OAKLAND, Calif. -- Health care reform may be where thepromise of biotechnology navigates the shoals of limitedreimbursement, but company executives still see opportunitiesin potentially broader coverage.

"The criteria by which we should be judged is the health statusof the population as a whole, and our charge should be to dothat as cost-effectively as possible," declared David Lawrence,chairman of Kaiser Permanente, the nation's largest healthmaintenance organization.

On the one hand, Lawrence said, organizations such as his arebeing pressured by employer groups to keep health insurancerates down. To minimize the cost of health care delivery,coalitions of health care delivery organizations are bandingtogether to negotiate lower wholesale pharmaceutical pricesand are adopting a "show-me" attitude toward benefits of newbreakthroughs.

On the other hand, he added, biotechnology is seen as theengine driving new ways to take care of patients. To enhance adialogue with bioscience companies, his organization has been acorporate underwriter of the Bay Area Bioscience Center.

Some 300 biotechnology industry representatives convenedhere last week to address foreseeable impacts of health reformon business prospects.

Lawrence doesn't expect health reform to be announced by theClinton administration until late this year, and more likely,early next year. "What we get through health care reform fromthe Clinton administration if it comes," he said, "is a supportstructure and more acceleration in the programs we're alreadyseeing."

Some 12 to 15 states have already enacted various forms ofhealth reform, mostly emphasizing a managed care approachthat budgets the rate medical procedures are reimbursed.

Lawrence, a physician, admitted medical practice has beenbased largely on "habit and where we're trained and smallstudies on special populations. ... We do not know what worksin terms of health care."

But he believes epidemiologic science is emerging as acomplement to bioscience, allowing health delivery to beevaluated for costs and outcomes within different segments oflarge populations, such as those insured and treated by Kaiser.

"We have the large populations and the time needed," he said.

Meanwhile, Ed Penhoet, president and chief executive officer ofChiron Corp. (NASDAQ:CHIR) of Emeryville, Calif., urged hiscounterparts to underscore how new products -- especiallyvaccines and diagnostics -- optimize health, a quality that hepredicted aging baby boomers will continue to value highly.

Old arguments about the costs of drug development are weak,he said, because they stress inefficiency.

Penhoet said speculating about health care reform seems tohave distracted many life science industry managers fromgetting down to work this spring.

He added that he sees more opportunity than problems inexpanded coverage and the agility of young biotechnologycompanies, but they will have to justify new products "just likeanyone else" since the ability to raise money is notsynonymous with fundamentals.

"Just because your company is worth $250 million in thefinancial market does not mean you've created anything ofvalue except stock," he said.

"It's a surprise to me that as few companies as have have gonebankrupt," said Penhoet. "We tend to think that because theyhave worthy goals, they're all worth supporting."

Just as health systems move into coalitions from the hodge-podge of entities that have randomly developed over the years,Penhoet also foresees increasingly large biotechnologynetworks of people and technology moving in and out oforganizations in a "much less crystalline way of doing things."

-- Nancy Garcia Associate Editor

(c) 1997 American Health Consultants. All rights reserved.