Research Briefing

Job Creators, States Face Millions In New Red Ink

JOB CREATORS TELL SHAREHOLDERS THEIR PROFITS ARE DOWN BECAUSE OF OBAMACARE

Amgen Expects To Take $250 Million Hit Due To ObamaCare. “Amgen reported adjusted earnings per share (EPS) of $1.30 for the first quarter of 2010, an increase of 20 percent compared to $1.08 for the first quarter of 2009. … The Company now expects revenues and adjusted EPS for 2010 to be towards the lower end of the current guidance ranges of $15.1 billion to $15.5 billion and $5.05 to $5.25, respectively, including an anticipated impact of $200 million to $250 million due to U.S. Health Care Reform.” (Amgen, “Amgen's First Quarter 2010 Adjusted Earnings Per Share Increased 20 Percent To $1.30,” Press Release, 4/21/10)

“AT&T Inc. On Wednesday Said First-Quarter Profit Fell 20% Because Of A Large Health-Care Expense ...” (Jeffry Bartash, “AT&T Profit Falls 20% On Health Charge,” MarketWatch, 4/21/10)

Baxter International Inc. Took $39 Million Hit Because Of Government-Run Health Care. “Baxter International Inc. today reported first quarter net income of $525 million, an increase of 2 percent from $516 million reported in the first quarter of 2009. … Baxter's first quarter financial results included a one-time, non-cash special charge of $39 million (or $0.07 per diluted share) related to a change in the tax treatment of post-retirement prescription drug benefits under recent U.S. healthcare reform legislation.” (Baxter International Inc., “Baxter Reports First Quarter 2010 Financial Results In-Line With Guidance,” Press Release, 4/22/10)

Boeing’s “Recent Earnings Include A 20 Cents-A-Share Charge For The Loss Of A Tax Deduction Related To Changes In Federal Healthcare Law.” “Boeing Co. said Wednesday its first-quarter earnings fell to $519 million, or 70 cents a share, from $610 million, or 86 cents a share, in the year-ago period. Recent earnings include a 20 cents-a-share charge for the loss of a tax deduction related to changes in federal healthcare law. Sales fell to $15.2 billion from $16.5 billion.” (Christopher Hinton, “Boeing Quarterly Profit Falls 15%,” MarketWatch, 4/21/10)

Lockheed Martin Took $96 Million Hit Due To Government-Run Health Care. “Lockheed Martin Corp. said Wednesday its first-quarter profit fell 18% because of the elimination of a tax deduction due to changes in federal health-care law, and reduced its full-year outlook. For the recent quarter, the Bethesda, Md., military contractor said its net earnings fell to $547 million, or $1.45 a share, from $666 million, or $1.68 a share, in the year-ago period. … The loss of the tax deduction, which lowered company earnings by $96 million, or 25 cents a share, is a one off that hit some 3,500 companies with retiree benefits.” (Christopher Hinton, “Lockheed Martin Bruised By Tax-Deduction Loss,” MarketWatch, 4/21/10)

StanCorp Financial Group Inc. Took $1 Million Hit Because Of ObamaCare. “StanCorp Financial Group, Inc. today reported net income for the first quarter of 2010 of $49.7 million, or $1.04 per diluted share … Earnings for the first quarter of 2010 included a non-cash charge of $1.0 million, or $0.02 per share, resulting from reduced deductibility of retiree health care costs under the recently passed federal health care legislation.” (StanCorp Financial Group Inc., “StanCorp Financial Group, Inc. Reports First Quarter 2010 Earnings,” Press Release, 4/21/10)

“Verizon Communications Inc. On Thursday Reported A 75% Drop In First-Quarter Earnings, Mostly Owing To A Large Onetime Charge For Retiree-Health Care Costs.” (Jeffry Bartash, “Verizon Earnings Fall 75%, Largely On Health Costs,” MarketWatch, 4/22/10)

AND SALLIE MAE FORCED TO CUT AT LEAST 2,500 JOBS

Student Loan Takeover Attached To ObamaCare Forces Sallie Mae CEO To “The Unpleasant Task Of Reducing [The] Work Force By 2,500 Persons.” “SLM Corp, the student loan company known as Sallie Mae, reported net income on a core earnings basis of $212 million, or 39 cents a share, in the first quarter. … ‘Ironically, one quarter before the government takes over loan originations, Sallie Mae broke its own FFELP origination record, a testament to the service provided by our talented employees,’ Albert Lord, chief executive of Sallie Mae, said in a statement. ‘Of more immediate concern, however, is the unpleasant task of reducing our work force by 2,500 persons and restructuring our operations.’” (Alistair Barr, “Sallie Mae Reports Quarterly Profit Of $240 Mln,” MarketWatch, 4/21/10)

700 Of Those Jobs Will Be Lost In The Florida Panhandle. “Sallie Mae will close its Lynn Haven facility by the beginning of next year, eliminating about 700 jobs in Bay County… The company is restructuring and will start eliminating positions in about 60 days… ‘It’s just not a very good day for a lot of families in Bay County,’ county Economic Development Alliance Executive Director Janet Watermeier said.” (Scarlet Sims, “Sallie Mae closing; Boyd Holds Out Hope,” The [Panama City] News Herald, 04/21/2010)

WHILE OBAMACARE SHIFTS BURDEN OF MEDICAID FUNDING TO CASH-STRAPPED STATES

ObamaCare “Change[s] The Way Medicaid Prescription Drug Rebates Are Treated,” Shifting Burden Of Medicaid From Washington To Cash-Strapped States. “The new health care law could shift billions of dollars from cash-strapped states to the federal government by changing the way Medicaid prescription drug rebates are treated, according to state and industry officials and an examination of Medicaid spending data. Democrats included a provision in the health law designed to raise $38 billion over 10 years by requiring greater discounts from drugmakers selling to Medicaid, the joint federal-state health insurance program for the poor. Previously, the rebates were divided between the states and the federal government. Under the law, a significant portion of the rebates will go solely to Washington beginning this year.” (Christopher Weaver, “States' Medicaid Funds Tapped For Federal Health Overhaul,” Kaiser Health News, 4/20/10)

• “Officials ‘Are Very Unhappy That Their Money Is Being Taken Away At A Time When The States Cannot Afford This,’ Said Ann Kohler, The Director Of The National Association Of State Medicaid Directors.” (Christopher Weaver, “States' Medicaid Funds Tapped For Federal Health Overhaul,” Kaiser Health News, 4/20/10)

As A Result, 47 States Will Likely Lose Millions Of Dollars Every Year. “All but three states, Arizona, Massachusetts and New Mexico, would stand to lose money, in many cases millions of dollars a year, because of the drug rebate changes, according to a state-by-state examination of 2009 Medicaid spending records by Kaiser Health News. The 47 other states and the District of Columbia had negotiated average rebates from drugmakers that are better than required and in many cases far surpass the 23.1 percent requirement.” (Christopher Weaver, “States' Medicaid Funds Tapped For Federal Health Overhaul,” Kaiser Health News, 4/20/10)

• California Burdened With $50 Million In Costs Next Year. “California, for instance, stands to lose $50 million next year alone because of the changes, according to Toby Douglas, the state's deputy Medicaid director.” (Christopher Weaver, “States' Medicaid Funds Tapped For Federal Health Overhaul,” Kaiser Health News, 4/20/10)
• Indiana Burdened With Estimated Costs Of $400 Million Over The Course Of 10 Years. “Anne Murphy, Indiana's secretary of the Family and Social Services Administration, circulated a memo predicting losses of $400 million over 10 years because the federal government plans to ‘confiscate’ a portion of its rebates.” (Christopher Weaver, “States' Medicaid Funds Tapped For Federal Health Overhaul,” Kaiser Health News, 4/20/10)
• Democrat Legislator In Maine Says It “Would Be A Slap In The Face” As Maine Will Have “Particularly Steep Losses.” “Some state lawmakers are already calling on federal officials to back away from the proposal. ‘Some things may need to be changed,’ said Sharon Treat, a Democratic Maine legislator. ‘For those of us that have been working hard to get health care passed, it would be a slap in the face if we lose money.’ Maine could face particularly steep losses under the change because the state does not use managed care for any of its Medicaid enrollees and would not benefit from the provision offering discounts for managed care programs.” (Christopher Weaver, “States' Medicaid Funds Tapped For Federal Health Overhaul,” Kaiser Health News, 4/20/10)