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SOUTH JORDAN — The cost of manufacturing and buying medical devices went up as part of the Affordable Care Act.
A Utah medical device company is paying millions of dollars to help fund the health care law, but rather than complain about it, the head of Merit Medical said he's figuring out ways to make it work.
Of the hundreds of medical devices designed and made in Utah, Merit Medical's Basix Touch inflation device for angioplasties is the newest.
Hospitals pay about $35 for each device, and 2.3 percent of that now helps pay for the law’s expansion of Medicaid coverage and the financial assistance for people purchasing health coverage on the insurance marketplaces. That means Merit Medical's profit margin is smaller than it used to be.
"It's clearly without any comparison the most difficult situation we've had to face in 34 years, no doubt about it," said Fred Lampropoulos, CEO of Merit Medical.
It's a tax Lampropoulos knew was coming because President Barack Obama himself told him.
“His response was, ‘Well, you guys have had it too good for too long, and someone has to pay for it, and we've chosen you,’” Lampropoulos said.
The device tax only applies to clinical medical devices such as stents, catheters and defibrillators that are sold to U.S. health care providers, the Associated Press reported. Devices manufactured abroad and in the U.S. are subject to the tax. Devices purchased directly by U.S. consumers like hearing aids, wheelchairs, thermometers and contact lenses are not subject to the tax.
The essence of it is that 20-30 percent of our net income as a company is gone. We'll adjust. We'll survive.
–Fred Lampropoulos, CEO of Merit Medical
The medical device tax is expected to raise $30 billion over the next decade. It amounts to about $6 million or $7 million a year for Merit Medical.
"The essence of it is that 20-30 percent of our net income as a company is gone," he said. "We'll adjust. We'll survive."
To make up for that loss, Lampropoulos has made tough choices.
The company no longer matches employees' 401(k) contributions, and it cut donations to charities it used to support, such as The Leonardo and Junior Jazz.
While it had to make cut backs, the company hasn’t laid off any of its 1,700 employees.
The bottom line is Merit Medical is still profitable and growing. Lampropoulos said he recognized the value of providing health insurance and reforming the system. But he said the Affordable Care Act's 2.3 percent excise tax on medical devices has presented one of the most challenging obstacles of his career.
“You take that kind of money out of a company and something has to give,” he said, “and it's basically research and development or marketing, and those are jobs.”