Obamacare Positive To Net Neutral For Pharmaceutical Industry According To Analysis By Morningstar Expert

• On 8:23 am EST, Tuesday November 3, 2009

67 WALL STREET, New York - November 3, 2009 - The Wall Street Transcript has just published its Pharmaceuticals Report offering a timely review of the sector to serious investors and industry executives. This 76 page feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Small-Cap Specialty Pharma - Patent Expiration - Pending Health Care Reform - Cultivating And Expanding R&D Pipelines - Chinese Drug Manufacturers - Brisk M&A Activity - Indian Pharma VS. U.S. Pharma - Competition From Generics - FDA Approval Process - Clinical Research Outsourcing Market - Stem Cell-Based Technology - Cancer Radiation Therapy - Expansion Into Asian Markets - Traditional Chinese Medicine VS. Western Medicine In Chinese Pharma

Companies include: Aeolus Pharmaceuticals (AOLS.OB); Nutra Pharma (NPHC.OB); Quick-Med Technologies (QMDT.OB); Abbott Labs (ABT); Alexza Pharmaceuticals (ALXA); AmexDrug Corporation (AXRX.OB); Aurobindo Pharma (AUROBINDOP.BO); BioClinica (BIOC); BioPharm Asia (BFAR.OB); Biocon (BIOCON.BO); Cephalon (CEPH); China Sky One Medical, Inc. (CSKI); Claris Lifesciences (CLARICH.BO); Cortex Pharmaceuticals (COR); Daiichi Sankyo (DSKYF.PK); Dr.Reddy's (RDY); Elan (Elan); Eli Lilly (LLY); Forest (FRX); GeoPharma (GORX); Glaxo (GSK); Glenmark (GLENMARK.BO); Johnson & Johnson (JNJ); Lupin (LUPINSL.BO); Mannatech (MTEX); Matrix Laboratories (ATRIXLAB.BO); Medical Nutrition (MDNU); Merck KGaA (MKGAY.PK); Mylan (MYL); NeoStem (NBS); Novartis (NVS); Pfizer (PFE); Piramal Healthcare (PIRAMALHE.BO); Provectus Pharmaceuticals (PVCT.OB); Ranbaxy (RANBAXY.BO); Salix Pharmaceuticals (SLXP); Shire (SHPGY); Telik (TELK); Winston Pharmaceuticals (WPHM.OB).

In the following brief excerpt from just one of the in depth interviews in the 76 page report, an industry veteran analyst discusses the outlook for the sector and for investors.

Damien Conover is the editor of Morningstar's Healthcare Observer as well as a healthcare strategist for Morningstar. Mr. Conover has been covering the healthcare industry for close to a decade with a primary focus on pharmaceutical and biotechnology companies. Before joining Morningstar in July 2007, he held equity analyst positions at Raymond James, Bank of Montreal, and Tucker Anthony. Mr. Conover is a recognized authority in healthcare investing, appearing regularly on Bloomberg TV, CNBC and CNN. Mr. Conover holds a bachelor's degree as well as master's degree in finance from the University of Wisconsin, where he was a member of the Applied Security Analysis Program.

TWST: Let's move over and touch on the hot topic, which is Obama's healthcare plan. What does that potentially mean for this space?

Mr. Conover: The healthcare reform plans that are formulated in Congress have a lot of potential to change the space for pharmaceutical companies. What we believe that we will see coming out of Congress and actually making it to the President's desk for signature is the bill that is in the Senate Finance Committee. This bill is probably the least revolutionary bill out of all the ones in Congress right now. We think that this bill will likely do a couple of different things. First we expect the bill will increase the amount of people who are insured in the United States. We think the uninsured folks will likely become insured because of the mandate that is included in the bill, so you're forced to have insurance. Also there would be increased subsidies for people who don't make as much money as the average American. These subsidies, we think, will increase volumes. That is beneficial for pharmaceutical firms. There is an offsetting factor that we also have done some analysis on, and that is regarding pricing pressure and some concessions that the pharmaceutical firms have made, so this is the other factor within the bill. We are going to see increase volumes, as I mentioned, but we are also going to see some concessions on pricing. What pharmaceutical firms have proposed, and has been largely accepted within the Senate Finance Committee bill, is $80 billion worth of concessions over the next ten years. That is a factor that we think will be largely offset by the increased volumes and we think there is actually potential upside for pharmaceutical firms with the increased volumes more than offsetting the $80 billion of cost that pharmaceutical firms are going to have to spend.

TWST: The $80 billion in cost, is that coming through lower prices? What's going to be the way that this is going to happen?

Mr. Conover: This is broken down in a couple of ways. Within that $80 billion, $30 billion is going to be going towards helping fill the cost of the 'doughnut hole', which is the part where seniors who are getting drugs through Medicare Part D have to pay the full cost. Seniors, as they spend money on drugs, get reimbursed up to a certain level. But there is a level where they don't get any reimbursement- and then as soon as they get to another level, they get reimbursed again. The so-called gap in Medicare Part D has been referred to as the 'doughnut hole'. What has been proposed is $30 billion of the $80 billion go towards helping fund 50% of the cost of drugs within that 'doughnut hole'.Now, that is partly a concession by the pharmaceutical firms, but it's also going to be beneficial to them as well. Some of the analysis we have seen and some of the analysis that we have done shows that by keeping seniors in the program, it's going to actually help pharmaceutical firms as soon as seniors get back to that reimbursement level at the top. We've seen numbers in the neighborhood of about $20 billion of recouped costs that would happen if seniors stay in the program. Your net is about $10 billion subsidy by the pharmaceutical firms to help get this program through, on that $30 billion piece of it. The remaining $50 billion is going to be pricing concessions within some of the government programs as well as just some fees that pharmaceutical firms will also pay just to help fund the increased amount of people who will be insured.

The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This 76 page special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online .

The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.

For Information on subscribing to The Wall Street Transcript, please call 800/246-7673

Buzz up!