U.S. reform a future boost for drugmakers, others

NEW YORK (Reuters) - Could U.S. healthcare reform improve the industry's profit prognosis?

Drugmakers, health insurers and medical device manufacturers have downplayed suggestions that the Obama administration's effort to revamp the $2.5 trillion healthcare system will pump up their profits. But longer term, the overhaul would result in more Americans accessing healthcare.

Legislation moving through Congress aims to expand health insurance to millions more Americans, paid in part by hefty company taxes and reduced government payments to the industry.

That could spur growth once the policies are enacted and more Americans seek out insurance plans and treatments even as fees and rebates dent the sector near-term.

"The prospect of bringing some significant percentage of 40-plus million people who are not insured currently into healthcare would, in general, auger well for our industry," Eli Lilly and Co (LLY.N) CEO John Lechleiter told the Reuters Health Summit in New York.

Roughly 46 million people in the United States currently lack access to healthcare. Lawmakers expect to extend coverage to anywhere from 29 million to 39 million of them.

But that expansion may not happen until at least 2013, when many of the proposals in the bills would go into effect. Hefty taxes and cuts in payment fees could occur immediately after the Democratic-controlled Congress passes a final bill.

President Barack Obama, a Democrat, is pushing for a final bill next month, with midterm elections looming in 2010. The U.S. House of Representatives passed its measure last week. Floor debate on a Senate bill could start as soon as next week although some analysts expect that to drag on through January.

Novo Nordisk A/S (NOVOb.CO) CEO Lars Sorensen said even if Congress approves final legislation, health companies may wait years for more people to get access to medicines and other therapies.

"The implementation of healthcare reform is not going to happen overnight. It's going to take time," Sorensen said at the summit. "We anticipate that there's going to be a drag on the top-line for a couple of years... and then the volume impact is going to come three years and onward."

2015 AND BEYOND

"I don't think we should assume that those additional customers are going to generate some great windfall for our industry," said Jeffrey Kindler, head of Pfizer Inc (PFE.N), the world's largest drugmaker.

Indeed, a report by industry researcher IMS Health found U.S. reform would contribute less than one percent of the global drug market's 4-to-7 percent growth through 2013.

But that could change, said Murray Aitken, a senior vice president for IMS Health, which estimates U.S. drugmakers will be a $310 billion to $315 billion industry next year. "I think the bigger overall impact of healthcare reform will be in the 2015 and 2020 and beyond," he told Reuters in an interview.

A number of unknowns in the legislative proposals could put pricing pressure on drugmakers, device companies and others.

Drugmakers agreed to contribute $80 billion in price cuts to help pay for reform, a deal reflected in a Senate bill. But the House took a harder line by calling for wider rebates and allowing the government to negotiate lower drug prices under the Medicare program for the elderly.

"You may see a slight increase in volume" depending on the final plan Democrats hammer out, Merck & Co Inc (MRK.N) CEO Richard Clark told the summit.

It's also unclear how many people will buy insurance.

Pending bills would require Americans to buy policies, but some insurers -- including WellPoint Inc (WLP.N) and Aetna Inc (AET.N) -- worry penalties are too weak to enforce the mandate. Insurers also dislike a rival government-run insurance option.

Still, some providers such as Humana Inc (HUM.N) are seeking to drum up business amid reform, especially among private plans that offer an alternative to traditional Medicare and low-income Medicaid programs.

"There's a very good chance that we could find ourselves one of the best players" in the Medicare space, said Humana CEO Mike McCallister, whose company gets roughly two-thirds of its earnings from such plans. He added that he was also open to possible expansion into Medicaid.

WellPoint CEO Angela Braly told the summit she expects the company's alternative Medicare plans to grow. WellPoint will launch more aggressive advertising to mitigate the effects of the legislation, according to a Citigroup research note.

But even as greater insurance coverage spurs long-term growth, diabetes specialist Novo Nordisk -- one of the few drugmakers to give specific guidance that factors in reform -- expects to see global sales dip by 1 to 2 percent in 2010.

And if Congress's bid for health reform fizzles?

"If it doesn't happen, then it's an upside for us," in the short-term, Novo's Sorensen said.

(Reporting by Susan Heavey; Editing by Phil Berlowitz)