Goldman opens annual health care conference Monday

The four-day conference will include presentations from drug developers, hospital operators and medical device makers, among others in the health care field. Goldman Sachs analyst Randall Stanicky said recently he will be interested to hear from drug developers and pharmacy benefit managers about how their businesses are being affected by the combined retail/PBM business model of Woonsocket, R.I.-based CVS Caremark Corp.--the only one of its kind.

A pharmacy-benefits manager is a third party under contract with managed-care organizations, companies and government agencies to administer prescription drug programs. CVS acquired Caremark in March 2007 to increase its bargaining power with drug makers and better compete with rival drugstore retailers Walgreen's and Wal-Mart, as well as Medco Health Solutions Inc., the nation's largest benefits manager.

Wall Street has since been watching CVS Caremark's performance closely to see if similar deals are likely to follow. Though none have yet been proposed, Wal-Mart earlier this year said it may enter the pharmacy-benefits fray, working with certain employers to help them manage their employee prescription claims and processing.

Stanicky also is looking for updates on the increasing focus of clinical research organizations, drug suppliers and drug developers on international opportunities to both speed growth and lower costs. Lab and clinical services companies like Wilmington, Mass.-based Charles River Laboratories Inc. and Princeton, N.J.-based Covance Inc. have boosted their presence in growing foreign markets to match the demands of big pharma and biotech firms, who are outsourcing more to trim costs.

While pharma's outsourcing is a boon for CROs, they in turn are under pressure to hire more staff in order to meet the increased drug development demand, potentially squeezing profit margins.

Also, a more aggressive generic drug industry remains a key focus, as companies like Israel's Teva Pharmaceutical Industries Ltd. and Canonsburg, Pa.-based Mylan Inc. increasingly challenge lucrative drug patents in an effort to be the first to sell generic versions of blockbuster drugs. The larger companies have grown bolder by performing at-risk drug launches--marketing a generic drug before the patent on that treatment expires even though that leaves them at risk for legal penalties if the patent challenge fails.

While some of the "Paragraph IV" patent challenges have been successful, many have been settled. Mylan, for example, settled its challenge to anti-seizure drug Depakote ER with Abbott Laboratories on Thursday in a deal that will give Mylan a 180-day exclusivity period to sell the drug after its launch, which will occur no later than Jan. 1

Stanicky said there will likely be more settlements of "at-risk" challenges, which could limit upside for generic and supply chain companies.

Finally, Stanicky said he hopes presentations will help him gauge the impact of generic versions of Johnson & Johnson's anti-psychotic drug Risperdal, which loses patent protection June 29.