Healthcare faces pivotal year in 2008, says PricewaterhouseCoopers’ health research institute in its annual review of the top health industry issues

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 Price- waterhouseCoopers 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.

* 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.

* 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.

* 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.

* 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.