Higher Healthcare Costs, New Devices, Drugs on Tap
HEALTHCARE
SPECIAL REPORT
By VITA REED
Orange County’s healthcare industry has had a busy past couple of years, and the pace of events might stay just as frenzied in 2002.
On the employee-benefits side, expect to see more rising healthcare costs. Employers that provide health insurance for their workers are expected to pay more money for that same coverage next year.
Insurance brokers and benefits consultants predict that businesses will pay at least 10% more in 2002, with some employers expected to be hit with premium increases in the range of 35% or higher.
Higher health premium prices are being spurred by several things: rising prescription drug costs; new medical devices; and pressure from Wall Street to improve financial results at healthcare operators.
In OC, another factor has come into play,contract disputes between insurance companies and health systems. Orange-based St. Joseph Health System, for one, signed pacts with several “partner health plans” that allowed for the sharing of insurance risks between the plans and the provider, which has three local hospitals.
But St. Joseph will have one less partner health plan in 2002,Woodland Hills-based Health Net Inc. Health Net said it was severing ties with St. Joseph because the health system declined to renegotiate a five-year contract after losing a key medical group. St. Joseph replied that Health Net was seeking contract concessions it couldn’t give.
As for coping strategies, insurance brokers said they have found that employers seem to be more interested in reducing benefits, rather than sticking large co-payment increases on their workers.
PacifiCare Health Systems Inc. of Santa Ana is expected to continue its efforts to expand beyond a traditional health maintenance organization next year. PacifiCare will be looking to build on its new preferred-provider organization and Medicare supplemental insurance products.
On the other side, PacifiCare will enter 2002 with fewer members in Secure Horizons, its Medicare HMO. PacifiCare decided to pull out of 44 counties in six Western states, citing rising healthcare costs and insufficient federal funding.
At Costa Mesa-based ICN Pharmaceuticals Inc., dissident shareholder intrigue could be the thing to watch. ICN announced a restructuring plan more than a year ago, but still has not set a date to split up into three separate companies.
A split stands to spawn Ribapharm Inc., a company that makes ribavirin, a hepatitis C treatment. Ribapharm is seen as the jewel of ICN and stands to be one of OC’s bigger spinoffs. . . if and when it publicly splits from ICN.
A group of small but vocal shareholders, led by Swiss financier Tito Tettamanti, have vowed to turn up the heat on Milan Panic, ICN’s tempestuous chairman and founder, in a bid to speed up the planned split. Dissidents have signaled that they plan to run another slate of directors at ICN’s next shareholders’ meeting.
Another story to watch in 2002 is whether the newly minted AmeriSourceBergen Corp. will have a smooth integration, along the lines of Beckman Instruments Inc.’s 1998 absorption of Coulter Corp., which created Fullerton-based Beckman Coulter Inc.
Orange-based Bergen Brunswig Corp. ended a long run as one of the area’s publicly traded health companies last year when it was bought by AmeriSource Health Corp., a rival based in suburban Philadelphia. AmeriSourceBergen plans to keep some of the old Bergen facilities as a West Coast management center.
Allergan Inc., the Irvine-based specialty pharmaceutical company, had a solid 2001 and could continue on that pace next year. Allergan’s stock price ranged between 60 and 100 during a 52-week period and was trading in the low 70s in recent weeks. The company counted a market value of more than $9.5 billion at recent check.
Allergan is banking on Lumigan, a new drug for treating glaucoma, and wider usage of its flagship Botox neurotoxin product, to drive its 2002 performance. Chief Executive David Pyott, in describing Lumigan, said it had “the characteristics of a product with great potential” and noted that it possibly could have fewer side effects than other drugs for the eye ailment.
Also next year watch for construction to begin on the Food and Drug Administration’s $36 million regional laboratory and district office on 10 acres next to the University of California, Irvine. The facility is set to house up to 200 workers on completion.
According to the FDA, construction on the 133,000-square-foot, two-story building will take some 24 months to complete, after an April start. Proximity to OC’s medical device industry was one factor involved in the decision to build a new facility, said Elizabeth Keville, director of the FDA’s Pacific Regional Laboratory Southwest.
The FDA’s pending Irvine complex will handle medical device testing, chemistry and microbiology functions, along with investigations and compliance. Pre-market approvals, which device and other medical companies seek before they can sell products, still will be done out of the agency’s main office in Washington, D.C.
“The focus will be on compliance, not market approvals,” said John Anderson, director of corporate strategic technology investment and advanced technology program management for Beckman Coulter, earlier this year. “We still have to deal with the Washington side of the equation.”
Edwards Lifesciences Corp., the Irvine-based cardiovascular device maker, will be looking to a wider product platform to continue its own solid Wall Street performance. Two prongs of that platform are Lifepath, a treatment for abdominal aortic aneurysms and a developing range of treatments for blood vessel disease in the legs and abdomen.
