Analysts: If health reform fails, expect more industry mergers

Feb 9 2010

News outlets report on how the fate of the health care overhaul might affect health industry mergers and biotech firms.

BusinessWeek: "With Congress' sweeping overhaul of the health system stalled, industry will seek its own answers to a push by government and the private sector to rein in costs, said Curtis Lane, senior managing director at MTS Health Partners, a New York-based equity fund." An aging population will further increase health spending, and "[o]ne solution will be increased consolidation, with companies led by WellPoint Inc., the biggest U.S. insurer by enrollment, and Community Health Systems Inc., the largest publicly traded hospital chain, scooping up rivals unable to 'spread rising costs across fewer customers,' said Paul Keckley, of the Deloitte Center for Health Solutions" (Nussbaum and Tirrell, 2/8).

Star-Ledger/NJ.com reports that while some biotech firms, including a start-up called Soligenix, are thriving, many others in the industry are struggling. "The nation's economic downturn has dried up many of the usual sources of money the smallest drugmakers depend on to pay for their work. ...  Now, the industry is banking on a little-known provision of the Senate's health care reform bill to help ease - at least, temporarily - its inability to raise money from the usual sources, namely venture capitalists and the financial markets. The provision, known as the Therapeutic Tax Credit, is intended to help companies with 250 or fewer employees pay the salaries of their scientists, continue their research and even hire workers to help the companies push out new medicines."

"Sen. Robert Menendez (D-N.J.), who pushed to include the amendment as part of health care reform, has said the provision also could be added to the Senate jobs bill" (Todd, 2/7).