Health Care Companies Assess Where They Stand On Health Reform After Election

The Wall Street Journal reports that several firms reiterated support for a health care reform bill Wednesday, a day after the overhaul's viability was called into question by the victory of Republican Sen.-elect Scott Brown in Massachusetts. "PhRMA, the drug industry association, as well as companies including Pfizer Inc., Johnson & Johnson, WellPoint Inc. and Humana Inc., voiced support for an overhaul of some kind, despite objections among insurers about the efforts to date."

The Journal reports that for insurers in particular, the possibility that the current bills could be jettisoned "spelled relief and presented an opportunity to push for legislation that better contained costs." A boost in stock price for health care companies is likely, analysts say, but the insurance industry still "faces a public-relations problem" on some practices such as denying coverage to patients with preexisting conditions. "Going back to business as usual isn't an option, said Michael Turpin, a former executive with UnitedHealth Group Inc.'s United Healthcare unit who is now an executive vice president at USI Holdings, an insurance broker" (Johnson and Rockoff, 1/21).

Forbes reports that some are saying that insurer stocks are likely to be boosted "because of a longer flu season and because consumers are rushing to spend on health care in the fear that they might lose their jobs." Drug companies, however, could face harder times, analysts say, because "investors are underestimating the havoc that patent expirations are going to wreak on drug company margins" (Herper, 1/20).

The Boston Globe reports analysts in Massachusetts agree that shares of health insurers could get a lift. "Brown's triumph over Democrat Martha Coakley, which echoed through the corridors of power on Capitol Hill, might not halt all legislative activity to broaden health care access or improve quality and delivery, industry leaders said. But they said lawmakers will be more hesitant to push proposals deemed onerous, such as the medical-device tax." If the larger health bills now being considered by Congress fail, narrower changes might include taking up protections for the exclusivity of biologic drugs from generics for 12 years, as well as reversing proposed cuts to Medicare reimbursements (Weisman, 1/21).

But, biotech firms have more uncertainty ahead as do medical device makers, The San Diego Union-Tribune reports. After the election Tuesday, "some medical-device makers who oppose a new, $2 billion tax aimed at their industry welcomed the possibility that the weakening of the Democrats' Senate majority could enable them to get that provision eliminated. But others in the biomedical sector expressed concern that with all aspects of the reform package conceivably back on the table, provisions they support could also come under fire." The article also lists three companies identified by stock analysts that would take the "biggest hit" on earnings in 2011 under the proposed tax: Volcano, which makes vision systems for heart surgery, Nuvasive, which develops tools for spinal surgery and Wright Medical, an orthopedic tool maker (Kupper, 1/21).

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