Home > Health care, The Noise Machine > Health-care reform won’t stop, analysts insist

Health-care reform won’t stop, analysts insist

Health care reform “has left the station and is not likely to be turned back,” no matter what happens to the Affordable Care Act, according to economists and health policy experts at a recent Univ. of California-Irvine Health Care Forecast Conference.

Even though repealing ACA will probably be a top GOP issue in 2012, the likelihood of it actually happening is slim, at best, according to former White House aide Chris Jennings. “And even if repeal were somehow successful, the market will have changed so much, repeal wouldn’t alter it,” he added.

Fundamental changes are underway in insurance coverage, access, payment, and delivery system organization, explains Jon Stewart of Kaiser-Permanente’s Institute for Health Policy.

Even Wall Street is inclined to agree that these “reforms” are acquiring their own momentum, Denver hedge-fund manager Ted Shannon told the UCI confab, noting that drug-makers and device-makers’ excessive profits are unsustainable. A $100 price tag for a brand-name drug that may be little better than its rivals will become a thing of the past, he declared.

Shannon described the Affordable Care Act as “the inevitable outcome of the failure of the industry to find a sustainable solution” to providing health care for Americans. We have endured “a long-term unsustainable trajectory of [health care] inflation,” he said. Given the threat that health care costs pose, he believes that if the Affordable Care Act fails to hold cost increases down, future legislation would impose price controls on the entire industry.

“The Affordable Care Act presents the best chance for the health care industry to survive,” Shannon declared. But if companies are going to stay afloat, they will have to become leaner. “The pharmaceutical and device industries are in for a long period of [profit] margin compression. Charging you $150,000 for chemo is a business model that is dying,” Shannon suggested.

For too long, the U.S. has been paying too much for everything from pills to hospital pillows. As just one example, Shannon pointed to drug and medical devices companies. “The average S&P company returns 12 cents for every dollar of investment, and that’s good. … For pharmaceutical and medtech, it’s like 35 percent to 40 percent-depending on the company. Is Pfizer really that much more innovative than Boeing?” he asked.

In recent years, Shannon added, companies introduced fewer and fewer new products for FDA approval while rolling out lots of ‘supplemental products’ that make small changes in old ones. Meanwhile drug-makers and device-makers are “telling Mr. Hospital Executive that they expect a 30% premium, because it’s new.”

“You all have been sold a bill of goods,” Shannon told his audience. “No question, R& D is expensive and … time-consuming.” But “the returns these companies have enjoyed – largely because of their profitability in the United States – have come out of the hides of the people in this room.”

H/t: Maggie Mahar, Health Beat Blog.

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