S&N Boss Says Device Tax Not Reason for Layffs

Just a week after a Smith and Nephew (S&N) public statement attributed the cut of 63 company jobs in Memphis to the 2.3% medical device excise tax, the company’s CEO Olivier Bohoun told analysts during a telephone conference call on February 7 that the Memphis media reports were “just wrong.”

Bohoun was asked about comments made by S&N management attributing the job cuts to the device tax.

According to a written transcript from seekingalpha.com, Bohoun replied: “Okay. It’s a mix of a lot of things. We announced 100 layoffs last week, 63 in Memphis, about 20 in Boston and something like 12 in Europe. This is just the follow-up of the value plan. So there is nothing new on this. This has nothing to do with Obamacare. This has to do with us willing to be fit and effective for the future. So this is nothing new. I mean, this is just a plan. So what folks, TV in Memphis or the Memphis Times have written is just wrong. It’s just a mix of things in the environment that we have seen a year ago, having driven us to make the changes we are making. And this is why it is what it is. So I mean, the 63 people have nothing to do with Obamacare per se.”

Analysts asked Bohoun if the device tax has forced the company to raise prices.

“No, ” said Bohoun, “and I double checked that yesterday night…I’ve seen a paper yesterday morning…saying that many companies have raised prices or have transferred the price on customers… we have not done that.”

Memphis media were not happy to be accused of directly quoting a company statement and then being told they had it wrong. So bizjournals.com reposted the January 31, 2013 S&N statement which read:

“The nearly $30 billion tax on medical devices that took effect Jan. 1, 2013 has impacted a number of companies across the U.S. Smith & Nephew is not immune from this added expense burden. Unfortunately, and in order to absorb this cost burden into our business, this has meant less than 100 positions have been made redundant across various departmental functions in our Tennessee and Massachusetts sites. The company is providing the affected employees with a comprehensive severance package and outplacement support.”

Numerous medical device companies have attributed layoffs to the new tax because of the added cost of doing business. But this was the first time we heard a company blame the tax for making jobs “redundant.”

This exchange between Bohoun and the Memphis media reminds us of former Zimmer Holdings, Inc.’s colorful and combative CEO Ray Elliot’s advice to his colleagues; “Never get into a fight with someone who buys ink by the barrel.”