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UNITEDHEALTH'S 4Q PROFIT SURGES 21% -- UnitedHealth Group Inc.’s (Minnetonka MN) fourth-quarter net income jumped 21%, but the big insurer saw signs of healthcare use picking up and left its 2012 earnings forecast unchanged. The company said Thursday utilization started rising in the last half of the year, as commercial health insurance costs increased 5.5% in 2011. That was a larger increase than in 2010 but still smaller than the jumps of 7% or more that insurers saw before the recession. UnitedHealth and other health insurers have been helped in recent quarters by healthcare use that has risen at rates that were slower than expected when they set premiums. Industry analysts and other experts have said use tends to rise at slower levels after a recession, as consumers cut back on spending. Many analysts think this trend will continue into 2012, but insurers have warned that they expect growth in use to return to normal levels. Citi analyst Carl McDonald said patient volumes at hospitals are picking up, but they remain relatively low, and it’s unclear yet whether healthcare use is on the rebound. He noted that use typically picks up in the fourth quarter when patients with high-deductible health plans seek care before their deductibles renew in the new year.
UnitedHealth told analysts Thursday that while use is climbing, price increases for inpatient hospital care are the biggest reason behind its growth in medical costs. “It’s an area of intense pressure and intense focus for us as a business,” said Daniel J. Schumacher, CFO for UnitedHealthcare Inc. (Minneapolis MN), the insurer’s largest segment. UnitedHealth earned $1.26 billion, or $1.17 per share, in the three months that ended Dec. 31. That’s up from $1.04 billion, or 94 cents per share, in the same quarter last year. Revenue grew 8% to $25.92 billion. Analysts had forecast, on average, earnings of $1.03 per share on $25.64 billion in revenue. Total medical costs, UnitedHealth’s largest expense, climbed 8% to $18.6 billion in the quarter. Enrollment grew 5% to 34.6 million people compared to the 2010 quarter. For the full year, UnitedHealth earned $5.14 billion, or $4.73 per share, on $101.9 billion in revenue. The insurer reiterated a 2012 forecast announced in November that calls for earnings to range between $4.55 and $4.75 per share on revenue of $107 billion to $108 billion. Analysts have labeled that forecast conservative and expect, on average, earnings of $4.77 per share. UnitedHealth closed the week off 43 cents, or 1%, at $52.27.
NEW RULES FORCE DRUGMAKERS TO REPORT PAYMENTS TO DOCTORS -- To head off medical conflicts of interest, the Obama administration is poised to require drug companies to disclose the payments they make to doctors for research, consulting, speaking, travel and entertainment. Some researchers have found evidence that such payments can influence doctors’ treatment decisions and contribute to higher costs by encouraging the use of more expensive drugs and medical devices. Consumer advocates and members of Congress say patients may benefit from the new standards, being issued by the government under the new healthcare law. Federal officials said the disclosures increased the likelihood that doctors would make decisions in the best interests of patients, without regard to the doctors’ financial interests. Large numbers of doctors receive payments from drug and device companies every year--sometimes into the hundreds of thousands or millions of dollars--in exchange for providing advice and giving lectures. Analyses by the New York Times and others have found that about a quarter of doctors take cash payments from drug or device makers and that nearly two-thirds accept routine gifts of food, including lunch for staff members and dinner for themselves.
The Obama administration estimates that more than 1,100 drug, device and medical supply companies will have to file reports, generating “large amounts of new data.” Federal officials said they will inspect and audit drug company records to make sure the reports were accurate and complete. Companies will be subject to a penalty up to $10,000 for each payment they fail to report. A company that knowingly fails to report payments will be subject to a penalty up to $100,000 for each violation, up to a total of $1 million a year.
MEDICAL STOCK SPOTLIGHT
-- Insmed Inc. (Nasdaq) led advancing issues, soaring $1.53, or 44% on the week, to $5.01. The company said Friday that the U.S. Food and Drug Administration has lifted the clinical hold on its investigational drug Arikace in patients with non-tuberculous mycobacteria lung disease. The Monmouth Junction, NJ-based company said it continues to hold talks with the FDA regarding the clinical hold FDA has placed on Arikace in Cystic Fibrosis, or CF patients with Pseudomonas lung infections. According to Insmed, the FDA previously requested the company to conduct a phase 2 clinical trial of Arikace in adult patients with non-tuberculous mycobacteria (NTM) to prove the drug’s efficacy and safety before proceeding with a phase 3 clinical trial. As part of its assessment of the Arikace program, including the phase 2 trial of the drug in NTM patients, the company said it is in continued communication with FDA regarding the CF clinical hold.Elsewhere, Neostem Inc. (AMEX) jumped 18 cents, or 32%, to $0.74. The penny stock was upgraded from Speculative Buy to Buy at WBB Securities. The firm’s Stephen Brozak is one of five analysts who cover the stock. New York-based NeoStem is a international biopharmaceutical company with global research and development capabilities and operations in three business units: U.S. adult stem cells, China adult stem cells and China pharmaceuticals, primarily antibiotics. In the United States the company is a provider of adult stem-cell collection, processing and storage services enabling healthy individuals to donate and store their stem cells for personal therapeutic use. Similar to the banking of cord blood, pre-donating cells at a younger age helps to ensure a supply of one’s own stem cells should they be needed for future medical treatment.
K-V Pharmaceutical Co. (NYSE) leaped 33 cents, or 19%, to $2.11 responding to news the FDA has said rival Columbia Labs’ preterm birth gel is not effective (see FDA Roundup). Bridgeton, MO-based K-V Pharma’s Makena was approved in February 2010 to reduce the risk of preterm birth in women with a history of the condition. Columbia Labs and partner Watson Pharmaceuticals Inc. said their gel would prevent preterm birth in women with a short cervix. K-V faced criticism for charging $1,500 per injection when it first brought Makena to market. The price was as much as 150 times the cost of compounds that pharmacies make outside of normal FDA rules. The company dropped the price to $690 a shot two months after its Feb. 3 approval. The FDA is investigating the safety of the so-called compounded versions made by pharmacies.
And Hansen Medical Inc. (Nasdaq) added 32 cents, or 13%, to $2.71 on no company-specific news. Mountain View, CA-based Hansen Medical develops, manufactures and markets a generation of medical robotics designed for accurate positioning, manipulation and stable control of catheters and catheter-based technologies.
But Achillion Pharma Inc. (Nasdaq) plummeted $2.90, or 23%, to $9.47, giving back gains from the previous week when Bristol-Myers Squibb Co. announced the purchase of Inhibitex Inc., primarily for its hepatitis-C drug candidate. “The world is moving toward an all-oral regimen for hepatitis C, and Bristol-Myers, which is strong in antivirals, seems like it wants to be a part of that,” said Les Funtleyder, a healthcare strategist and portfolio manager with Miller Tabak & Co. in New York. Hepatitis drugs now in use are given through injection, and can have problematic side effects. The generation now in testing would be easier-to-use pills that may be more effective than their predecessors. Cambridge, MA-based Achillion and other developers of hepatitis C drugs had risen sharply on speculation they may follow Inhibitex.
