logo


Health Care Poised to Weather Recession
Sunday, November 02, 2008 10:54 AM


(Source: Deseret News (Salt Lake City))trackingBy Matthew Perrone Associated Press

WASHINGTON -- With the global economy at risk of a deep recession, many battered areas of the economy stand to suffer more damage in coming months. Other industries, though, seem poised to withstand even a severe downturn.

The health-care sector should hold up especially well even in a recession, along with defense and a few other industries. Still, analysts say a unique collision of economic and political challenges means many businesses might not be as well-insulated as they were in past recessions. Here's a look at major industries that, if not exactly recession-proof, seem best able to endure the downturn:

With an aging population and the largest health-care spending in the world, the nation's medical sector could fare perhaps best of all. During economic downturns, sales of prescription drugs and medical devices tend to hold up better than nonessential goods, noted David Wyss, chief economist of Standard and Poor's.

"Generally, you're looking for things that are necessities, not luxuries," Wyss said. "People get sick and need medical care regardless of the state of the economy."

But recent earnings show that drug makers aren't immune from slumping sales that have plagued their peers in the retail and auto industries. Pfizer said last month that U.S. sales of its best- selling product, the cholesterol drug Lipitor, fell 13 percent in the last quarter as some financially struggling patients stopped filling their prescriptions.

"The typical safe harbors (for investors) have been pharmaceuticals," said analyst Steve Brozak of WBB Securities. "They're no longer safe; they're now the least bad choice."

Pfizer and Schering-Plough Corp. were able to offset weak revenue in the U.S. with higher sales abroad. But other companies, such as Merck & Co. Inc., have been less successful. Merck said recently it will cut 7,200 jobs after reporting sales declines.

Experts say pharmaceuticals are more vulnerable to economic cycles because employers have shifted more of the financial burden for care to patients, with higher copays and deductibles.

"With consumers having more cost-sharing in their benefits, you're going to see a greater effect on their health-care spending right away," said Paul Ginsburg, President of the nonprofit Center for Studying Health System Change.

The lagging economy and rising unemployment have made it harder for health insurers such as UnitedHealth Group Inc. and Humana Inc. to raise prices to offset higher costs and investment losses.

Health-care companies least affected are those that sell inexpensive medical products directly to hospitals, bypassing cash- strapped consumers.

Becton, Dickinson & Co.




(0)
No Comments
Post Comment
Name:  
Alert for new comments:
Your email:
Your Website:
Title:
Comments:
   
 
 
 
 
   
 

  
Related Press Releases
Advertisement
Popular Articles
Advertisement
Partner Center
Fundamental data is provided by Zacks Investment Research, market data is provided by AlphaTrade. , and Commentary and Press Releases provided by Quotemedia