Clinical Labs Lobby Way Out of Proposed $750 Million Levy

Apparently the domestic clinical laboratory industry does not lack in lobbying power. While much of the rest of the country was focused on such issues as “death panels” and the “public option,” the laboratory industry, at least in September, lobbied with all its collective force against a new proposal in the healthcare reform bill targeted squarely on their top line: a $750 million non-deductible annual fee starting in 2010. For the industry, which generates an aggregate of approximately $45 billion annually according to Roth Capital Partners, the proposed fee represents about 1.7 percent of revenues.

By Sept. 23 the companies were no doubt breathing a sigh of relief. The fee has been removed from the bill.

Proposed as a way to help pay for healthcare reform, the fee would have been levied based on each company’s share of the market so the biggest labs, like Quest Diagnostics (NYSE: DGX, http://www.questdiagnostics.com) and Laboratory Corporation of America (NYSE: LH, http://www.labcorp.com) would have been hit hardest. Indeed Quest and Lab Corp, with $9.7 billion and $7.2 billion market caps respectively, saw their stocks track downward earlier in September as investors learned of the tax but then jumped back up when the tax disappeared.

For the small cap lab companies, the tax would not have been as severe but worrisome for investors nonetheless. Some of the leading small caps in this space include Aliso Viejo, CA-based Clarient* (Nasdaq: CLRT, http://www.clarientinc.com), Carlsbad, CA-based Genoptix (Nasdaq: GXDX, http://www.genoptix.com), Redwood City, CA-based Genomic Health (Nasdaq: GHDX), http://www.genomichealth.com) and Ft. Meyers, FLA-based NeoGenomics (Nasdaq: NGNM, http://www.neogenomics.org).

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