How the Obamacare Verdict Will Affect the Life Sciences Sector

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We're down to just a matter of hours before the Supreme Court will rule on the validity of the Patient Protection and Affordable Care Act, aka Obamacare. Signed into law in 2010, the bill holds huge ramifications for much of the health-care sector. Today, I want to focus specifically on the implications the verdict will have on the life sciences sector.

The biggest factor that's set to influence the life sciences sector is the individual mandate. Requiring all citizens to either purchase insurance or be enrolled in government-sponsored Medicaid health plans, the individual mandate bears watching not only as the most controversial aspect of the ACA, but also with regard to its impact on the life sciences sector.

If the entire bill (including the individual mandate) passes, I've already purported that it will have a negative effect on device makers, but it could be a positive for many other aspects of the life sciences sector.

I see one specific benefactor being immunology and rare disease companies. Pharmaceutical juggernaut Johnson & Johnson (NYSE: JNJ  ) may find that the individual mandate will get lower-to-middle-income people who had previously been uncovered by Medicaid into their doctors' offices for standard vaccines -- ultimately boosting its bottom line.

Rare disease-focused biotechnology companies -- such as Alexion Pharmaceuticals (Nasdaq: ALXN  ) , whose sole drug, Soliris, which treats a form of anemia, and Isis Pharmaceuticals' (Nasdaq: ISIS  ) , whose lead drug candidate, Kynamro, treat homozygous familial hypocholesterolemia -- could see an immediate boost, since expanded coverage would relieve some of physicians and patients' worries about the high cost of rare drugs. With uncertainty being an insurers' worst enemy, a definitive thumbs-up from the Supreme Court on the individual mandate could go a long way toward keeping health-care costs low and helping high-cost rare disease companies to thrive.

Still other sections of life sciences would be a bit of a toss-up, like genomics. Both Life Technologies (Nasdaq: LIFE  ) and Illumina (Nasdaq: ILMN  ) have worked tirelessly to develop genome mapping machines capable of decoding someone's DNA in shorter time periods and for cheaper costs. In fact, Life Technologies recently introduced a genome mapping machine capable of decoding the human genome in just one day for $1,000.

Genomics providers may suffer in the short term if the individual mandate is upheld; the R&D budgets for many of their customers could be reduced as health-care companies cut back on spending. However, over the long term, Big Pharma will probably view the survival of the individual mandate in a positive light, since it would mean a larger influx of insured customers who now have no reason not to visit their doctors. With the patent cliff approaching for many pharmaceutical companies, the need for creating collaborative partnerships is pressing, and this situation may spur Big Pharma to invest heavily in genomics and other life sciences divisions as they try to create the next generation of blockbuster drugs.

Clearly, there's a lot at stake for Thursday's decision for the life sciences sector and the health-care sector as a whole. Stay tuned Thursday for more Foolish coverage of this historic ruling.

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Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool owns shares of Johnson & Johnson. Motley Fool newsletter services have recommended buying shares of Stryker, Johnson & Johnson, and Illumina, as well as creating a diagonal call position in Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that never takes a sick day.

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