Medicines are “essential goods”, why not devices?
From the beautiful venue at Casino Bern
Medicines get a reduced VAT rate as "essential goods." Medical devices don't.
That's true in Switzerland, and true in some, though not all, EU member states. It sounds like a footnote in a tax code, but it's the surface of a much older divide: two therapeutic product categories, financed on different logics, now colliding with a funding gap that someone has to pay for.
Funding of healthtech is about financing innovators, but it's also about financing the regulatory authorities who evaluate them: legislation, classification, clinical trials, surveillance.
That side of the story got a rare public airing at today's Swiss MedTech event in Bern, "MedTech in Recalibration", hosted by Sidley Austin, ISS AG and Swiss Medtech, with speakers from the European Commission's Joint Research Centre, Swissmedic, MedTech Europe, TÜV SÜD, Medtronic and Becton Dickinson.
Bernhard Bichsel, Co-CEO of ISS AG and formerly Head of Swissmedic's Medical Device Division, explained why medicines and devices ended up funded so differently, and why that gap is now the subject of a live legislative fight.
Essential or not essential
Across the European continent, medicines benefit from reduced VAT as "essential goods." In Switzerland that's 2.6%, against a standard rate of 8.1%. Their pre- and post-market review is funded largely through industry fees, paid directly to the competent authority: Swissmedic nationally, or the EMA at EU level, under a regulated pricing framework. Little of that oversight comes from the general taxpayer.
Medical devices took a different path. Swissmedic itself only came into existence on 1 January 2002, created by the Therapeutic Products Act, which also gave it authority over devices for the first time. Since devices weren't classified as "essential goods," they carry the standard VAT rate, and the agency's device-related work was instead financed through federal government contributions. Device market entry was never run through a Swissmedic authorisation process at all: conformity assessment is outsourced to private Notified Bodies, with no regulated pricing framework and no fixed fee schedule. Pricing here is market-driven, commercially and on the regulatory-service side.
The two categories sat (and still sit) on different footing: tax advantages and controlled fees for medicines, standard VAT and privately-priced review for devices.
The impact of MDR
When the EU's Medical Device Regulation (MDR) entered into application on 26 May 2021, it added significant compliance costs for manufacturers and competent authorities across Europe.
For Switzerland, that same date broke the medical devices chapter of the Swiss-EU Mutual Recognition Agreement, which had allowed devices certified in the EU to be marketed in Switzerland without duplicate procedures. The EU declined to update that chapter for the new MDR, and Switzerland became a third country for device trade purposes overnight.
The fallout for Swissmedic was substantial:
new ordinances (MedDO and others) to align domestic law with the MDR;
mandatory swissdamed registration for devices that had previously relied on CE-mark recognition alone (registration is not the same as a Swissmedic approval, which still doesn't exist for devices); and
building swissdamed, the Swiss equivalent of the EU's EUDAMED database, largely from scratch.
None of that was offset by additional device-related revenue, because devices were never on the industry-fee model medicines use.
Swissmedic posted an overall loss of CHF 23.4 million in 2024. It's not a device-only figure, but device market surveillance costs no longer covered by the federal contribution are a real contributor. The agency's proposed fix: shift medical devices onto the same industry-levy model medicines already use.
Is that fair?
There's a real argument for it:
administrative consistency,
a funding source that scales with the sector it oversees, and
a levy of tens of millions of francs to close a real gap.
There's also a real argument against asking industry to absorb this cost, on this timeline.
The medtech industry is already paying VAT, unlike medicines.
The MRA reversal isn't even hypothetical anymore - Switzerland and the EU signed a package in March 2026 that would reinstate mutual recognition for devices, currently working through ratification.
I’d also question if approvals and surveillance can truly be impartial if purely funded by industry fees - a real risk also with the Notified Body setup.
In addition, the MRA breakdown driving part of Swissmedic's current costs may not be permanent: Switzerland and the EU signed a package of agreements on 2 March 2026, "Bilaterals III," including a full update to the MRA that reinstates mutual recognition for medical devices. It's not yet ratified (Swiss parliamentary approval and likely a referendum lie ahead, with 2028 floated for full effect), but it's signed, not hypothetical. Asking industry to fund a cost structure built partly on a gap that a signed treaty is working to close is a harder sell than the consultation document suggests.
Not just a Swiss story
The pattern extends beyond Switzerland, even where the specifics differ.
Reduced VAT for medicines is close to universal across EU member states; for medical devices it's narrower and conditional, often tied to disability-specific equipment or reimbursement status rather than applied as a blanket category.
France illustrates how granular this gets: reimbursed medicines at 2.1%, non-reimbursed medicines at 10%, general medical devices for healthcare professionals at the standard 20%, devices specifically for disabled patients at 5.5%.
A few countries don't distinguish at all: Denmark applies its single 25% rate uniformly, medicines included.
Switzerland's version is comparatively clean, one binary split, one funding consequence, but the underlying dynamic (medicines financed and reviewed centrally with industry fees, devices financed through a more fragmented, market-driven structure) shows up in some form almost everywhere devices and medicines are regulated side by side.
This is largely a legacy of timing. Medicines have carried centralised regulatory oversight for the better part of a century; devices only became a harmonised regulatory category from the 1990s onward, and largely through an industrial-conformity lens (private certification, technical standards) rather than the public-health-authority model medicines use.
The funding architecture never fully caught up, and Switzerland's current deficit is what happens when a fast-moving cost shock (2021) lands on a structural gap that's been present since the category was created (2002).
What's next
The proposed shift to an industry-funded supervisory levy for medical devices is out for public consultation on the revision to the Therapeutic Products Act (HMG 3b), open until 16 October 2026.
Swiss Medtech is actively advocating against it - I'm grateful to be part of such forward looking and ambitious network!
Thank you Bernhard Bichsel for bringing attention to this topic and teaching me something today at the EDGE between medicines and medical devices.
Thanks Sidley Austin, ISS AG, Swiss Medtech for the great event in Bern!
References
Swissmedic, Swissmedic takes action to consolidate its financial position, November 2025
Federal Office of Public Health / Swissmedic, Federal contribution to Swissmedic to be increased, May 2026
Swiss Medtech, No new fees for medical devices, 2026
Federal Council, Teilrevision Heilmittelgesetz 3b, public consultation (Vernehmlassung), opened 19 June 2026, closes 16 October 2026
Swiss Federal Tax Administration (ESTV), VAT rates in Switzerland, 2026
MedTech Europe, EU-Switzerland relations: renewed momentum on mutual recognition, March 2026
Federal Council, Stabilisation and further development of Swiss-EU relations (Bilaterals III), dispatch to Parliament, 13 March 2026
Swissmedic, Regulation of medical devices and agency timeline/history pages
Event programme, "MedTech in Recalibration”, Casino Bern, 25th August 2026
Methodology note: This article is based on my original LinkedIn post (link), reflecting notes taken at the Swiss MedTech event in Bern. AI assisted in elaborating the topic into a broader article by integrating background research, along with fact-checking of the figures and dates cited. All analysis and regulatory perspectives are my own, and all content has been reviewed for accuracy.
