From the January 2007 issue of Investment Advisor • Subscribe!

January 1, 2007

A Healthy New Year

Report predicts healthcare will take center stage in 2007

Growth of Health Savings Accounts (HSAs) and pricing pressure on brand name pharmaceutical manufacturers are among the top seven healthcare industry issues identified in The Top Seven Health Industry Trends of '07, a report by PricewaterhouseCoopers.

While some observers have said it's unlikely Democrats will vote for additional incentives for HSAs in 2007, a tax bill passed the House and Senate in December that would expand HSAs and make them more palatable by repealing the annual deductible limit on HSA contributions.

The PricewaterhouseCoopers report predicts that the shift toward consumer-driven health plans like HSAs will continue this year, with '07 being the "tipping point" for these plans. Sandy Lutz, director of the Health Research Institute at PricewaterhouseCoopers, says HSAs have been considered a "boutique product" because so few people are enrolled in them--currently about three to four million. While that number is a lot of people, she admits, "percentage wise" it's not much, and the number of enrollees as well as the number of HSAs has been too small to "really affect the healthcare system." The report says that insurers, employers, and, to some extent, the government have been pushing consumer-directed health plans "in the absence of strong support from consumers themselves and from strong data on the results of such changes in benefits." In 2007, however, Lutz believes "a significantly higher population" of consumers will embrace HSAs. "A high enough population [will be] in [HSAs] so that you can see how the healthcare system will be affected"--particularly as it relates to transparency, she says. "Once you have a bigger population in HSAs, [consumers] are going to start asking questions about pricing and quality, which will have a bigger effect on the healthcare system."

Another top trend this year will be that the entire healthcare industry will focus on being more transparent, with demand for transparency around pricing, quality, safety standards, and community benefits "being driven by, and is supportive of, consumer-directed healthcare and pay-for-performance." The report notes that it will be up to "the government, insurers, and employers to educate consumers about the availability and use of such information."

Tough Year for Big PharmA?

Brand-name pharmaceutical companies will also feel the pinch in 2007, as 42 "blockbuster drugs" will lose their patents, the report notes, "opening the door for generic equivalents and potentially creating an enormous amount of revenue loss for brand name pharmaceutical manufacturers." The report, which also included a survey polling 1,000 Americans on their perceptions of the U.S. healthcare system, found that 72% of those surveyed said they would be willing to take a generic drug over a brand-name prescription drug.

While the PricewaterhouseCoopers report didn't address changes in Medicare, Paul Dennett, VP for health policy at the American Benefits Council in Washington, says Democrats have already pledged that in the first 100 hours of Congress they will remove language enacted as part of the Medicare drug benefit, Part D, that prohibits the secretary of Health and Human Services (HHS) from interfering with prescription drug price negotiations.

Removal of such language wouldn't require the HHS secretary to be engaged in pricing, but observers are concerned that Congress would "direct the secretary to take action on drug pricing" later in 2007, Dennett says.

Rep. Pete Stark (D-California), chairman of the House Ways and Means Health Subcommittee, has said that he intends to introduce legislation requiring the HHS secretary to be involved in drug pricing. However, Dennett says incoming Senate Finance Chairman Max Baucus (D-Montana) is taking a more cautious approach, "indicating that he wants to hold hearings and understand what the options might be" and what the effects of giving the HHS secretary such authority would be on the marketplace.

Reprints Discuss this story
This is where the comments go.