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Medical Device Excise Tax Highlights the Cost Benefits of Sound Quality Management

The medical device excise tax should come as no surprise to manufacturers in the medical field. By any standard, a 2.3% excise tax on any manufacturing sector will surely create unintended consequences. Today, the consequences of the medical device excise tax are lost jobs and stunted investment in R&D.

Medical Device Excise Tax Highlights the Cost Benefits of Sound Quality Management

From the perspective of quality management, the medical device excise tax may potentially have a negative impact on departmental budgets as companies adapt to the cost of this tax. Manufacturers should reevaluate quality management as a value-added asset as opposed to a requisite departmental cost. Too many medical device manufacturers view regulatory compliance as a barrier, but there are many benefits of redeploying quality management resources that remain untapped.  There are cost benefits of sound quality management with the medical industry.

The Affordable Care and Patient Protection Act created the medical device excise tax in 2010. This provision of the Affordable Healthcare Act (still derisively referred to as “Obamacare” despite the act’s creation by Congress) took effect at the start of 2013. Manufacturers have had several years to blueprint how to tackle this issue in the most cost-effective manner; too many companies have allowed politics to seep into the sphere of business.

Companies that have over-allocated resources to prevent the implementation of “Obamacare” have wasted valuable time. Manufacturers that planned for the contingency of healthcare reform to proceed as-is have the advantage. Quality management is one area where these companies can achieve actual cost reductions and impressive ROI. Specifically, the cost benefits of integrated quality management systems present medical device manufacturers with a golden opportunity to surpass two goals with one system: lowering the cost of quality, and offsetting the cost of the medical device excise tax.

The marriage of healthcare IT and affordable care will continue as healthcare reform proceeds as enacted by law. In the future, the medical device industry will put strong emphasis on the cost of quality to gain a competitive advantage. As lean principles begin to permeate throughout the manufacturing industry as a whole, companies may no longer scrutinize the value-added potential of integrated quality management software. The myriad success stories of manufacturers that have improved quality while lowering cost of quality speak for themselves.

Several hyperbolic media reports that warn of the medical device excise tax’s far-reaching tentacles. The truth is that the definition of a medical device has indeed expanded to encompass components of finished devices, too. But the myth surrounding the medical device excise tax expanding to include retail items such as prescription eyeglasses has no merit.

Medical device manufacturers must adjust to the new reality of their industry’s regulatory environment in the U.S.. As of early 2013, “Obamacare” is still the law of the land. To help offset the cost of implementing the law’s provisions, manufacturers should take a closer look at the value-added potential of integrated quality management systems.

LNS Research_ Building a Business Case EQMS with the cost of quality_IQS


Michael Rapaport

Michael Rapaport is the President of IQS, Inc. in Cleveland OH. Michael is responsible for enabling operational excellence across the company as well as building capabilities for IQS’s growth. Vision, strategic planning, and innovation are the cornerstone to Mike’s 30 years of leadership in the technology industry. He is passionate about data visibility and continuous improvement and believes in helping manufacturers save time and money with real technology solutions.



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