SAN FRANCISCO – Better be prepared to batten down the hatches in 2008. But also continue to do business as usual.

Those were the corollary messages of the opening re-marks of Jamie Dimon here as the 26th edition of the JPMorgan Healthcare Conference got underway yesterday at the Westin St. Francis Hotel.

Dimon, CEO and chairman of JPMorgan Chase, rather seriously joked that a financial crisis “seems to happen about every five years.”

And while it appears that a recession for the U.S. is a distinct possibility, he said he doesn’t feel it will be on the level of the last, most difficult recession this country had in 1982 — “when,” he noted, “inflation was hitting double digits.”

Dimon said the signs are out there that a recession is around the corner, and he advised attendees to “have plenty of capital and teach your management team to be mature. If [a financial crisis] is going to happen, you don’t necessarily know what direction, but be prepared. If you have the money and you have the wherewithal, you will have the confidence to continue to build and will do well.”

Dimos assured attendees that JPMorgan has no intention of pulling up the stakes and striking the tent.

“We’re still going to be making loans. I don’t care if it hurts 10 or 20 or 30 cents a share of earnings” to make these types of investments.

Dimos claimed that an “unjust legal system” is stifling innovation in the U.S., and he went on to describe a variety of “long-term trends” that he said will be of much more concern than any short-term recession.

The U.S., he said, needs comprehensive infrastructure, energy, geopolitical trading, social security and medical policies, and it needs to find the political will to achieve those things or there could be a bleak future for this country 30 or 40 years down the road.

“I don’t think we have a divine right to success,” Dimos said. “When you go to Washington, I urge you don’t go purely partisan, or do only what’s good for your company.” And he urged attendees to push for policies that are “good for America and the people that live in this country.”

In an equity note that was circulating at the meeting, JPMorgan U.S. Healthcare Policy analyst Ipsita Smolinski, said she expects the 2008 election to dominate headlines as candidates debate universal healthcare coverage.

These headlines, she said, would “likely be negative” for pharma/biotech as well as managed care.

Smolinski said she believes that with the November 2008 elections, the Democrats could capture a governmental trifecta — House, Senate and White House – with even a wider margin than they now have in both chambers of Congress, “making liberal proposals more likely to pass muster.”

Looking ahead, Smolinski said that she expects the FDA/CMS collaboration on coverage and reimbursement to continue.

She said that the fallout from the erythropoiesis-stimulating agents (ESAs) national coverage determination from CMS “leads us to believe that we will only see more collaboration between federal and agencies on Part B drugs in the future.”

Senior FDA and drug reimbursement experts, she said, “stated this explicitly at the JPM Therapeutics Day held in Washington DC on Dec. 18th.”

The medical device industry, she said, will face few regulatory risks in 2008 but that device makers are unlikely to be “heavily penalized” in a new world of severity-adjusted diagnostic-related groups.

However, she noted that JPMorgan “does believe that comparative effectiveness is likely to become a part of a Medicare package passed in 2008.”

The key questions JPMorgan has on comparative effectiveness, according to Smolinski, revolve around how much the government will be involved and how much funding/appropriations CMS will have.

“In our view, the truth is that randomized, controlled clinical trials are prohibitively expensive, and the government will likely not be able to compare treatments with extremely high cost.”

She promised that JPMorgan will continue to watch the progress in 2008 of a bill that would allow for greater medical device transparency by requiring manufacturers to disclose the prices they charge for implantable medical devices to every hospital in the U.S., on a quarterly basis.

On the biologics front, Smolinski said she did not expect the drug pricing rhetoric to become a reality until 2009 — or beyond.

“While most Democratic candidates embrace drug reimportation, biogenerics and government drug price negotiation, we believe there will be little more than rhetoric during 2008.”

And she said that she is “skeptical” that universal coverage is achievable during the next four-year presidential term and that “truly innovative biotech or drug products will be able to retain their margins.”

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