Boston, MA 04/22/2014 (wallstreetpr) – UnitedHealth Group Inc. (NYSE:UNH) posted lower profit in the first quarter and blamed the impact on the federal healthcare law. The company also cited the impact from an expensive drug for the treatment of Hepatitis C. However; the company remained upbeat about the future.
The company reported first quarter net income of $1.1 billion, suggesting 7.8 percent drop from $1.19 billion realized in the comparable quarter a year earlier. Revenue in the quarter was $31.71 billion, suggesting increase 4.5 percent increase over $30.34 billion generated in the first quarter of 2013.
Earnings per share in the quarter were $1.10. The slim earnings resulted from the impact of budget cuts and healthcare law that together consumed $0.35 per share in the first quarter.
UnitedHealth Group Inc. (NYSE:UNH)’s first quarter profit was dented by fees for insurers, taxes related to the healthcare law and significant cutbacks in the Medical Advantage program. Moreover, profit was significantly impacted by high costs related to Sovaldi that is used to treat hepatitis C.
It received more than $100 million bill for the drug. The drug is manufactured by Gilead Sciences Inc (NASDAQ:GILD) and costs $1,000 per pill.
However, besides UnitedHealth, many other health insurers have criticized Gilead over the expensive price of Sovaldi that is eroding their profits.
Although UnitedHealth posted lower profit in the first quarter, the figures exceeded Wall Street estimates by a penny. On that note, the company’s CEO Stephen J. Hemsley observed that UnitedHealth expects the future to get better as immediate-term impacts of the healthcare law wither, and the company implements more disciplined austerity measures.
Industry indicator
Given the size of UnitedHealth Group Inc. (NYSE:UNH), the company’s performance is view as an indicator of what other health insurers are going through regarding the Affordable Care Act. The impact on profit might be seen in the financial results of other insurers that are trying to balance their operations in the wake of the new health insurance environment. Nonetheless, analysts expect the troubles faced by insurers under the healthcare law to reduce in the long-term.
