseas subsidiaries.
“That amounts to a 5% US tax rate on the money. For US-based companies, profits earned overseas are subject to the 35% US corporate tax rate when repatriated to the US.
“Medtronic said it is transferring the money after completing an ‘internal restructuring’ in the wake of its acquisition of Dublin-based Covidien earlier this year. That acquisition allowed Medtronic to move its headquarters from Minneapolis to Dublin, a so-called tax inversion move aimed at lowering the company’s tax burden.”
If Trump makes his way to the White House, a cut in corporation tax is on the cards. According to Fortune: “Hillary Clinton and Donald Trump’s tax plans are ‘mirror images’ of one another, with the democrat proposing steep tax hikes on the wealthy while the republican candidate proposes even deeper reductions in the taxes paid by America’s richest people”.
Clinton plans to levy an ‘exit tax’ on companies that take their business outside of the US. Meanwhile Trump recognises why businesses take advantage of overseas tax loopholes, and plans to cut the business tax rate from 35% to 15%.
Jared Meyer, The National Review, commented: “Corporations that take steps to shield themselves from punitive taxes are not blameworthy — and Trump clearly understands this. Trump’s tax-reform plan even states: ‘Too many companies — from great American brands to innovative startups — are leaving America, either directly or through corporate inversions. . . . Companies leaving is not the disease, it is the symptom.’ Trump says his plan will make ‘America globally competitive again” by lowering the top federal tax on business income to 15%.”