Health care sector gears up for U.S. reform

By Susan Heavey and Lisa Richwine

NEW YORK (Reuters) - Drug makers, insurers and other health care companies are preparing for possibly dramatic changes to the U.S. health care system as Democrats increase their power in Washington next year.

Companies such as Pfizer Inc (PFE.N), WellPoint Inc (WLP.N) and Walgreen Co (WAG.N) are eyeing growth opportunities and selling themselves as part of a solution rather than as targets for cost-cutting and more regulation.

"Improving both the quality of healthcare access and affordability will ultimately require public-private partnerships," Aetna Inc (AET.N) Chief Executive Officer Ron Williams said at the Reuters Health Summit this week.

Democrats, including President-elect Barack Obama, have made providing coverage to the nation's 46 million uninsured Americans a top healthcare priority, along with boosting access to medications and preventive services such as screenings.

Companies view that translating into more patients seeing doctors, visiting hospitals and taking prescription drugs.

"There are a number of things that the new administration can do for health care that are very good ... We're going to see increased volume not (only) through providers but through consumption of medical products," said Tim van Biesen, a partner at Bain & Co.

"If the new administration chooses to implement its version of expanded coverage through the private sector ... then the managed care plans stand to add a lot of volume and members to their rolls as well," he said.

It will not be easy for companies to press their case for quick reforms as the nation's economy slips toward recession.

Tough times already have some companies anticipating patients skipping pills or avoiding costly procedures. But many CEOs said growing unemployment simply highlights the need for a better model to providing care.

Most Americans receive health care benefits through their employer, but more than one million have lost their jobs so far this year, with analysts expecting more cuts next year.

"One of the challenges with governments around the world bailing out a financial system, looking at consumer stimulus programs and still wanting to support the health care systems -- the question is what gives," said Arthur Higgins, chief executive officer of Bayer AG's BAYG.DE healthcare unit.

The United States already spends more than $2 trillion a year on health care, or about 16 percent of the U.S. gross domestic product. It is expected to reach 20 percent by 2017.

Even as Obama campaigned on greater access, he urged cost cuts and stressed the need for better coordinated care, fewer costly errors and more prevention. He also called for more competition among insurers, lower drug prices and less spending in the Medicare program for the nation's elderly and disabled.

"We do expect a lot of pressure to be placed on the industry," said Bayer's Higgins.

Obama this week signaled his intent to prioritize health care even amid economic turmoil and wars in Iraq and Afghanistan, as Democratic sources said he would nominate former Sen. Tom Daschle to lead the Department of Health and Human Services in an early round of Cabinet post picks.