iStockAnalyst Click Broker Wednesday, April 22, 2009 12:22 AM
April 22, 2009
In two Tuesday Q1 earnings conference calls, one at 8:30 AM and one at 11:00 AM, I got the notions of Alice in Wonderland and an ostrich with its head in the sand. Neither Merck (MRK) nor UnitedHealth Group (UNH) really believes that President Obama and the Democrats can actually pull off a healthcare revolution. Both half heartedly said that some type of reform is coming, but neither showed any deviations from business as usual as they continue to deteriorate.
Let’s look at Merck first. Overall sales dropped 8% and sales of Gardasil dropped 39%, Vytorin dropped 28%, and Fosimax went generic. And Merck still believes that the Schering-Plough (SGP) merger still makes sense. According to Merck, it’s just the economy and distributors running down inventory. Consumer behavior has not really changed and their lobbyists will never allow Congress to pass funding for efficacy and cost effectiveness drug comparisons.
As soon as the distributors start restocking, Merck will be fine their thinking goes. Merck did admit that consumers appeared to be delaying doctor visits, but they intend to ramp up direct to consumer advertising to remedy that. Apparently, Merck was not listening to Larry Summers this Sunday when he said that comparative analysis of medical procedures and pharmaceuticals could save the nation up to $700B over a decade.
Gardasil is on the way to becoming a flop, and Vytorin is just another me-too statin. If Merck cannot provide true cost effective value during the healthcare revolution, it will become a generic of itself. Maybe that’s the idea behind Merck BioVentures.
Here I go again ranting that UnitedHealth just does not get it. Membership dropped by 1.5M due to job losses, but government programs (Medicare and Medicaid) were steady. UnitedHealth has not seen any evidence of adverse selection through COBRA, however analysts were concerned.
The economy has not caused their 3M high-deductible plan members to cut back on usage so far. So UnitedHealth will start feeling the impact once the deductibles are broke. UnitedHealth tried to make sure analysts understood the seasonality of deductibles.
Comment from Leslie
Oh yeah – and this is who we entrust our daughter’s health to. Hopefully, they will soon be “one less.”