Impact of the Medical Device Tax on Firm R&D and Performance: Evidence from the Affordable Care Act

Posted: 26 Apr 2017 Last revised: 15 Feb 2018

Daeyong Lee

Iowa State University

Date Written: April 26, 2017

Abstract

This article examines how the excise tax affects firm research and development (R&D) investment and performance in the medical device industry in the United States. The Affordable Care Act imposed a 2.3% excise tax on medical devices from January 2013. Using the Compustat data from 2006 and 2015, the author finds that the medical device tax significantly reduced the R&D investment, sales revenues, gross margins, earnings, and return on equity for medical device manufacturing firms. In addition, the device tax significantly increased their international sales revenue, international diversification, and customer diversification in the U.S. markets.

Keywords: Medical device tax, research and development (R&D), firm performance, business diversification, Affordable Care Act

JEL Classification: H25, I11, G38, O32, L25, L65

Suggested Citation

Lee, Daeyong, Impact of the Medical Device Tax on Firm R&D and Performance: Evidence from the Affordable Care Act (April 26, 2017). Research Policy, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2958831 or http://dx.doi.org/10.2139/ssrn.2958831

Daeyong Lee (Contact Author)

Iowa State University ( email )

Ames, IA 50011-2063
United States
515-294-6120 (Phone)

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