Healthcare Faces Pivotal Year in 2008, Says PricewaterhouseCoopers' Health Research Institute in Its Annual Review of the Top Health Industry Issues
NEW YORK, Dec. 19, 2007 -- The health industries face a pivotal year ahead as they anticipate the outcome of the 2008 presidential election and adjust to a new Medicare payment system, additional reporting requirements, pressure on Big Pharma to cut costs and innovate, the rise of retail health services and the ongoing evolution of consumer-directed healthcare. The implications of these issues are addressed in the Top Eight Health Industry Issues in 2008, an annual review of the pressing issues in healthcare, released today by PricewaterhouseCoopers' Health Research Institute.
"The future strategies of hospitals, commercial insurers, pharmaceutical companies and life sciences firms will be influenced by big changes ahead in government policies, market pressures and global trends," said R. Carter Pate, Global and U.S. health industries and government services leader, PricewaterhouseCoopers. "With healthcare costs taking a bigger bite out of the assets of individuals, businesses and the U.S. economy, there is a demand for greater accountability from the health industries and a demonstration of the value they create."
PricewaterhouseCoopers' Health Research Institute identifies the following eight issues that will dominate health industry discussions in 2008:
 * Retirees Will Play a Greater Role in Funding Their Healthcare
  Coverage
  Three-quarters of executives at multi-national companies surveyed
  by PricewaterhouseCoopers in 2007 said that, while employers should
  help provide access to affordable retiree health benefits, they no
  longer should be expected to pay for it. Is this the bell tolling
  for retiree health coverage?  PwC's report suggests that in 2008
  employers may reexamine their approach to retiree healthcare by
  capping and/or eliminating traditional retiree benefits from their
  balance sheets and shifting toward "defined contribution" or "no
  contribution" approaches.
 * New Medicare Payment System Will Create Hospital Winners and Losers
  The Centers for Medicare & Medicaid Services (CMS) has changed the
  way it pays hospitals, adding 200 diagnosis codes that more
  precisely recognize the severity of illness among patients. As a
  result, hospitals that treat sicker patients will be reimbursed
  more for doing so, potentially leveling the playing field between
  general and specialty hospitals and between rural and urban
  hospitals.  That, combined with CMS's new stance to not pay for
  certain conditions resulting from medical errors, infections and
  other maladies acquired in a hospital, mean some hospitals may see
  a decline in revenue. In 2008, watch for commercial payers to
  follow in CMS's footsteps and an increased demand for medical
  coding staff.
 * Retail Health Clinics Will Challenge Primary Care Models
  Driven by consumer demand for convenient and lower-cost medical
  care, the number of retail clinics in discount chain stores,
  grocery stores and drugstores throughout the U.S. is expected to
  quadruple, from 700 today to more than 3,000 in five years. In the
  year ahead, U.S. states, payers and policymakers will be crafting
  legislation and policies applicable to this new breed of healthcare
  provider, which lacks uniform regulation and quality controls. The
  growth of retail healthcare could create opportunities for
  providers, or it could threaten the primary care delivery model.
  Pharmaceutical companies may choose to step up marketing directly
  to nurse practitioners who staff the clinics.
 * Individual Health Insurance Could Take Off
  Typically more expensive than group health insurance, individual
  health insurance could see market growth as more states mandate
  health insurance such as Massachusetts has done, and if an
  individual mandate or additional tax incentives come to fruition
  from proposals by Republican and Democratic presidential
  candidates. Hospitals and other providers may suffer if these
  plans offer limited benefits, but in the long run would benefit
  from fewer uninsured Americans. Look for insurers to tailor
  products and distribution strategies to individuals in the year
  ahead.
 * Increased Merger and Acquisition Activity Between Pharmaceutical
  and Life Sciences Companies
  Revenue growth is down for Big Pharma: The pipeline of new drugs
  coming to market is thinning, big money-making brand drugs are
  coming off patent, and the cost of bringing new, innovative drugs
  to market is increasing. To address these woes, Big Pharma is
  joining forces with life sciences companies. In the first quarter
  of 2007, life sciences firms recorded the most deal activity and
  the highest dollar amounts for mergers and acquisition deals than
  any quarter in their history. With these collaborations, life
  sciences companies are now driving the industry whereas big
  pharmaceutical companies once had a significant advantage. To fill
  the pipeline and accelerate innovation, look for greater
  collaboration between pharmaceutical and life sciences companies
  through mergers, collaborative risk-sharing, joint ventures and
  other co-development and co-promotion arrangements. An unknown is
  whether regulators will clear a path for generic versions of newer
  biologic drugs, which could cause disruption to pharmaceutical
  companies' future revenue streams.
 * Asia Plays Bigger Role in the Pharmaceutical Industry, but Safety
  Concerns Loom
  Asia is poised to become one of the world's largest pharmaceutical
  consumers and producers. The rising cost of drug discovery has led
  pharmaceutical companies to look outside the U.S. for a less
  expensive workforce and to outsource both clinical development and
  manufacturing operations overseas. Yet there are significant
  concerns regarding Asia's uneven protection of intellectual
  property rights and Asian drug safety. If a large portion of
  fundamental intellectual property creation moves to Asia, the
  West's dominance and ownership in medical scientific breakthroughs
  may rapidly decline.
 * FDA Tightens Drug and Medical Device Safety Standards
  Congress granted the U.S. Food and Drug Administration increased
  authority to require, not just request, increased safety standards
  from drug companies, and it gave the FDA increased authority over
  post-market drug safety. Under new FDA guidance, the
  pharmaceutical industry will face even more regulatory burdens,
  which could be costly. Physicians and hospitals will need to
  adhere to new restrictions in prescribing and dispensing certain
  prescriptions. Look for payers to track and report to the FDA
  insurance claims data that identify patterns of adverse reactions
  to certain medications, such as off-label drugs prescribed for use
  in ways not approved by the FDA.
 * IRS to Seek Full Accounting of Hospital Community Benefit
  The Internal Revenue Service wants hospitals to submit a full
  accounting of the benefits they provide to the community, reported
  in a uniform manner, as part of their annual tax return to the IRS,
  submitted on the proposed 2008 Form 990 and available for public
  inspection. Many hospitals document their community benefit, but
  have done so inconsistently. In 2008, tax-exempt hospitals will
  need to start tracking community benefit efforts so that, when and
  if required, they can accurately report their activities for the
  year.
"The government and the public have high expectations that the health industries will deliver safe care and safe drugs and will meet consumer and patient demands for innovative products and services," said Dr. David Chin, partner and leader of PwC's Health Research Institute. "Now there is some real accountability behind many of these expectations."
A full copy of PricewaterhouseCoopers' Health Research Institute's Top Eight Health Industry issues in 2008 is available online at www.pwc.com/hri.
About the PricewaterhouseCoopers Health Research Institute
PricewaterhouseCoopers Health Research Institute (www.pwc.com/hri) provides new intelligence, perspective and analysis on trends affecting all health-related industries, including health care providers, pharmaceuticals, health and life sciences and payers. The Institute is part of PricewaterhouseCoopers' larger initiative for the health-related industries that brings together expertise and allows collaboration across all sectors in the health continuum.
About PricewaterhouseCoopers Health Industries Group
Committed to the transformation of healthcare through innovation, collaboration and thought leadership, PricewaterhouseCoopers Health Industries Group (www.pwc.com/healthindustries) offers industry and technical expertise across all health-related industries, including providers and payers, health sciences, biotech/medical devices, pharmaceutical and employer practices.
About PricewaterhouseCoopers
PricewaterhouseCoopers provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 146,000 people in 150 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice.
"PricewaterhouseCoopers" refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.