Healthcare Faces Pivotal Year

Dec. 27, 2007
Retirees will pay more and other major changes will occur in 2008 according to PricewaterhouseCoopers new study.

Looking at the changes in 2008, PricewaterhouseCoopers' Health Research Institute identified the eight issues that it says 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 said that while employers should help provide access to affordable retiree health benefits, they no longer should be expected to pay for it. PwC's report suggests that employers may reexamine their approach to retiree healthcare by capping or eliminating traditional retiree benefits from their balance sheets and shifting toward "defined contribution" or "no contribution" approaches.

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 is expected to quadruple, from 700 today to more than 3,000 in five years. In the year ahead, states, payers and policymakers will be crafting legislation and policies applicable to this new breed of healthcare provider.

New Medicare Payment System Will Create Hospital Winners and Losers
The Centers for Medicare & Medicaid Services (CMS) has changed the way it pays hospitals to recognize the severity of illness among patients. Hospitals that treat sicker patients will be reimbursed more for doing so, potentially leveling the playing field among hospitals. That, combined with CMS's new stance to not pay for certain conditions resulting from medical errors mean some hospitals may see a decline in revenue. In 2008, watch for private payers to follow in CMS's footsteps and an increased demand for medical coding staff.

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 and if an individual mandate or additional tax incentives come to fruition.

Increased M&A Between Pharmaceutical and Life Sciences Companies
Revenue growth is down for Big Pharmacy: The pipeline of new drugs coming to market is thinning, brand drugs are coming off patent and the cost of bringing new drugs to market is increasing. To address these woes, Big Pharma is joining forces with life sciences companies. With these collaborations, life sciences companies are now driving the industry where big pharmaceutical companies once had a significant advantage. Look for greater collaboration through mergers, collaborative risk-sharing, joint ventures and other co-development and co-promotion arrangements.

Asia Plays Bigger Role in the Pharmaceutical Industry, but Safety Concerns Loom
Asia is poised to become one of the worlds 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.

FDA Tightens Medical Device and Drug Safety Standards
Congress granted the U.S. Food and Drug Administration increased authority over post-market drug safety and the ability to require increased safety standards from drug companies. Under new FDA guidance, the pharmaceutical industry will face even more regulatory burdens. Look for payers to report to the FDA insurance claims data that identify patterns of adverse reactions to certain medications, such as with 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 provide 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.

"The future strategies of hospitals, insurers, pharmaceutical and life sciences companies will be influenced by 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 demonstration of the value for the money."

PricewaterhouseCoopers' Health Research Institute's Top Eight Health Industry issues in 2008 is available online at

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