Pharmas, Hospitals Fall Due to Health Care Reform Troubles

Rep. Henry Waxman (D-CA) helped depress most drug and hospital stocks Thursday with his warning that the Obama administration doesn’t feel bound by its deal with pharmaceutical companies and that Congress isn’t bound by that deal.

The markets obviously didn’t believe the White House denial that anyone working there said President Obama isn’t bound by the deal he made with drug makers, which made a vague promise to help the government save some $80 billion on drug purchases over the next 10 years.

Daily charts for some drug and device makers are here.

If the drug companies can’t depend on Obama and Congress to uphold their ends of the deal they thought they had with the politicians, then the drug makers appear to be more vulnerable to health reformers’ efforts to legalize reimportation of exported drugs, shorten the lives of patents on new biologic drugs and make the companies pay for advertising to consumers with after tax dollars.

Hospital stocks also fell because the industry’s $155 billion deal announced with President Obama and the Senate also is worthless, if it ever was worth anything. That deal supposedly protected hospitals against a variety of attacks under consideration in Congress, but it is being opposed by several state hospital associations that say the deal provides for costly cuts in Medicare payments that hospitals can’t afford.

Congress also is considering making tax-exempt private hospitals taxable. But that would only help publicly-owned hospital companies, because they could grow by snapping up not-for-profit hospitals after Congress made them for profit businesses. This assumes, however, that consolidators could get anyone to finance their acquisitions of more hospitals.

Hospital stocks also are down because speculators think that if health insurance market reforms die in Congress, hospitals won’t get any relief from the cost of serving the 6 million to 8 million uninsured Americans who can’t afford health insurance and aren’t qualified for existing government programs. And they would continue to be obligated to treat some 9 million to 15 million illegal immigrants without getting paid.

Daily charts for major acute care hospital chains are here.

With the major media reporting new splits over health care reform proposals in Democratic Party Congressional ranks daily, this hasn’t been a good week for health care reform or health insurance reform.

Health care reform may not be dead, but it’s in big trouble. In the long run, the death of all of the health reform schemes being considered in Congress would be good for most health stocks.

Daily charts for health insurers’ stocks, which were mixed Thursday, are here.

Disclosure: I own BDX.

Comments

[goofball:]

why doesnt someone get rid of all the liberals in congress

Jul 10 07:19 PM

[a. palmer jr.:]

No one should ever vote for a Congressman who has been in for 2 terms. It just exposes them to more corruptness. This Senate and House need to go NOW!

Jul 11 08:54 AM

[YoYoMama:]

The author wrote:
...the drug makers appear to be more vulnerable to health reformers’ efforts to legalize reimportation of exported drugs, shorten the lives of patents on new biologic drugs and make the companies pay for advertising to consumers with after tax dollars....

My reponse:
While this is bad news for stocks, this would be good news for consumers.

American consumers bear the brunt drug companies costs for RD, advertising, etc.. No wonder a growing trend is to order pharmaceuticals overseas. Perhaps if drug companies had incentives to charge less here, and more to their overseas market, there would be one less impetus for health care reform.

Jul 11 08:56 AM

[Bob55:]

Why does health care reform have to be seen as such a negative for health insurance companies? If nothing else, it forces them to streamline their operations, and reduce waste and red tape thus lowering cost. Such actions can be seen as nothing more than a good thing from any investors in these companies.

For health care consumers, a national health care plan just increases choice. I doubt very much health care insurers will fall on the wayside like so many would like you too, but will adapt and even thrive in the face of competition. For the uninsured and those soon to lose their coverage because of the tough economy, it provides a much needed safety net.

Jul 11 10:44 AM

[Bob55:]

Typo - I meant to say "I doubt very much health insurers will fall on the wayside like so many would like you to believe, but will adapt and even thrive in the face of competition."

Jul 11 10:45 AM

[Teddie01:]

You are naive and ignorant...."I am from the government and am here to help you!"


On Jul 11 10:44 AM Bob55 wrote:

> Why does health care reform have to be seen as such a negative for
> health insurance companies? If nothing else, it forces them to streamline
> their operations, and reduce waste and red tape thus lowering cost.
> Such actions can be seen as nothing more than a good thing from any
> investors in these companies.
>
> For health care consumers, a national health care plan just increases
> choice. I doubt very much health care insurers will fall on the wayside
> like so many would like you too, but will adapt and even thrive in
> the face of competition. For the uninsured and those soon to lose
> their coverage because of the tough economy, it provides a much needed
> safety net.

Jul 11 08:12 PM

[Bob55:]

And, you, I take it work for health insurance. I used to work in health insurance way back when so hopefully I'm not totally ignorant of all things that go on within the industry.


On Jul 11 08:12 PM Teddie01 wrote:

> You are naive and ignorant...."I am from the government and am here
> to help you!"

Jul 12 02:21 PM

[Bob55:]

... and no I do not work for the government just to make things clear.

Jul 12 02:56 PM

[Chiroworks:]

Interesting thread. I respect all your thoughts and opinons. I think there will be a reform and the drops that we're seeing is people hedging and positioning themselves based on the information, or lack of, that they have. Personally, as a Chiropractor and someone who is pretty much anti big Pharma, I have a hard time feeling sorry for the loses their stocks are taking. Drugs are big money but have not proved to bring quality to life as promised.

Sep 21 06:43 PM