Health Care and Eli Lilly and Co. and Government Health Care and Health Care Reform and WellPoint and Health Care & Life Sciences

Lilly, WellPoint CEOs pin hopes on Senate

November 11, 2009

After the U.S. House of Representatives narrowly passed a sweeping health care overhaul, leaders of Indiana’s two largest health care entities turned their hopes to the U.S. Senate to give them a bill more to their liking.

WellPoint Inc. CEO Angela Braly is counting on the Senate airing the “true impact” of the House bill, which she has warned could include layoffs at her company, higher insurance premiums for those currently covered, and even hospitals going bankrupt.

"I do think there is an expectation that the process in the Senate will be a fulsome one and there will be a great discussion about the true impact of these reforms," Braly said Monday at the Reuters Health Summit in New York, according to the news agency.

Meanwhile, drugmakers like Eli Lilly and Co. were upset that the House bill would allow Medicare to use its buying power to negotiate larger discounts from drug companies, something Lilly has likened to price controls.

Legislation pending in the Senate includes no such provision, which drugmakers have fought intensely since 2003.

"We feel much more encouraged by what's developing in the Senate," Lilly CEO John Lechleiter said at the summit, according to Reuters.

A statement from the pharmaceutical trade group PhRMA said the House bill would kill tens of thousands of jobs in the industry—even though drug companies have already announced more than 40,000 job cuts in the past year.

The House bill does include the biggest goal this session for Lilly and its peers: the approval of a pathway for cheaper generic biotech drugs that would allow Lilly to shield its data on drugs for 12 years after they hit the market, rather than the five years allowed for standard chemical drugs.

That provision is important to Lilly because half the experimental drugs in its pipeline are biotech drugs, meaning they are proteins derived from living cells, instead of standard drugs synthesized from chemicals.

Investors apparently think the Senate will pass a more industry-friendly bill. Since the House passed its version late Saturday, the stock prices of WellPoint and Lilly have ticked up 3 percent and 2 percent, respectively.

With the insurance industry turning increasingly against the pending reform bills, Braly listed several negative impacts she anticipates from the House bill.

It "would actually raise the cost for those with coverage," she said at the Reuters summit, because of higher taxes and insurance market reforms that would raise coverage costs.

An earlier WellPoint analysis predicted Indianapolis small businesses with workers in good or average health would see their premiums rise at least 20 percent due to health reform proposals. By contrast, a company with unhealthy workers would see a 23-percent break on premiums, WellPoint concluded.

Braly said she fears that the public option included in the House bill could lead to lower payments for hospitals, closer to the rates Medicare and Medicaid pay now, which are substantially lower than what private insurers pay.

"Our perception is it could potentially bankrupt some hospitals, depending on the scenario,” Braly told the Reuters summit audience. She added that it could make it more difficult for patients to receive care: "The question is whether we're solving or creating access problems in another way.”

However, the Congressional Budget Office predicts the House public option would negotiate rates with hospitals and doctors, meaning it would pay rates similar to companies like WellPoint. Because it would not have a competitive pricing advantage over private insurers, the CBO estimates that only about 6 million Americans would choose the public option.

President Obama, in an e-mail to supporters after the House passed the bill, wrote, "Tonight's vote brought every American closer to the secure, affordable care we need."
 

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