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Impact of the excise tax on firm R&D and performance in the medical device industry: Evidence from the Affordable Care Act |
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| Authors: | Daeyong Lee |
| Institution: | Human Development and Family Studies, Iowa State University, 1325 Palmer, 2222 Osborn Drive, Ames, IA 50011, United States |
| Abstract: | This article examines how the excise tax affects firms’ R&D investment, performance, and market strategy in the US medical device industry. The Affordable Care Act imposed a 2.3% excise tax on medical devices beginning in January 2013, and thus this study compares the medical device firms with other high-tech firms before and after the tax incidence. Using COMPUSTAT data from 2006 to 2015, the author finds that the excise tax reduced R&D investment, sales revenue, gross margins, and earnings for medical device firms. In addition, the excise tax increased their global market sales intensity, global market diversification, and customer diversification in the US domestic market. |
| Keywords: | ACA Affordable Care Act DD difference-in-differences FFDCA Federal Food Drug and Cosmetic Act IRS Internal Revenue Service M&A mergers and acquisitions NAICS North American Industry Classification System R&D research and development ROE return on equity ROA return on assets SIC Standard Industry Classification H25 O32 L25 I11 G38 Medical device tax Research and development (R&D) Firm performance Market strategy Affordable Care Act |
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