Trump for president but what does it mean for medtech?

Unexpected as it may have been for some, Donald Trump is on his way to the White House. But what does it mean for the medical device and medical plastics industries?

Looking at the wider healthcare market to begin with, a recent Commonwealth Fund reports highlighted the impact of Trump health reform proposals. According to Rand analysis Trump’s repeal-and-replace plan for the Affordable Care Act (ACA) would see a rise in the number of uninsured. The report says that elements of his proposals could add to federal deficit and that some of his proposals would decrease the number of people with insurance by between 15.6 million and 25.1 million.

But what about medtech itself? Trump’s win could significantly affect the medical device tax. Former Republican HHS secretary Tommy Thompson recently promised, ‘A Donald Trump administration would repeal the medical device tax’.

The Advanced Medical Technology Association (AdvaMed) has long argued that the tax harms job creation, deters medical innovation and increases the cost of healthcare. It previously announced that the tax should be scrapped altogether with senator Chuck Schumer from the Republican party calling 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 now...

The Trump win may also have a strong effect on 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.”

Trump has spoken about a cut in corporation tax being on the cards. He 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%.”

Let's see that the coming months bring for the medtech sector…