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The Influence of the US Excise Tax on Veterinary Equipment Costs

22 May, 2013 | medical equipment, Veterinary equipment

Veterinarian examining golden retriever dog

Veterinarian examining golden retriever dog

On January 1, 2013 the 2.3% excise tax on the sale of medical devices went into effect, aiming to help fund the Affordable Care Act; providing health insurance coverage for all Americans living in the USA. This federal statute was meant to be imposed on any device “intended for humans” and was not supposed to effect veterinary equipment.

In practice, in cases where veterinarians purchase dual-use medical devices – those intended for humans but that are also used for treatment of animals – they are also exposed to the tax. This is especially applicable regarding devices purchased for treating small animals.

The tax was initially supposed to be paid by the manufacturer, importer or distributor, but in reality, it is often passed along to the purchaser, which in this case is the veterinarian, who in turn passes it along to the American pet owner.

In a survey that included 181 manufacturers, over 58% of North American medical equipment manufacturers admitted that they plan to pass along the tax, either partially or even completely, to the subsequent parties in the supply chain.

Dr. John Beltz of Wisconsin Veterinary Referral Center of Racine estimates that approximately 70% of the medical equipment that he purchases for his clinic is originally manufactured for humans, and is therefore affected by the tax.

The increase in medical device prices may influence veterinarians deliberating whether or not to buy a new device and, in turn, may result in them not purchasing the most advanced devices, to the detriment of the animals receiving their care. The impact will be the greatest on veterinarians starting a new practice and needing to buy a lot of new equipment.

Some veterinarians say out right that if costs for them increase, they will raise prices for the customers, while others are not so fast to raise their prices considering the economic situation. The result of the price increase in veterinary expenses could lead people to think twice before taking their pet to the vet or before adopting a new one, and this could be a considerable concern.

For veterinarians working mostly with large farm animals, such as cows and horses, there is very little dual-use medical equipment, therefore, they are much less affected by the new tax.

There are currently efforts on both sides of the political map to repeal the tax, and the American Veterinary Medical Association is in the process of bringing the implications of the Affordable Care Act to the awareness of veterinarians.

Conclusion

It looks like unless there is a reform in the 2.3% excise tax, there may be two relatively straight forward solutions for the case of medical devices with dual-use, one being a funded tax deduction for devices that are proven to be used for animals, the other, much more fundamental approach to the entire issue, being a stricter enforcement of the statute, ensuring that it is indeed the manufacturers who pay the tax, as was originally intended. But perhaps this is a difficult one to implement. In any case, what can definitely be said is that health coverage for all is a vital element for an advanced healthy society and at the same time, pet owners and animals should not be the ones carrying the load.