Healthcare Reform.. Aftermath of the Mass Nuke

All of my readers certainly have heard about Brown's stunning victory over Coakley in the Massachusetts special election and the loss of the Dems filibuster proof seat count in the Senate. There has been plenty of speculation on what this means to Healthcare Reform.  Some of you have asked for my opinion.  Well, we are slowing getting a glimpse of what may transpire in the future and at the moment I'm prepared to at least gaze into my crystal ball.  It sure looks like Dems will move forward with bits and pieces of the current legislation but some of the parts left behind, such as the huge subsidies to insure the uninsured, won't be good for Pharma. 
 
Yesterday, Obama signaled that the Dems should not rush through Healthcare reform before they lose their filibuster proof seat count in the Senate.  Today Pelosi says she doesn't have the votes in the House to pass an unmodified Senate version of the legislation to avoid another vote in the Senate prior to going to Obama's pen. This to me signals the end of the current legislation as we know it.  However, I believe there is no downside to the Dems producing a more watered down version of the legislation and this will take time to emerge from The Hill. In fact, Dems almost have to produce  something.  They need to save face and to attempt to spin an upside prior to this years mid-term elections.

Indeed, there are elements of the plan that probably would have strong bipartisan support.  For example denial of coverage for pre-existing conditions.  Turning to Pharma's concerns, there is no apparent reason legislators will not hold the industry to their commitment of $80 billion to healthcare reform coffers.   A sizable chunk would be used to help close the Donut Hole providing Seniors with large discounts (50%-70%) of drugs purchased within  the Donut Hole.

However, I would speculate that we will see major changes in the legislation with regard to insuring the uninsured.  Expect fewer of the uninsured to be covered.  Why?  Subsidies to the uninsured, will likely evaporate as they represent huge cost items (Over $1 trillion alone of the 10 year cost of the House Legislation is directed at exchange subsidies and new outlays for Medicaid and CHIP).  Increased taxes, albeit on more wealthy Americans, or raised upon the backs of "Cadillac" Insurance plans have become a huge firing target for health reform opposition.  Given that many of the 35 million uninsured live in households below the median income of $50,000, a lack of subsidies will mean no play or pay to "encourage" the uninsured to sign up for insurance.  And no requirement to become insured and no subsidies will leave many of the uninsured still uninsured.  Of course this means no revenue jump for Pharma from insuring the uninsured. (I estimate this in the current versions of reform legislation to approach $10 billion per year).

So while all of this is simply a little more than speculation at this point, look for Pharma, at least in the near-term, to still "contribute" the $80 billion to healthcare reform but lose a very significant chunk of incremental revenue from what will certainly be depleted ranks of the newly insured.