Insurers, Drugmakers Fight Profit-Pinching House Health-Care Overhaul Bill

By Catherine Dodge and Kristin Jensen

Nov. 8 (Bloomberg) -- U.S. drugmakers, medical-device companies and insurers are gearing up for another chance to make changes to House-passed legislation overhauling the health-care system when the issue moves to the Senate.

Drugmakers such as New York-based Pfizer Inc. want to alter a House provision that would put pressure on profits by letting the U.S. government negotiate prescription drug prices for patients in Medicare. Insurers such as Indianapolis-based WellPoint Inc. are targeting the House’s creation of a government-run insurance program to compete with private companies.

“Passage of the House bill is historic,” said Paul Heldman, a health-policy analyst with Potomac Research Group in Washington. “But there’s a whole other chapter in the debate yet to be written.”

Many of the House-passed provisions may wind up not being part of the Senate version. If the Senate passes a separate bill, it will have to be merged with the House plan, giving industries weeks or even months to whittle away at policies they don’t like.

Industries were calling for changes even as the House was debating and voting on the measure last night. The Washington- based Advanced Medical Technology Association, or AdvaMed, sought changes to a provision that will impose $20 billion in fees over 10 years on medical-device makers such as Minneapolis- based Medtronic Inc.

The group, in a letter to lawmakers, called the tax on its members “burdensome” and asked for changes such as exclusions for smaller companies.

“There are provisions that are of great concern to the medical technology and diagnostics industry,” said Stephen Ubl, president of AdvaMed.

‘Bankrupt Hospitals’

Karen Ignagni, president of America’s Health Insurance Plans, in a Nov. 5 letter to House Speaker Nancy Pelosi and Republican leader John Boehner, said a new government-run plan “would bankrupt hospitals, dismantle employer coverage,” and “ultimately increase the federal deficit.”

The Washington trade group represents about 1,300 health- insurance companies.

Lawmakers are trying to craft a bill that would cover tens of millions of uninsured Americans while curbing rising medical costs. Their proposals for new purchasing exchanges, subsidies and a requirement that all Americans have insurance represent the biggest changes to U.S. health care in four decades.

The House version, which promises new customers for insurers, would also increase regulation.

“The industry is going to be less profitable and look more like a utility,” said Heldman.

Senate Majority Leader Harry Reid is seeking votes for a government insurance program, or public option, that would let states opt out.

‘Unintended Consequence’

WellPoint Chief Executive Officer Angela Braly said the legislation includes proposals that will “have the unintended consequence of increasing health-care costs that will be reflected in higher premiums for many individuals, families and businesses,” on an Oct. 28 conference call to discuss the company’s earnings.

The House bill would also require insurers to spend at least 85 percent of premiums they collect on customers’ health care. Legislation in the Senate, by comparison, would require insurers only to report the amount of premiums spent on care.

The Senate Finance Committee version, which some lawmakers say should be a blueprint, doesn’t have the prescription drug negotiations, though the panel included $40 billion in fees on the medical device industry, twice the amount in the House.

The House measure would require pharmaceutical manufacturers to pay a rebate under the Medicare drug benefit program.

‘Someone’s Job’

“When you start trading someone’s job for someone else’s health insurance, what have you really accomplished?” Ken Johnson, the senior vice president for the Washington trade group Pharmaceutical Research and Manufacturers of America, said on Oct. 29. “From our perspective, that is the scenario that is unfolding in this House bill.”

Drugmakers had already agreed to contribute $80 billion toward the overhaul, in part to help the elderly afford prescription drug medicine, in return for averting further challenges to their profits.

Also hit under the House plan are home-health care companies such as Baton Rouge, Louisiana-based Amedisys Inc. They would see more than $50 billion in cuts to the growth of Medicare reimbursement rates over 10 years, according to Heldman.

Industry Stocks Lag

Concerns about the health-care legislation have held back industry stocks this year. While the Standard & Poor’s 500 Index has climbed 18 percent, a subgroup of six managed-care companies has risen 16 percent, a group of 12 health-care equipment makers has gained 15 percent and a group of 11 drugmakers has risen 5.9 percent.

Hospitals companies such as Nashville, Tennessee-based HCA Inc., who also entered into a deal with the White House and Senate Finance Committee Chairman Max Baucus, have held off many of the provisions of most concern. As part of that agreement, payments for taking care of charity cases would be reduced only if certain insurance-coverage levels are met.

Hospitals also will benefit from treating a greater number of insured patients, analysts said.

Other companies benefiting from new customers include pharmacy benefit managers, such as Woonsocket, Rhode Island- based CVS Caremark Corp. and Medco Health Solutions Inc. of Franklin Lakes, New Jersey.

Those companies will also be helped by incentives for greater use of generic drugs, which are more profitable to the benefit managers than brand-name drugs.

[link to www.feedcry.com]