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 Boston Scientific Corporation (NYSE: BSX) and Medtronic, Inc. (NYSE: MDT).
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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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Boston Scientific is a worldwide developer, manufacturer and marketer of medical devices that are used in a broad range of interventional medical specialties. The company's defibrillators have recently received the CE Mark approval for extended longevity. Projected device longevity exceeds 10 years for some models of Boston Scientific ICDs, approaches eight years for its CRT-D devices, and is up to double that of comparable competitive device models.
Medtronic is engaged in the medical technology -- alleviating pain, restoring health, and extending life for people with chronic conditions worldwide. The company has recently reported that worldwide second quarter revenues increased 5 percent on a constant currency basis to $4.1 billion. Shares of the company have surged nearly 5 percent in the past week.
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