Snipers Take Aim at the Devil

Timing of potential impact: We believe that any potential healthcare legislation sponsored by the Democrats won’t go into effect until 2010 or later. Congress will likely concentrate on the Iraq war at the onset and any healthcare legislation would likely be vetoed by Bush regardless, therefore we would expect that Democrats wouldn’t attempt any major legislation until there was a Democratic Administration. If a Democratic President took office in 2009, any legislation that was passed that year could only take effect in 2010 or later.

The risk of negative healthcare legislation is real due to past Democratic efforts. While its not clear at the present time what potential legislation will come about until the Democratic leaders provide more clarity, there are several items that have been discussed in the past

Potential legislative proposals

Drug reimportation legalization:
Negative for: Large Pharma due to lower selling prices in Canada.Distributors would take a hit as well although they have some presence in Canada.

Reimbursement cuts:
Democrats have squeezed healthcare reimbursement in the past through cuts to Medicare and Medicaid (several publicly traded nursing homes went bankrupt during the late 90’s due to changes in the reimbursement codes.) This could potentially be negative for all companies with exposure to Medicare/Medicaid.

Universal Healthcare (insurance for the uninsured):
Positive for: Providers (docs, hospitals, etc), although only to the extent of coverage. This would alleviate some of the bad debt problems of the hospitals although would only be limited in dollar terms. This program wouldn’t likely be a substantial entitlement unless cuts are made elsewhere to pay for it – in which case it may be a zero sum game to providers.

Drug Price caps: This is highly unlikely as this was a debacle in the past. Hopefully this subject does not come into the picture due to its potentially devastating nature.