Sunday, March 28, 2010

Healthcare Reform: Now What?

The Patient Protection and Affordable Care Act has passed. Twice. Healthcare reform, sought after since Teddy Roosevelt, has arrived in the United States. Now what?

The run up to this historic (I don’t use that word often or lightly) moment began maybe a year before the 2008 Presidential election and supplied increasingly higher drama as the election receded into the past and the first year of the Obama administration progressed. Everyone seemed to be caught up in the debates that were taking place in Washington, D.C.. Well, the legislation has passed and as President Obama said, ‘Armageddon didn’t occur, nothing fell from the sky on me, and it turned out to be a pretty nice day’. But, not all the bill’s provisions happen right away. Some of its key provisions don’t occur until 2014, for example, prohibiting excluding healthcare insurance coverage because of preexisting conditions by insurers. Others won’t kick in until 2018, coverage of preventative procedures and examinations without copayment requirements as another example. (See the Wikipedia article on the bill for a summary of the bill, .)

I expect that some time will need to pass before we’ll begin to understand what happens out there with this legislation. Yes, more people will be covered and that’s good for healthcare companies. But, as I’ve blogged before, the government and insurance companies will eventually use their enormous purchasing power to keep costs down. The conservatives’ concerns over rationing of healthcare may have some basis for these fears. After all, how many neurosurgeons are there in the country? More basic services may not be as affected but there could be some disruptions to the provision of care in the early days.

Could Patient Protection and Affordable Care Act provide a stimulus to the economy? Possibly. More facilities and care providers will be needed. The population is aging and the Baby Boomers will be around requiring care for about another forty years or so. With the funding model being worked out, there’s a reasonable chance that this will be positive for the economy. I use the U.S. Interstate Highway System proposed by President Eisenhower as an example of the indirect benefits of government legislation.

Possible winners from healthcare reform are the outsourcers. Taylor Barnes ( ) has written an interesting article for the Christian Science Monitor that is available on Yahoo! News ( ) about Indian outsourcers and the potential for new business for them. I’ll return to this particular point in the future because it’s part of the whole healthcare story that Larry and I have been following.

Likewise, we’ll be blogging and inviting others to join us as this story continues to unfold. We won’t be lacking material.

As always, we welcome your feedback. Please contact us at We look forward to hearing from you.

Contributed by Guy de Lastin

Sunday, March 21, 2010

Healthcare Reform: Endgame?

Finally. We seem to moving to closure on the seemingly unending national debate over healthcare in the U.S.. Tomorrow, Sunday, March 21, 2010, in an unusual Sunday session, the U.S. Congress will put healthcare reform to the vote. I predict that the Democrats will get the necessary votes and the legislation will pass. Then it’s over and we can all go home, right?

We may all go home but this is far from over. Let’s not forget that august body, the U.S. Senate which would still need to put its imprimatur on the proposed legislation. The Republicans are preparing a desperate, last ditch defense there that would make John Wayne’s Alamo look like a tea party (and I don't mean the one in Boston Harbor nor the current anti-Republican/Democrat Party) If the Senate can’t pass the legislation before the spring recess we could be in this state of affairs for a while longer. (Am I the only one who’s reminded of Waiting for Godot?) Various governors and state legislatures are promising to challenge the constitutionality of government mandated healthcare reform. Their positions are based on the old states’ rights arguments. (Somebody should tell those guys that those arguments didn’t work very well for the Confederacy.)

CNBC’s Patti Domm wrote a piece ( ) yesterday about the potential short term negative impact of healthcare reform on stack prices. I’m still convinced that most people still unsure about what healthcare reform means for business, especially in the life sciences sector. I’m excluding the Republicans and Tea Party members from this because they’re just opposed in general to the whole idea.

Tomorrow, we may have the unusual situation of most of the country sitting around their televisions, computers, PDA’s, whatever to follow the final debates in the Congress. I can’t wait to see the audience ratings. (Another prediction, they may rival the recent Olympics.)

After all that has gone on before now, the present moment seems somewhat anticlimactic. If the past is any guide even if the legislation passes not much may change immediately. But, changes will be put into play that combined with the law of unintended consequences will change many things. (Nobody ever thought that when Congress put through a minor piece of legislation for something called a 401k plan would become the primary financial tool for retirement planning and practically shut down employer funded pensions as generations knew them.) What will we wake up to on Monday morning if healthcare reform passes?

No one knows what the future holds for healthcare reform. I can predict passage but that’s just one person’s opinion. But, passage is just one point in time. It’s binary – yes or no. What happens after that is much more complicated and the stakes are very high. Let’s see what happens.

As always, we welcome your feedback. Please contact us at We look forward to hearing from you.

Contributed by Guy de Lastin

Tuesday, March 16, 2010

Healthcare Reform: Watching Paint Dry

I’m fascinated by the healthcare reform debate that’s currently underway in the U.S. both inside the Houses of Congress and without. Last week, everyone in the country became experts in the arcana of the Senate’s reconciliation rules. This week, we’re all becoming familiar with President Obama’s travel schedule. Oh, and, let’s not forget the furies that have been unleashed at the health insurance providers. (I loved that move on the part of the President. A friend of mine who is a rabid opponent of healthcare reform rallied to that one. As he said, “Who doesn’t hate the health insurance companies?”)

The absence of Big Pharma from this debate is obvious. As I blogged last week, they appear to be in the President’s camp but their silence is deafening. Given all that’s at stake here I find that response, or, more accurately, lack of one, puzzling.

Maybe, just maybe, healthcare reform is not all that it’s knocked up to be for Big Pharma. The argument advanced by some (see Janet Adamy’s and Greg Hitt’s article in the Wall Street Journal, ) that the drug companies will profit from all the sales to customers who couldn’t afford their wares reg Hitt, previously. That assumes Big Pharma has something to sell. This blog has noted previously the struggling new product pipelines at many drug companies. Now, the generic manufacturers may have something to crow about but I doubt their more upscale brethren will.

OK, you don’t buy the drying up pipeline argument. You say that new product development is not a straight line always headed up. You believe that research and development is a fitful, creative process with long dry spells frequently the result. I buy that. There is historical precedent. Now, let’s stop and think who’s going to be footing the bill for all this. The Federal government and the insurance companies. Am I the only one who thinks that these august institutions won’t figure out a way to squeeze volume purchase discounts from the drug companies? The drug companies are doing it to their own suppliers and even their own employees. Or, the Federal government could fall back on their old standard – price controls.

Here’s where I’m going with this. I don’t believe that healthcare reform will be beneficial to Big Pharma and other life sciences companies. Yes, more products may be sold to more people but at lower prices. Doctors will probably be second guessed over treatments. Stories have been around for years of nurses paid by health insurers second guessing physicians over treatments and medications. These practices will only continue and grow in all likelihood.

I’ve stuck my neck out now and given my position. There may be a vote on healthcare reform in the next week. If it passes, and the jury’s still out on this one, then I think we’ll see an interesting time for Big Pharma in the next several months.

As always, we welcome your feedback. Please contact us at We look forward to hearing from you.

Contributed by Guy de Lastin

Sunday, March 7, 2010

Healthcare Reform: Reconciliation?

I have to admit to being a bit distracted lately in my blogging because of the recent debates over healthcare reform. (Actually, Larry’s been politely suggesting that I get back on track about Big Pharma.) Here’s my dilemma – I’m not really sure what happens next. Now, coming from someone as highly opinionated as myself this is something.

President Obama’s announcement this week that he expects the Congress to push through healthcare reform despite Republican opposition. Larry Kudlow called this a “declaration of war” on the National Review’s website ( ) this week. The Democrats will probably be forced to use an arcane legislative rule called reconciliation to make this happen. The seemingly unending gridlock in Washington, D.C. may be coming to an end one way or the other. The whole country, if not the world, will be on the edge of its seat for several more weeks until this is over. And, then, then the next round begins.

What can anyone make of this? More to the point, how does Big Pharma or any of the other players in the healthcare industry plan around this? And, let’s not forget all the other problems that Big Pharma is facing – poor new product pipelines, increasing competition from generics, and more aggressive FDA enforcement.

Consensus doesn’t seem to exist on whether or not passage of healthcare reform will be good or bad for Big Pharma. While Big Pharma still seems to be in the President’s camp supporting healthcare reform, I’m still looking for a simple, cogent argument about why healthcare reform is good for Big Pharma. (If any of our readers would refer me to any such links, I’ll be forever in your debt.) Likewise, while gloom and doom prognosticators abound about the impact of healthcare reform on Big Pharma, no one seems to have a straightforward analysis of why.

Now, maybe the problem is the state of the healthcare reform legislation itself. The Senate bill is supposedly about 2,700 pages. I guess trying to sort all the possible implications is a bit daunting.

Or, maybe, just maybe, the healthcare reform debate is irrelevant to Big Pharma. Why do I say that? Not just to be provocative. (OK, OK, I do want to be provocative.) When there’s a lack of consensus, no obvious ways forward, something’s going on. Sure, healthcare reform will change many things but does it mean that the fundamentals of Big Pharma’s business will necessarily change? I’m beginning to think not.

Sure, Big Phama has many issues and challenges to deal with. But, their businesses which have grown to their current size and power by learning to respond to these. Healthcare reform may only be a distraction from the real problems which Big Pharma is facing.

As always, we welcome your feedback. Please contact us at We look forward to hearing from you.

Contributed by Guy de Lastin