But even if the tax gets repealed, the job cuts would be necessary because of slower sales, analysts say.

Medical technology manufacturers have been struggling with weak sales for the last several years as people lost their jobs and health insurance, and as cash-strapped governments around the world slashed spending. The industry needed to downsize.

Even more layoffs are in the works for 2013.

The 2.3 percent tax on medical device sales, slated to take effect on January 1, is estimated to collect more than $30 billion in taxes over the next decade.

Analysts say it will be difficult in most cases for medical equipment manufacturers to pass along the costs to hospitals in this sluggish environment, even as these companies stand to gain more customers because of the new healthcare law.

The Patient Protection and Affordable Care Act, which President Barack Obama signed into law more than 2-1/2 years ago, is expected to extend health coverage to more than 30 million uninsured Americans. Those who enroll starting in October would be covered by insurance from January 1, 2014.

The Advanced Medical Technology Association, or AdvaMed, the trade group for medical device manufacturers, is pushing hard to repeal the device sales tax as part of the "fiscal cliff" negotiations.

While the U.S. House of Representatives has passed legislation that would repeal the tax and there is some support in the Senate, analysts said companies should prepare to pay.

Obama recently said he was against a delay or repeal of the device tax.

"Despite the president's comments, our D.C. contacts continue to believe a delay in the device tax is still a real possibility, but full repeal remains an uphill battle," Wells Fargo analyst Larry Biegelsen wrote in a research report.

STILL BLOATED

The industry directly employs more than 420,000 Americans, exports $33 billion worth of products, and supports 2 million manufacturing jobs around the world, according to AdvaMed.

AdvaMed forecasts up to 43,000 more jobs will be cut over the next five years because of the tax. The group said it did not calculate how many jobs would be lost if the tax gets repealed.

"It's easy to blame the tax, but it's something that would have happened eventually at these companies," said Frost & Sullivan analyst Venkat Rajan.

The industry's sales were growing at close to double-digit rates for about a decade from the mid-1990s, bolstered by advances in minimally invasive technology and different types of safer and smaller implants, which opened up new patient populations. The devices replaced drugs in some cases, Rajan noted.

In established markets, such as the United States, Europe and Japan, there was money to pay for high-end devices and medtech companies saw the aging Baby Boomers as a further opportunity to expand.

"A lot of companies were built for that kind of market. Then the recession came," Rajan said. "It hit insurance rates, the number of people who had insurance, hospitals were going out of business, then there was reform and the realization that there's a finite number of dollars to spend on healthcare."

Even the increase in the number of Americans insured under the new healthcare law will not be enough to guarantee profit for medical equipment makers.

Analysts say the industry is still bloated and needs to squeeze more costs out of its infrastructure by cutting jobs and redirecting resources to faster-growing emerging markets. The U.S. excise tax, they say, will only exacerbate the problems the industry already faces.

"The tax is a very significant factor, but also should be placed in the context of the other challenges," Stephen Ubl, president and CEO of AdvaMed, said in an interview.

CUTS COMING

According to an AdvaMed survey of 81 of its roughly 350 members, the industry will have to spend up to $667 million to implement the tax, and 62 percent of those surveyed said they are planning layoffs or reduced hiring to help offset the tax.

Since last year, the top publicly traded medical technology companies have eliminated some 7,000 jobs.

Medtronic Inc, the world's biggest stand-alone medical device maker, which employs 38,000 people worldwide, took the lead, announcing earlier this year that it would cut 1,000 jobs.

Since early 2011, Abbott Laboratories Inc announced plans to lay off about 2,400 employees over the next several years. Abbott has roughly 65,000 employees and said it will cut several hundred more jobs in 2013.

St. Jude Medical Inc, a maker of heart and other medical devices, said it would lay off about 5 percent of its workforce.

Boston Scientific, which has about 24,000 employees, is working through a restructuring that aims to cut 1,000 jobs.

Orthopedic device maker Stryker Corp announced earlier this year it will cut about 5 percent of its workforce, citing the tax and a challenging economic environment. The company declined to say whether its restructuring is complete.

Zimmer Holdings Inc has cut 400 jobs over the past couple of years because of weak demand for its orthopedic implants. Zimmer has about 85,000 employees.

The vast majority of U.S. medical device companies are small and employ fewer than 50 people. Some 80 percent of them generate less than $100 million in revenue.

One likely consequence of the tax is that the smaller companies might be acquired, said Morningstar analyst Alex Morozov.

But the larger ones will need to downsize regardless of whether the tax takes effect, he said, adding that more layoffs are likely even if the tax gets repealed, which is unlikely.

"Device companies realized a couple years ago that the heyday day of the industry, particularly in the U.S. and Europe, is over, so now they have to operate with a leaner infrastructure," Morozov said, adding that the industry is "in the early to middle innings of right-sizing operations."

"They don't want the public to realize that what they should have done is cut infrastructure a long time ago," he said. "This (tax) is not what started the deterioration of the environment, but the tax is out of their control, so they can point to it as a catalyst and cry foul."

(Editing by Matthew Lewis)

• A Permanent Economic Emergency