$2.5 trillion on healthcare

Could U.S. healthcare reform improve the industry's profit prognosis?
Drugmakers, health insurers and medical device manufacturers have downplayed suggestions that the Obama administration's effort to revamp the $2.5 trillion healthcare system will pump up their profits. But longer term, the overhaul would result in more Americans accessing healthcare.Legislation moving through Congress aims to expand health insurance to millions more Americans, paid in part by hefty company taxes and reduced government payments to the industry.That could spur growth once the policies are enacted and more Americans seek out insurance plans and treatments even as fees and rebates dent the sector near-term.
"The prospect of bringing some significant percentage of 40-plus million people who are not insured currently into healthcare would, in general, auger well for our industry," Eli Lilly and Co (LLY.N: Quote, Profile, Research, Stock Buzz) CEO John Lechleiter told the Reuters Health Summit in New York.Roughly 46 million people in the United States currently lack access to healthcare. Lawmakers expect to extend coverage to anywhere from 29 million to 39 million of them.But that expansion may not happen until at least 2013, when many of the proposals in the bills would go into effect. Hefty taxes and cuts in payment fees could occur immediately after the Democratic-controlled Congress passes a final bill.President Barack Obama, a Democrat, is pushing for a final bill next month, with midterm elections looming in 2010. The U.S. House of Representatives passed its measure last week. Floor debate on a Senate bill could start as soon as next week although some analysts expect that to drag on through January.CEO Lars Sorensen said even if Congress approves final legislation, health companies may wait years for more people to get access to medicines and other therapies."The implementation of healthcare reform is not going to happen overnight. It's going to take time," Sorensen said at the summit. "We anticipate that there's going to be a drag on the top-line for a couple of years... and then the volume impact is going to come three years and onward.""I don't think we should assume that those additional customers are going to generate some great windfall for our industry," said Jeffrey Kindler, head of Pfizer Inc (PFE.N: Quote, Profile, Research, Stock Buzz), the world's largest drugmaker.Indeed, a report by industry researcher IMS Health found U.S. reform would contribute less than one percent of the global drug market's 4-to-7 percent growth through 2013.But that could change, said Murray Aitken, a senior vice president for IMS Health, which estimates U.S. drugmakers will be a $310 billion to $315 billion industry next year. "I think the bigger overall impact of healthcare reform will be in the 2015 and 2020 and beyond," he told Reuters in an interview.A number of unknowns in the legislative proposals could put pricing pressure on drugmakers, device companies and others.