The health care industry, once seemingly immune to market vagaries, has been in sick bay throughout this presidential election year. No matter which candidate wins, there will be changes in this longtime system whose pricing is now considered out of control by most Americans.
Few health care legislative changes ever wind up as initially proposed, yet some degree of readjustment is unavoidable. The respective plans of Gov. Bill Clinton and President Bush have been the focus of most of the yearlong conjecture.
The Clinton plan to require employers to provide health insurance or buy into a public-insurance program suggests the most fundamental potential change in pricing of products and services, and has caused the most industry worry.
Bush's proposals to use tax incentives to help consumers purchase medical insurance are more conventional.
Fear of how lower costs would affect various types of health care and pharmaceutical firms has put the industry and its stock investors into a deep depression. The stocks have performed miserably.
"The presidential election is a virus that's infected the market for health care industry stocks," said Margo Vignola, analyst with Salomon Brothers. "One positive, however, is that most of these stocks have already discounted the election concerns." There's been endless speculation, some of it with dire predictions of profitability lost forever.
More positive thinkers point to solid prospects for those entities that control costs, such as health maintenance organizations; home health care providers and their equipment; and generic drug manufacturers.
"It's not so much who wins the presidential election as the fact that we get it behind us," said John Hindelong, analyst with Donaldson Lufkin & Jenrette.
"None of the candidates have workable solutions to medical care costs, and none of them will get a clear mandate from the electorate which would make it possible for them to change the industry," he said.
In pharmaceuticals, change won't affect all companies equally.
"Many pharmaceutical companies have relied on increases in their product prices, rather than invention of new products, and government pressure to price more competitively will hurt companies that don't have big product pipelines," said James Flynn, analyst with Kidder, Peabody.
"Clinton as president would be more likely to support House and Senate legislation on government pricing, while a Bush re-election would signify the status quo," said Flynn.
Some companies will prosper no matter what happens in Washington, say the experts.
But the health care stocks are not particularly in favor, and picking the likely winners is a painstaking process.
Hindelong recommends stock of both Healthtrust and Health Management Associates in acute care hospitals because each should have 20 percent to 30 percent earnings growth per year. They have strong local franchises dominant in their markets.
Among specialty providers, he likes Tokos Medical Corp., whose home uterine activity monitor is designed to detect pre-term labor and avoid premature delivery; and Continental Medical Systems, whose rehabilitation hospitals will be in greater demand as the population ages.
Vignola suggests stock of U.S. HealthCare in health maintenance management and Humana Inc. in acute care hospitals. To a lesser degree, she likes American Medical Holdings in hospitals and services and Healthtrust.
Meanwhile, Flynn's picks in pharmaceuticals favor generic drug producers. They are Forest Labs, a company with good earnings growth and excellent drug delivery technology for complicated generic products, such as its new urinary antibiotic; and A.L. Labs, strong in the specialty generic business with vaginal infection products, asthma treatment and periodontal disease gel.
The Standard & Poor's Outlook newsletter believes that, while pharmaceutical company stocks may remain volatile through the rest of the U.S. election campaign, selected shares of high-quality firms will outperform the averages. It recommends stock of Bristol-Myers Squibb, Merck & Co., Amgen, Glaxo Holdings, Ivax Corp. and Johnson & Johnson.
Their long-term fundamentals remain intact despite likely changes, and Outlook notes that "new prescription medications, although expensive, can save patients from a hospital stay or even surgery."