Health-Care Stocks Up After House OK's Overhaul

Did this take anyone by surprise? When the mandates kick in, expect these stocks to skyrocket. That's one of the reasons they passed the corporate healthcare bill.

Health-Care Stocks Up After House OK's Overhaul


THE NEWS: Health-care stocks led the stock market higher Monday after the U.S. House Sunday approved a historic health-care overhaul designed to bring health insurance to 32 million more Americas while subjecting U.S. industries to a dramatically redrawn and newly regulated marketplace.

The Dow's pharmaceutical components strengthened, as drug makers are expected to profit from the expansion of health-care coverage. Merck rose 2.3%, while Pfizer climbed 1.5%.

Hospital operator Tenet Healthcare rose 6.1%, while insurer Cigna gained 1.9% and Express Scripts, a pharmacy benefit manager, rose 2.1%. Pharmaceutical companies also climbed, with Eli Lilly up 1.3% and Bristol-Myers Squibb up 0.6%.

WINNERS & LOSERS: Health-care providers, drug companies and device makers are expected to see a neutral or even a positive impact from the legislation. Hospitals, clinical laboratories and pharmaceutical companies will see a deluge of new customers and could potentially benefit if millions of more Americans are insured.

The outlook may not be so rosy for insurers. Though they will gain enrollees, they also face a raft of new regulations that would bar insurance companies from denying coverage to individuals with pre-existing conditions -- and limit their ability to differentiate insurance premiums based on a customer's age and other factors.

Also, Medicare providers will face both cuts and new regulatory restrictions.

Business groups have lambasted the legislation, saying the requirement to provide health coverage would be an impediment for future hiring.

NEW TAXES, COSTS: The health-care overhaul bill will be paid for by nearly $ 438 billion in new taxes and fees on high-income Americans, drug and medical device makers and health insurers.

High-income earners will face a 3.8% Medicare tax on investment income, a 0.9% surtax on earned income, higher Medicare taxes and a 40% excise tax on generous health-care plans, dubbed "Cadillac plans."

A tax on medical devices manufacturers was reduced to 2.3%, but will apply to a broader range of devices.

Pharmaceutical companies would face $28 billion in fees over the next ten years and would have to provide deep discounts on prescriptions filled in the Medicare Part D program.

STUDENT LOAN CHANGES: The health-care bill included a major shake-up of the student loan industry Sunday, ending most private banks' ability to originate lending in the market. Ending such origination fees will save the taxpayers an estimated $68 billion over 10 years. However, private banks still can earn money servicing student loans.

WHAT THEY SAID:

"There're a lot of people who were uninsured, who will start behaving differently in an environment where they will go to the doctor, get lab tests and take prescription drugs," says Derek Taner, a lead manager of the AIM Global Health Care Fund.

"We will have an effort to repeal the bill" House Minority Leader John A. Boehner (R, Ohio) told NBC's "Meet The Press," on what the Republicans will do if they retake the House in the fall elections. "I'd have a bill on the floor the first thing out, to eliminate the Medicare cuts, eliminate the tax increases, eliminate the mandate that every American has to buy health insurance, and the employer mandate that's going to kill jobs," he said

"I look forward to the campaign in November . . . and I very much look forward to the Republican Party running on a platform of repealing this bill,"" Rep. Tim Ryan (D., Ohio)

"It even puts new taxes on medical devices like wheelchairs, oxygen and pacemakers and incredibly, on drugs used to treat cancer and heart disease," Rep. Joe Barton (R., Texas) said.

"I was unable to find anything in there that would cause me to have anxiety if I were a shareholder in a pharmaceutical company," said Ira Loss, a senior health-care analyst at the research firm Washington Analysis.

Sanofi-Aventis SA (SNY) Chief Executive Christopher Viehbacher said in an interview that the impact of the legislation will be neutral to slightly negative "but better for the industry than if healthcare reform didn't pass."

"I don't think the market was surprised by the passage, and we should remember that when the Senate passed their bill on Christmas Eve, the market held up fine," said Mike O'Rourke, chief market strategist at BTIG, an institutional broker.