Nov. 9 (Bloomberg) -- Drugmakers including Pfizer Inc. and health insurers such as WellPoint Inc. are looking to the U.S. Senate to revamp House-passed legislation overhauling the health-care system that threatens to squeeze profits.

The House bill, passed by a vote of 220-215 just before midnight Washington time on Nov. 7, would let the U.S. government negotiate prescription drug prices for patients on Medicare and create a government-run insurance program to compete with private companies.

“We remain convinced that the approach taken by the Senate Finance Committee provides the best blueprint for comprehensive reform,” Ken Johnson, senior vice president for the Washington trade group Pharmaceutical Research and Manufacturers of America, said in a statement following the vote.

The Senate Finance Committee version, approved on Oct. 13, doesn’t call for the prescription drug negotiations. Drug companies managed to keep the provision out of legislation that created the Medicare prescription drug program in 2003 and have fought it this year.

Drugmakers had already agreed to contribute $80 billion toward the overhaul, in part to help the elderly afford prescriptions, in return for averting further challenges to their profits.

Public Option

The finance committee also voted against the so-called public option approved by the House. The panel supported instead nonprofit cooperatives, networks of health-insurance plans owned by the customers they serve, that would get government seed money.

A government-run plan “would bankrupt hospitals, dismantle employer coverage” and “ultimately increase the federal deficit,” Karen Ignagni, president of America’s Health Insurance Plans, said in a Nov. 5 letter to House Speaker Nancy Pelosi and Republican leader John Boehner. Pelosi, a California Democrat, steered the bill to passage, while Boehner of Ohio led the opposition.

Ignagni’s Washington trade group represents about 1,300 health-insurance companies.

Many of the House-passed provisions may end up missing from the version being spearheaded by Senate Majority Leader Harry Reid, a Nevada Democrat. If the Senate passes a separate bill, it will have to be merged with the House plan, giving industries weeks or months to whittle away at policies they don’t like.

“Passage of the House bill is historic,” said Paul Heldman, a health-policy analyst with Potomac Research Group in Washington. “But there’s a whole other chapter in the debate yet to be written.”

Lieberman, Snowe

Connecticut Senator Joe Lieberman, an independent who caucuses with Democrats, reiterated his opposition to the public option yesterday.

“As a matter of conscience, I will not allow this bill to come to a final vote” if the public option remains, Lieberman said on “Fox News Sunday.”

The only Republican to support any Senate proposal so far, Maine Senator Olympia Snowe, has said Reid’s plan for a public option that lets states opt out is unacceptable.

Senate Democrats will have a “very difficult” time finding the 60 votes necessary to approve a government-backed insurer to compete with the private sector, Bradley Fluegel, chief strategy officer at Indianapolis-based WellPoint, said at an investors conference on Nov. 4.

Medical-device makers say they want changes to a House provision that would place $20 billion in fees over 10 years on the companies. The Senate committee version seeks double that amount.

‘Burdensome’ Tax

The Washington-based Advanced Medical Technology Association, or AdvaMed, which represents companies such as Minneapolis-based Medtronic Inc., sent a letter to lawmakers calling the tax on its members “burdensome” and asked for changes such as exclusions for smaller companies.

“There are provisions that are of great concern to the medical technology and diagnostics industry,” said Stephen Ubl, president of AdvaMed.

Lawmakers are trying to craft a bill that would cover tens of millions of uninsured Americans while curbing rising medical costs. Their proposals for new purchasing exchanges, subsidies and a requirement that all Americans have insurance represent the biggest changes to U.S. health care in four decades.

The House version, which promises new customers for insurers, would also increase regulation.

“The industry is going to be less profitable and look more like a utility,” said Heldman.

‘Someone’s Job’

The House bill would also require insurers to spend at least 85 percent of premiums they collect on customers’ health care. Legislation in the Senate would require only that insurers report the amount of premiums spent on care.

The House measure would require pharmaceutical manufacturers to pay a rebate under the Medicare drug benefit program.

“When you start trading someone’s job for someone else’s health insurance, what have you really accomplished?” said Johnson of the pharmaceutical trade group on Oct. 29. “From our perspective, that is the scenario that is unfolding in this House bill.”

Also hit under the House plan are home-health care companies such as Baton Rouge, Louisiana-based Amedisys Inc. They would see more than $50 billion in cuts to the growth of Medicare reimbursement rates over 10 years, according to Heldman.

Industry Shares

Concerns about the health-care legislation have held back industry stocks this year. While the Standard & Poor’s 500 Index has climbed 18 percent, a subgroup of six managed-care companies has risen 16 percent, a group of 12 health-care equipment makers has gained 15 percent and a group of 11 drugmakers has risen 5.9 percent.

Hospital companies such as Nashville, Tennessee-based HCA Inc., which also entered into a deal with the White House and Senate Finance Committee Chairman Max Baucus, a Montana Democrat, have fended off many of the provisions they found of greatest concern. As part of that agreement, payments for taking care of charity cases would be reduced only if certain insurance-coverage levels are met.

Hospitals also would benefit from treating a greater number of insured patients, analysts said.

Other companies benefiting from new customers would include pharmacy benefit managers, such as Woonsocket, Rhode Island- based CVS Caremark Corp. and Medco Health Solutions Inc. of Franklin Lakes, New Jersey.

Those companies would also be helped by incentives for greater use of generic drugs, which are more profitable to the benefit managers than brand-name drugs.

To contact the reporters on this story: Catherine Dodge in Washington at cdodge1@bloomberg.net; Kristin Jensen in Washington at kjensen@bloomberg.net;

Last Updated: November 9, 2009 00:00 EST