1. Medicare and the Prescription Drug Benefit

Medicare will account for an estimated 28 percent of prescription drug

spending in 2006, compared to just 2 percent in 2005, as a result of

the Medicare Prescription Drug Benefit, which went into effect January

1, 2006. The benefit introduces a powerful single purchaser of drugs

in the U.S., which may eventually put negative pricing pressure on

pharmaceutical manufacturers. It could ultimately affect the

profitability of health plans, pharmacy benefit managers and drug

manufacturers. Look for premiums to go up if the program does not

attract a sufficient number of subscribers, and for Congress to rein in

spending if Medicare costs continue to increase.

2. Care and Coverage of the Uninsured

As more and more Americans drop health insurance coverage, hospitals

are seeing a corresponding increase in bad debt levels. While a few

payers have begun to collaborate on pilot programs to develop low-cost

health insurance coverage, providers will continue to face the issue of

how to handle uncompensated care and its impact on their bottom line.

In 2006, hospitals will need to develop an approach to charity and

uncompensated care to improve their operational and financial

performance and control regulatory and reputational risk.

3. Major Changes in Health Insurance

The simple days of $10 co-pays will become a distant memory for

hundreds of thousands of Americans with high-deductible health plans

and Health Savings Accounts. Research by PricewaterhouseCoopers shows

that more than three-fourths of large employers believe they can cut

healthcare costs by asking their employees to pay a greater share of

those costs. In 2006, health plans will develop new product lines and

lines of business to meet the changing needs of consumers.

Pharmaceutical and life sciences companies may need to examine their

product portfolios as consumers become increasingly price-sensitive and

comparison shop for generic drugs and other alternatives.

4. Patient Safety

Calls for improved patient safety will intensify in 2006, and the

healthcare industry will turn to technology to help reduce medical

errors and improve tracking and reporting of safety and quality

standards. The Patient Safety and Quality Improvement Act of 2005

removed some of the fear of liability that kept medical errors from

being reported and addressed, and laid the groundwork for a national

database for non-identifiable patient safety data. Annual investments

in healthcare IT are expected to nearly double to approximately 5

percent of revenue from an average of 2 to 3 percent now.

5. Wellness and Obesity

Consumers who pay for more of the direct cost of their healthcare have

an increased incentive to manage their health and lifestyle. Poor diet

and physical inactivity rose by 33 percent over the past decade and may

soon overtake tobacco as the leading preventable causes of death in the

United States. In 2006, expect a significant increase in voluntary

and/or mandatory health promotion and wellness initiatives. In

addition, health industries are likely to see a growing market for

drugs, treatments and services oriented toward wellness and prevention.

6. Pay for Performance

Accountability takes on more importance than ever as reimbursement and

financial incentives are tied to performance. This will place new

demands on health industries executives to develop and agree on quality

measures so that payers can evaluate and compare providers. To win

financial bonuses for quality, hospitals and physicians will need to

work together to change behavior and measure their clinical performance

against these standards. Pharmaceutical and life sciences companies

will adopt greater vigilance in product safety from research through

market adoption. All health organizations will need to rely more

heavily on information technology to capture, store, retrieve and

report quality information.

7. Report Card Fever

Reporting pressure for all sectors of the health industry is coming

from the government seeking to justify hospitals' tax-exempt status and

from consumers who are spending more out of their own pockets for

healthcare. There will be increasing demand for more transparent

information about pricing to make better decisions. In 2006, health

organizations will need to focus on developing proactive, coordinated

reporting of their prices, error rates and safety standards.

8. Technology Backbone

Information technology is crucial to resolving many of the issues

plaguing the healthcare industry. Significant progress will be made in

2006 by government, industry coalitions and banks to build a technology

infrastructure to improve claims processing, create electronic medical

records, reduce medical errors and track performance. Healthcare

organizations have little latitude for error and will to need to

develop a system for making wise decisions about technology investments

to ensure maximum acceptance, flexibility and return on investment.

9. Labor Shortages

PricewaterhouseCoopers' research found that healthcare executives rank

staff shortages and training as the top problem facing healthcare

delivery. Healthcare organizations will need to address this problem,

and many will pursue the increased use of automation for administrative

functions, outsourcing, subsidized training, aggressive recruitment and

retention, as well as redefining staff functions.

10. Diminishing Drug Pipeline

With the cost of drug development in excess of $800 million,

pharmaceutical manufacturers are under pressure from stakeholders to

produce even as their margins erode. The imminent expiration of key

patents could further decrease revenue by up to 60 percent. This is

exacerbated by growing competition from generic drugs, production of

cheap counterfeit drugs from markets such as China and India and the

emergence of China as a low-cost manufacturing base. In 2006, the

pharmaceutical industry will be focused on boosting R&D productivity

and cutting costs; many drug companies will consider forming strategic

alliances and joint ventures with biotech firms as a source for new

products.

About the PricewaterhouseCoopers' Health Research Institute

PricewaterhouseCoopers' Health Research Institute provides new intelligence, perspective and analysis on trends affecting all health-related industries, including healthcare 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.

© 2006 HealthNewsDigest.com