Advancing Health and Earning Tax Savings: The R&D Tax Credit for Medical Device and Pharmaceutical Companies

For companies in the medical device and pharmaceutical industries, innovation is at the heart of everything you do. What many don’t realize is that the technical challenges you overcome in developing new therapies, products, or testing methods may qualify for the federal R&D (Research & Development) tax credit; a powerful tool that can significantly reduce your tax burden.

Why It Matters

The R&D tax credit is designed to reward companies that push the boundaries of science and technology. It can offset income tax, and for qualified small businesses, even payroll tax. That means more capital to reinvest in R&D, clinical trials, regulatory strategy, or expanding your team.

Qualifying Activities in MedTech, Medical Devices, and Pharma

As long as your work involves technical uncertainty and a process of experimentation, there’s a strong chance it qualifies. Examples include:

• Developing new medical devices, from concept through prototyping and testing.
• Improving existing products, such as enhancing device functionality or materials.
• Conducting pre-clinical or clinical research to support FDA submissions.
• Designing and validating manufacturing processes under regulatory constraints.
• Developing drug formulations, delivery mechanisms, or dosage improvements.
• Engineering software used in diagnostics, monitoring, or data collection.

Real-World Example

A medical device company developed a wearable sensor to track patient vitals in real time. The R&D process involved hardware design, firmware development, software integration, and multiple rounds of testing to meet regulatory requirements. These activities qualified for the R&D tax credit, and the company recouped a significant portion of its development costs.

Don’t Overlook This Opportunity

Whether you’re working on the next breakthrough therapy or refining a Class II device, your R&D efforts may qualify. Even if you’re still in early development or clinical stages, it’s worth exploring.

Let’s chat about how your innovation could lead to real tax savings.