Tariff-proof medical devices with single-use reprocessing

Substantial (25%) tariffs are expected to increase the hospital’s price of buying PPE equipment, medical devices, and capital assets like MRI machines. However, the capacity of the healthcare system to absorb more price increases is limited (most hospitals and health systems work with operating profit margins of 2% or less), and the Medtech sector just may have to face the reality that they have to cut spending.

Substantial (25%) tariffs are expected to increase the hospital’s price of buying PPE equipment, medical devices, and capital assets like MRI machines.

With increased costs and tighter margins, the life-blood of the medtech industry – innovation investments – are at risk. To the US health system, tariffs causing cost pressure on an already embattled healthcare provide industry is only the surface of a bigger challenge that could include setbacks in technology advancement and patient care improvements that could leave scars for decades to come.

COVID made us think supply chain in a new way. It made us better understand the value of re-using devices, it changed the focus from costs to supply chain resilience, and it showed us the vulnerabilities of a health system that imports 75% of its supplies from abroad. Here is how reprocessing can help:

Not only does reprocessing reduce device costs and environmental impact for hospitals; the circular use program also makes the hospital less dependent on supplies from overseas, simply because devices can be used more than once. This is highly relevant today where we may be looking at tariffs or import restrictions focused on healthcare products coming from China and Mexico.

When a product is reprocessed, the “raw material” is sourced in the United States – and it is always reprocessed in the United States, and not subject to tariffs.

Therefore, when sourcing medical devices, smart hospitals will select devices that can be reprocessed and let their suppliers know that the reprocessing programs cannot be interfered with. This way, the cost of a device that is reprocessed just once – and made available at half the cost of a new device – will offset a 25% tariff and more. A $2,500 ultrasound catheter with 25% tax costs the hospital $3,125. A reprocessed ultrasound catheter costs ~$1,250. A hospital that starts using a reprocessed catheter every second time a catheter is used will pay ~300 less per use than before the tax.

...when sourcing medical devices, smart hospitals will select devices that can be reprocessed and let their suppliers know that the reprocessing programs cannot be interfered with.

At the least, the lower cost of a reprocessed device will help offset any tariffs – as long as the suppliers understand the need to back off from interfering with reprocessing.