By Bruce Japsen | Abbott Laboratories’ first-quarter profits fell 30 percent thanks to
costs related to the coming implementation of health care reform and an
unusual gain from the sale of a drug venture a year ago, the company
reported Wednesday.

The North Chicago-based drug and medical product giant still reported
profits of $1 billion, or 64 cents a share, for the quarter ended March
31 compared to $1.4 billion, or 92 cents in the year ago quarter.
Earnings were off primarily because of the health overhaul as well as
the impact of an extraordinary gain of more than $500 million Abbott
reported in the first quarter of 2009 when it sold its stake of the
former TAP Pharmaceuticals to its Japanese partner.

Abbott’s revenues were robust, jumping 14.6 percent as the company began to benefit from its acquisition of Solvay pharmaceuticals, a deal it closed earlier this year to bolster its drug sales and future prescription pipeline.

Still, worries about health care reform caused the price of Abbott shares to tumble more than two percent, or $1.28 a share, to $51.78 in trading Wednesday on the New York Stock Exchange. Abbott was among several major drug companies reporting earnings this week that had their stocks hit hard after reporting the impact of health care reform.

Despite the early negative impact of health care reform on drug company bottom lines being reported this week, the drug industry was an early and influential supporter of President Barack Obama’s effort to reform the health care system.

In particular, the Pharmaceutical Research and Manufacturers of America, which includes Abbott as a member, pledged $80 billion over the course of a decade to help pay for reform in the form of rebates to the federal government, certain taxes and fees.

Analysts largely expect drug makers to reap huge sales over the long-term thanks to more than 30 million new customers who today have no health insurance coverage. And Abbott met Wall Street analysts’ quarterly earnings expectations, saying the company is able to withstand the short and long-term impact of the cost of implementing the health-care overhaul.

Abbott’s solid revenue and profit “reflects stronger-than-expected growth of the underlying business, enabling the company to absorb some of the healthcare reform impact,” wrote Rick Wise, analyst with Leerink Swann in New York in a report issued Wednesday.

Like other drug makers, Abbott said health care reform requires the company to pay larger rebates to the Medicaid health insurance program for the poor. That resulted in sales being reduced by $60 million in the first quarter and “ongoing earnings per share in the first quarter reduced by 3 cents a share,” Abbott said in a statement.

In addition, Abbott recorded a one-time charge in the first quarter of $60 million, or 4 cents a share, related to “deferred tax assets associated with a provision of the U.S. health care reform legislation that will eliminate the Federal income tax deduction for prescription drug expenses of retirees for which companies receive reimbursement under the Medicare” drug benefit subsidy program.”

In 2010, Abbott said the full impact of health care reform will cost the company $230 million, or 11 cents a share. The company also said that, in 2011, health care reform will cost at least another $200 million or more “on top of the 2010 impact,” Abbott chief financial officer Thomas Freyman said.

But Freyman cautioned Wall Street analysts the company was still evaluating the law, which “is complex” and will be implemented over the next four years.