NEW YORK, NY--(Marketwire - Nov 22, 2012) - The Medical Devices Industry has shown admirable gains in 2012, but a medical device excise tax set to kick in next year will have a major impact on companies' profits going forward. The iShares Dow Jones US Medical Devices ETF (IHI) has gained nearly 20 percent year-to-date. The Paragon Report examines investing opportunities in the Medical Equipment and Supplies Industry and provides equity research on St. Jude Medical, Inc. (NYSE: STJ) and Sunshine Heart Inc. (NASDAQ: SSH).
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The medical device excise tax, which was designed to support the Affordable Care Act, places a 2.3 percent levy on all sales of medical devices regardless if a company makes a profit or not. Despite not taking effect until January 1, 2013, many companies have already announced job cuts and delayed expansion plans in preparation for the tax.
"American already has the highest corporate tax rates in the world," AdvaMed senior executive vice president David Nexon told reporters today. "To load this additional burden on an industry which is so important to our economy and which is facing a strong international competitive pressure makes no sense at all; it flies in the face of everything tax reform is supposed to achieve."
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St. Jude Medical develops medical technology and services that focus on putting more control into the hands of those who treat cardiac, neurological and chronic pain patients worldwide. Shares of the company fell sharply Wednesday after an inspection report from the FDA found serious flaws in the company's design changes to their Durata line of implantable defibrillator leads.
Sunshine Heart is an early-stage global medical device company committed to the commercialization of the C-Pulse Heart Assist System, an implantable, non-blood contacting, heart assist therapy for the treatment of moderate to severe heart failure. Shares of the company spiked earlier this week after reporting it has received unconditional approval from the FDA to begin trials of their C-Pulse Heart Assist System.
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