Health Care, Pharmaceuticals and Investments

Do you remember the piece I wrote a few days ago about health care costs doubling by 2017? Well, today I am going to revisit that topic by sharing with you an article by Brian Lawler I found on the investment website The Motley Fool.

Why would I share an article on investing here, you might ask? Because it provides a window into some of the economic forces that are driving the health care industry. Lawler references the Centers for Medicare and Medicaid Services (CMS) forecast which shows aging baby boomers creating one of the largest demographic shifts on record. As these boomers begin reaching the age where they will be relying on Medicare/Medicaid, and the attendant prescription drug plans, the pharmaceutical companies will be raking in larger and larger profits. Or will they?

While this forecast for increased prescription-drug spending might be a positive omen for the pharmaceuticals industry, the reality is that if health-care spending does jump to a fifth of GDP, there will be a lot of pushback from government and private health-care payers. For example, as we're seeing now, the leading presidential candidates are agitating to allow prescription-drug importation from less-costly developed countries, or to give Medicare and Medicaid more direct negotiating power over drug prices.

Nonetheless, there are strong demographic trends favoring the pharma industry. With the large dividends that many large-cap drugmakers like GlaxoSmithKline (NYSE: GSK) pay out and the relatively recession-proof nature of the pharma industry, investors should keep a keen eye on the sector in the coming years.

As the citizens of the U.S. push for reform in our health care system, it would be wise to keep in mind that economics and political lobbies are a very large factor in what decisions and legislation actually pass. A quick scan of the dollar amounts donated by pharmaceutical companies and their lobbyists to the current batch of presidential hopefuls speaks volumes about the industry's influence.

I would love to hear some input from anyone with an investment background on this issue. Please leave us a comment if you have views you would like to share.

SOURCE: "Medicare, Health Care, and Megabucks" 02/28/08
photo courtesy of holding.me, used under this Creative Commons license

Lilly CEO Calls for Reform and EMRs

While the health care reform community is focused on President George W. Bush’s imminent veto of the children's health insurance bill, a major announcement about Electronic Medical Records (EMRs) has evaded the spotlight.

Sidney Taurel, CEO of pharmaceutical giant Eli Lilly put forth a call for development of a health information technology system. His proposed system would be a collaborative effort of both public and private sectors and would involve the U.S. government, the health care industry and the medical community as active participants.

The aim is tracking both actual effectiveness and side effects of drugs that have been released into the market. This "real world" data will enhance the safety profile of drugs first established through standard drug trials.

CNNMoney reports on Taurel's address at the Cleveland Clinic:

Although traditional drug trials will continue to test new hypotheses about medicines after they have reached the market, Taurel outlined how a well-functioning health IT system could serve not only to frame hypotheses for so-called "Phase IV" clinical research, but also become the practical equivalent of massive, real-world trials. Such a system would collect detailed data from day-to-day medical practices and feed insights quickly, seamlessly and at a lower cost to doctors, regulators, and drug manufacturers. The result would be a more accurate picture of a drug's safety and efficacy than exists today.

Once again we see the importance of developing portable, transparent records as Kaiser-Permanente CEO George Halvorson outlines in his book, Health Care Reform Now!

The CNNMoney article goes on to describe the current collaboration along these lines:

Taurel explained that as EMR systems build out, they provide what amounts to a 'commons' in which organizations can collaborate to share health information.

For example, Lilly, Pfizer, and Johnson & Johnson are collaborating with 'e-Health Initiative' - a not-for-profit health information technology group - as well as with the Indiana Health Information Exchange and the Partners Healthcare System in Boston. The goal is to test how safety signals can be located and understood using existing data, potentially leading to a better understanding of the risk and benefits of medicines.

SOURCE: "Lilly’s CEO Calls For Reform of Nation’s Drug Safety System" 10/02/07
photo courtesy of Uh…Bob

Market Reform Key to Health Care Reform?

In today's Boston Herald, Dr. Lawrence A. Hunter, a senior fellow at the Institute for Policy Innovation, critiques health care reform plans that involve market reform.

Hunter criticizes "market-based health plans," such as those proposed by 2008 Presidential candidates Sen. Hillary Clinton, Massachusetts Gov. Mitt Romney, and Sen. Barack Obama, and former Sen. John Edwards.

In both parties, politicians have proposed to "curb," "harness" or "reform" the market to "fix" America’s health care system. However, lawmakers continue to ignore the underlying problem with today’s health care system. Because of government intervention in the marketplace, there’s a vast gap between the demand for health care and its supply.

Hunter discusses troubles he believes are already apparent in Massachusetts' state-based health care reform and compares these to potential reform on the national level. He also goes on to point out specific problems he sees with the candidates' plans.

John Edwards' plan hides this tax hike by forcing businesses to "either cover their employees or help finance their health insurance," and Obama has promised to "require employers to make a meaningful contribution to the health coverage of their employees." Romney’s plan assessed new taxes on those who chose not to buy health insurance and small business owners who wouldn’t play along - proving there is no such thing as voluntary socialism, even when designed by a so-called conservative.

SOURCE: "Market Reform Most Unhealthy: Gov’t Meddling Sickens System" 07/30/07