How the ACA’s Tax Provisions Affect the Medical Device Sector: Johnson & Johnson (JNJ), Medtronic, Inc. (MDT), St. Jude Medical, Inc. (STJ)

also faces greater challenges for product liability than the excise tax poses. Some of these are related to faulty wiring in its cardio-rhythm devices. The company develops, manufactures, and distributes cardiovascular valves and implantable neuro-stimulation medical devices (like insulin pumps).

St. Jude has a market cap of $12.8 billion, with a price/earnings ratio of 11.9. In 2013, shares are up about 15 percent. Last week, the outfit announced raised its quarterly dividend by 9 percent to 25 cents a share from 23 cents. This lifts the annual dividend to $1.00 per share from the current payout of 92 cents (a dividend yield of about 2.4 percent).

However, as mentioned the company faces product liability issues. Last month St. Jude announced the recall of a potentially faulty wire in a device that closes openings between the two upper chambers of the heart.

This move came on the heels of warnings from the U.S. Food and Drug Administration that the firm had failed to respond to FDA inquiries regarding same.

In the final analysis, across this market sector the medical device excise tax looks like a minor impediment to future earnings compared to the perils of product liability lawsuits. Ultimately, the costs of the tax will invariably be passed onto consumers. So, the total costs of the Affordable Care Act excise tax remain to be seen. And the question remains as to the effect of liability cases.

The article How the ACA’s Tax Provisions Affect the Medical Device Sector originally appeared on Fool.com and is written by Kyle Colona.

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