The legislation does not work like a sales or excise tax. Rather, it follows the model of the punitive tobacco settlement imposed on cigarette companies in the '90s. It assesses an industry-wide payment that firms must make in proportion to their market share. It bars the them from passing along the cost of the assessment by charging more for certain basic products, but allows them to raise the price of others to raise the funds for the fee.Part of the reason the device industry did not capitulate on the price consessions was that hospitals are already pressuring device companies to lower their prices. Despite their best efforts, medical device companies will continue to feel the pinch from increasingly capitated payments to "Accountable Care Organizations" (aka, big lumbering hospital systems serving as HMO's), we'll see the gradual erosion of medical innovation in favor of business survival, especially for those who don't "play nice" with reform efforts underway.
The result will be that virtually every piece of advanced surgical equipment will be subject to a price increase to meet the levy from Washington. No matter that these devices often make the difference between life and death and that, in effect, taxing them raises the cost of vital treatments. The vengeful White House will have its pound of flesh from the medical device industry for daring to be independent and to refuse to knuckle down to administration pressure.
But rest assured, for those accustomed to doing business the "Chicago Way," they'll continue to see the government gravy train flowing their way.