ObamaCare helps the Middle Man?

Obamacare Helps the Middle Man?

Wall St. Journal reports that the ratings agency Fitch had increased the rating of McKesson (MCK), Cardinal Health (CAH) and AmerisourceBergen (ABC).  “Fitch Ratings announced on Thursday increased optimism about drug distributors, noting low debt levels and ongoing growth in the industry, which is expected to be further helped by the federal health-care overhaul.”

Fitch sees “moderate increases” in prescription volumes when Obamacare goes into effect in 2014, and concomitant leverage for MCK, ABC and CAH.  Like others, MCK is keenly aware of the disruptive power and shift in buying due to ObamaCare.  McKesson has been giving monthly updates on the Federal Stimulus, especially as it relates to McKesson’s Electronic Health Record offering.

McKesson has had a particularly good run over the last few months.  Successes include winning the coveted Walmart Supplier of the Year Award; increasing their shareholder dividend by 50%; and showing increased quarterly revenue for the quarter ending June 30, 2010.  McKesson cited strength in its Distribution Solutions Group, the same group that grabbed the Walmart Supplier of the Year Award.  That MCK Distribution Solutions Group is the one that will be able to leverage new buying contracts and volume when ObamaCare goes into place.

Consistent with the patient ‘land-grab’ happening among electronic health record providers including eclipsys, GE Health, Siemens, Cerner, Sage, PracticeFusion and Epic, McKesson took the hit on profit margins as they chose to invest invest more in developing their EHR offering.  They, like others, are keenly aware and caught in the race to position their software as uniquely designed to qualify providers as achieving ‘meaningful use’.  Said their CEO:

“We are pleased that the Department of Health and Human Services released the final rules for meaningful use and certification standards of electronic health record (EHR) systems under the Medicare and Medicaid incentive programs,” said Hammergren. “Providers now have the flexibility to achieve meaningful use by taking different paths to implementing an EHR system based on their needs and priorities, which we believe is critical to broad-based adoption. We remain focused on working with our customers to make sure they have the right resources in place to qualify for stimulus money and improve the quality of care for their patients.”

The future seems to hold a nice mix for McKesson: new, as yet inefficient Rx markets in existing distribution channels, increased Rx volume, and an existing clinical solution driven by ObamaCare stimulus and regulation.  Maybe this time the ratings agencies are getting it right.