Still, the tax poses a significant risk to the medical device industry, particularly smaller firms that rely on venture capital funding in their early stages. The 2.3% tax on revenue will likely be passed on by larger medical device firms to consumers, but as the tax went into effect earlier this year, venture capital investment in medical devices has all but ceased, report Fred Burbank and Thomas J. Fogarty for the Wall Street Journal.
Investors may want to keep an eye on IHI in the near-term because some senators are working to repeal the medical device tax. That group includes Senators Amy Klobuchar and Al Franken, two Minnesota Democrats. Every other year is an election year in the U.S. and Franken is up for reelection in 2014 following a narrow victory in 2008 in which he did not capture a majority of the vote. Medtronic and St. Jude are based in Minnesota.
iShares U.S. Medical Devices ETF
ETF Trends editorial team contributed to this post.