Uncle Sam is getting into medicine? Reporting from the JP Morgan Healthcare Conference

Checking the pulse of healthcare
Checking the pulse of health care

Attending the JP Morgan Healthcare conference is probably one of the fastest way to check the pulse of the global health care industry and assess investor’s appetite for health care investments. With the Obama administration poised to take office today, almost all presenters anticipate that 2009 will be a seminal year for U.S. health care.

Ted Kennedy, Jr., founder of Marwood Group, a business development and government relations consulting firm, spoke at a conference lunch. Kennedy (yes, he does look like Ted  Kennedy), expressed a strong belief that 2009 could become The Year of comprehensive universal health care coverage in the U.S., as in “if it will ever happen, it will happen now.”

The alignment of political planets is such that there is no organized opposition to the healthcare reform and Tom Daschle staked his reputation on making it happen. Furthermore, the electorate, including young and middle class, wants an accessible healthcare that doesn’t consume 17% of GDP. As deep economic recession spreads out, the U.S. federal government is poised to inject serious cash into the health care programs, such as SCHIP and Healthcare IT ($20B) (see “House Leaders Unveil Economic Stimulus Package That Includes Health IT, Medicaid Funding“).

With this political lens, what is “in” and what is “out” in this new world of U.S. health care?

  • Linking payment to quality.
  • Better pricing transparency is a boon for young, newer companies attempting to break into the system, especially in the med.tech space. Competitive bidding for durable equipment is definitely “in”.
  • Comparative effectiveness, the framework adopted by the UK agency, NICE (see this blog for description and comments). If this is the case, pharmaceutical companies will face pressure to show superiority. Along the same vein, generics are “in” and generic companies are poised for growth.
  • Healthcare IT: Good for employment and good for healthcare.
  • Hospitals consume about 40% of health care dollars, and anything that can improve their performance is “in”. Furthermore, hospitals are usually large employers in any community, so it’s unlikely that there will be cuts there.
  • New FDA commissioner, better attitude towards the agency, more respect for science and new money for the NIH.
  • Kennedy also indicated that clinical labs would do well under any scenario. However, there is a perception that existing fee schedule overpays for services and any private high margin businesses represent a red flag.
  • Establishing protocols for re-importation of drugs is also on the table.

What is under pressure (“out”)?

  • Medicare Advantage, because it is seen as a high margin/commodity business;
  • Specialty hospitals
  • Home healthcare: although the need is understood, it is viewed as a high margins business
  • Branded pharma and biotech. According to Kennedy, “$100K/year drugs spoil it for everyone.”
  • Kenedy also indicated that political winds seem to blow towards Medicare-style rebates rather than direct price controls.

Stay tuned!