Health bill sweet pill for US drugmakers
London:Global drugmakers face a hit to earnings from 2011, as they are forced to chip in to help pay for US health care reform, but will benefit in the long run as millions more Americans become customers for their medicines.
The future promise lifted stocks in major drug companies on both sides of the Atlantic on Monday, after US lawmakers gave final approval to a sweeping health care overhaul at the weekend. Big Pharma will provide somewhat more in savings than the original $80 billion agreement under the latest version of health care reform but the bill passed by the House of Representatives creates 32 million more customers for the industry's products.
Crucially, the government will not impose drug price caps. "The amount they are paying, essentially in a tax, over a five to 10 year period is potentially more than offset by the increased volume that they have coming in, " said Ben Yeoh, an industry analyst at Atlantic Equities. "It looks neutral, within forecast error, " he said. "There's relief that something has got through that drugmakers can live with. "Morgan Stanley analysts said the reform package would depress earnings per share at European pharmaceutical companies by up to 2 to3% in 2011.
But this would be counteracted by a sharp increase in the number of insured patients and enhanced revenues from the Medicare programme for the clderly, the brokerage said. Drugmakers were unlikely to revise longterm earnings outlooks on the back of the news, it added.
Under the complex deal hammered out in Washington, the drugs industry will have to pay fees of $2.5 billion $3 billion from next year-rising to a peak of $4.2 billion in 2018-and provide discounts to help ensure Medicare coverage. "There's a sense that if no health reform had passed this time around, then everything would have got a really bg kicking in three or four years time because, inevitably, something had to give, : said Jack Scannell, an industry analyst at Sanford Bernstein.
Lawmakers also rejected an initial plan to end Lucrative "pay-for-delay" settlements between brand-name and generic drugmakers-a win for both groups of manufacturers.
the biotechnology industry, too, has reason to be thankful that the legislation was not worse. A big fear for biotech investors had been that government would give generic alternatives a fast route to the market. In fact, makers of biotech drugs like Amgen Inc and Roche Holding AG's Genentech unit will still have a 12-year period of exclusive sales before facing competition from generic revals.
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However, Heigl continued undeterred and managed to say her thanks with a little help from host Billy Bush, who held her strap as she finished her speech. She later laughed off the whole incident.
