Conceptus Upbeat on Obamacare

The Supreme Court verdict to uphold the Patient Protection and Affordable Care Act of 2010 (PPACA) (also known as Obamacare) provided the much needed impetus to Conceptus’ (CPTS) business. The manufacturer of the Essure permanent birth control system is upbeat regarding the fact that under the PPACA, the entire list of contraceptive methods approved by the US Food and Drug Administration (FDA), including the Essure procedure, will be covered by all private insurance plans.

Currently, most insurance plans cover a part of the Essure procedure. However, as per the ruling, effective August 1, 2012, the coverage for contraceptive services will become mandatory for all private health plans. Based on some initial research, Conceptus estimates that the insurance coverage will build gradually with a majority of the plans expected to cover the procedure by April 2013.

Essure procedure is elective in nature, and often gets delayed amid economic uncertainty and high unemployment. Conceptus’ obstetrics and gynecology (OB/GYN) office visit trends remained mixed during the past few months due to macroeconomic pressure. Amidst this difficult scenario, we strongly believe that this Supreme Court ruling will emerge as a landmark development for women's health care.

This will largely benefit Conceptus’ sales performance as it will reduce cost burden and increase access and affordability of the Essure procedure worldwide. Further, added to the recent exit of Hologic’s (HOLX - Analyst Report) Adiana from the permanent birth control market Conceptus is expected to get a double advantage through this latest ruling.

According to the PPACA, all Americans will have access to quality, affordable health care and will create the transformation within the health care system necessary to contain costs. The Congressional Budget Office (CBO) said that the PPACA will cover over 94% of Americans staying under the $900 billion limit that was set by President Obama. This in turn is expected to cut the health care cost reducing the deficit over the next ten years and beyond.

Presently, Conceptus retains a Zacks #2 (short-term Buy) Rank. Over the long term, we have a Neutral recommendation on the stock.