Four reform scenarios, four pharma outcomes

Worst-case scenario types, listen up: If U.S. healthcare reform yields a national health plan that offers little patient choice on drugs, then pharma companies would be in a world of hurt. A world in which drugmakers' fair value plummets 38 percent drop, says the investment firm Morningstar, and drug prices fall 30 percent on average. Fortunately for drugmakers, this worst case is deemed a "very unlikely outcome" by Morningstar analysts.

It's just one of four healthcare reform possibilities that Morningstar has sliced and diced for pharma. The most likely outcome, eventually? Good news, in the form of increased insurance coverage for the uninsured and underinsured. Pricing pressure will come along with broader coverage, but volumes will make up for lower prices.

In the near term, though--as lawmakers continue to wrangle over expanding coverage to the uninsured--Morningstar sees more Medicare pricing pressure, perhaps pushing government drug prices down by 15 percent. The good news? Medicare spending only accounts for 21 percent of U.S. drug expenditures, so the average drug price would only drop by 2 percent, sending fair values down by 5 percent.

Sound like the kind of quantitative analysis that might inspire the pharma industry to back a healthcare plan that would extend insurance coverage to the have-nots? So really, it's not so curious that drugmakers are firmly behind reform--at least, the kind of reform they can believe in.

- read the Morningstar article

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