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Baucus health reform bill would stick Indiana companies with fees

October 10, 2009

The health reform bill sponsored by U.S. Sen. Max Baucus, D-Mont., would help pay for expanded health insurance coverage by levying fees of $13 billion a year on the health care industry.

The fees would deliver a hefty bill to just about all of Indiana’s major health care companies. But how they’re reacting to the fees is all over the map.

Here’s a breakdown of what some Indiana companies could pay, derived from each company’s share of the U.S. market. The market totals were calculated by U.S. News & World Report, using data from New York-based research firm Capital IQ:

• WellPoint Inc., $1.1 billion per year

• Eli Lilly and Co., $88 million

• Zimmer Holdings Inc., $88 million

• Biomet Inc., $61 million

The companies crying the loudest are medical-device makers, such as the orthopedics companies in Warsaw.

“We expect that this particular fee would wipe out about 20 percent of all the profitability in the medical-device industry,” Biomet CEO Jeffrey Binder told the “Nightly Business Report” Sept. 16. “And there’s absolutely no way that that will not affect employment.” Because of that potential impact, Indiana’s two senators, Evan Bayh and Richard Lugar, have objected to the fees. Also, Indiana Gov. Mitch Daniels joined four other governors in writing a letter to Baucus, slamming his proposed fees as a job killer.

“Many of these are high-paying, basic science and engineering jobs that must be preserved and increased for a sector that provides an important economic engine for our country and states,” they wrote.

In the Warsaw area, the orthopedics industry pulls in $11 billion a year and employs 6,000 people. Indiana is also home to other medical companies, such as Bloomington-based Cook Inc., which does not disclose its revenue. Also, the state has been trying to nurture medical-device startups, such as Indianapolis-based Nico Corp.

Even though WellPoint would have a whopping bill, the Indianapolis-based health insurer and its peers haven’t opposed the fees too stridently. That’s because the Baucus bill would also give $452 billion over a decade in subsidies to help Americans buy health insurance.

If WellPoint gets the same share of the new customers as it currently holds—16 percent—it would mean more than $7 billion a year in new revenue. Paying $1 billion to get $7 billion in return is a slam-dunk for any investor.

Lilly isn’t squawking too much, either. Sure, it doesn’t watch $88 million fly out the door lightly, but more people with health insurance also means more people able to buy its prescription drugs.

Besides, Lilly is getting its top legislative goal, which is 12 years of exclusivity before biotech drugs face generic competitors. Legislation in both the House and Senate includes the provision.

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