Health care reform may hurt drugmakers, insurers

Health insurers and pharmaceutical makers have not faced a Democrat-controlled White House and Congress since 1994, when President Clinton tried to overhaul the nation's health care system. That effort was largely torpedoed by the health insurance industry, which blasted the proposal in ads featuring a couple named Harry and Louise fretting over the new "billion-dollar bureaucracy."

Analysts don't expect another contentious fight anytime soon. First, they say the economic meltdown and $700 billion bailout will limit lawmakers' chances for major health care reform.

"The fiscal reality is so crushing, it will be virtually impossible to do major reform next year," said Dan Mendelson, president of Avalere Health.

Additionally, Obama's approach to reform is not drastically different from the one proposed by industry groups: using a two pronged public-private approach to cover virtually all Americans.

Nevertheless, there are plenty of aspects to Obama's plan that are unfriendly to corporate interests.

"The branded drug industry, along with managed care, likely faces the greatest combination risk coming from the election," wrote Barclays Capital analyst Tony Clapsis in a note to investors Wednesday. "President-elect Obama and Democrats in Congress are looking to go after the industry on virtually every aspect of their business."

Obama would set up a government-run clearinghouse of insurance options that would negotiate prices and benefits with private insurers. One option would be a government-run plan that is expected to compete directly with private plans. Additionally, no participating company could turn someone away because of pre-existing conditions like cancer, heart disease or diabetes.

Many companies pledged Wednesday to cooperate with Obama, while avoiding any direct comments on his proposals.

"The ability to call on the expertise of all stakeholders will be the key to positive change, and we stand ready to work with President-elect Obama to advance health care for all Americans," said a statement from WellPoint Inc., the nation's largest managed care company.