Drugmakers and health insurers will gain millions of customers under legislation overhauling the US medical system. The industry also will pay new fees to the government, and face stricter rules that may narrow profit margins and fuel mergers.
The bill that the House passed on a 220-211 vote yesterday expands coverage to 32 million uninsured Americans, according to Congressional number crunchers. That means more sales for Pfizer Inc, the world’s largest drugmaker; UnitedHealth Group Inc, the largest health insurer; and a cluster of companies led by Amerigroup Corp that specialize in managing services through Medicaid, a program that will grow in the remake.
The revamp will cost $940 billion over 10 years, with industry fees and taxes helping defray the cost of adding to the ranks of customers who can afford to pay their doctors, drugstores and hospitals. Because the legislation creates pressure to curb medical costs, companies may merge as a way to lower expenses, said Paul H Keckley, executive director of the Deloitte Center for Health Solutions, a Washington-based research firm.
“You have some that are able to manage more efficiently and strategically and some that can’t,” Keckley said by telephone March 19. “You’ll see an acceleration of acquisitions.”
Drugmakers, who took part early in negotiations with the Senate Finance Committee and the White House, may have the most to gain. More health-care coverage “makes a difference in demand for drug products,” said John L Sullivan, an analyst at Leerink Swann & Co in Boston. People won’t have to skip doses of medicines as frequently to save money, he said.
And while the industry pays $28 billion in fees over nine years to help the elderly afford drugs, it avoided requirements to have complicated pricing agreements with the government in Medicare, the program for the elderly and disabled, said Ramsey Baghdadi, a researcher at the analysis firm Prevision Policy LLC in Washington who specializes in pharmaceutical and biotechnology policy.
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Pfizer, based in New York, gained 6 cents to ¤12.59 at 10:11 am in German trading. The Bloomberg Europe Pharmaceutical Index, which tracks 18 European drugmakers, fell 0.6 per cent to 167.80.
For health insurers, the potential increase in customers will be tempered by subsidy cuts for custom Medicare Advantage plans offered to the elderly, and the prospect of new regulations. The industry, through its trade group America’s Health Insurance Plans, argued as recently as March 18 that the legislation won’t control costs and that people will still wait until they’re sick to buy coverage.