6/28/2012
By David Urani, Research Analyst

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I'll admit, I thought the individual mandate was going to get struck down but it was left mostly intact despite a narrow decision by the Supreme Justices. Of course, there are a number of winners and losers, although the big loser today is the entire market, which now has to deal with higher healthcare costs for virtually all employers. The decision wiped away roughly 60 Dow points on initial reaction.

Hospitals are happy about this decision because when it comes down to it, more people with insurance means more business for them, along with higher reimbursement rates. HCA (HCA), Universal Health Services (UHS), LifePoint (LPNT) and Tenet (THC) are among hospitals that were up in high single-digit percentages on the ruling.

Insurers are among the losers, as they will be more obligated to pay, including patients with pre-existing conditions. The likes of Aetna (AET), Cigna (CI), WellPoint (WLP) and United Health (UNH) took hits, mostly in the mid-single digit percentages.

Aside from the individual mandate there was also the issue of taxes on medical device makers. It would've been a real surprise for this to get struck down, so the action isn't huge but nevertheless the likes of Medtronic (MDT), Stryker (SYK), St. Jude (STJ) and Intuitive Surgical (ISRG) took a small dent. The same goes for pharmaceutical companies who may take a hit on margins as lawmakers seek to make medication more affordable; Pfizer (PFE), Eli Lilly (LLY), Merck (MRK), Novartis (NVS) and others took very small hits.

Opposing Obesity

Off the beaten path there has been some action in the weight-loss business over the past couple of days. Wednesday saw that big decision by the FDA to approve Arena Pharmaceuticals' (ARNA) anti-obesity drug which saw that stock soar and potentially gave rise to a big new drug fad, with another potential player, Vivus (VVUS), also up in sympathy. Where it has gotten funny is in the diet companies Weight Watchers (WTW) and NutriSystem (NTRI), who were down Wednesday on the drug ruling, but were up more than 3% Thursday as Credit Suisse says employers may incentivize weight loss to save on healthcare costs. That move seems like a bit of a stretch to me.

David Urani
Wall Street Strategies