Why are People so Interested in the DSM-5?

There is a lot of internet buzz about the approval by the American Psychiatric Association‘s (APA) board of trustees of its fifth edition of the Diagnostic and Statistical Manual of Mental Disorders (DSM-5.)

The APA press release notes “the trustees’ action marks the end of the manual’s comprehensive revision process, which has spanned over a decade and included contributions from more than 1,500 experts in psychiatry, psychology, social work, psychiatric nursing, pediatrics, neurology, and other related fields from 39 countries.”The approval was announced on Saturday, December 1 (was the APA trying to keep it quiet?) with publication of the DSM-5 scheduled spring 2013. For a book that has no plot or characters, its pending publication has caused great excitement. True, it is a sequel, but it is not the latest installment of Harry Potter or the Twilight Saga.Though the DSMs have not reached the volume of sales of a Harry Potter (so far), the paperback edition of the last version of the DSM had a sales rank of 261 on Amazon.com. This is remarkable for a book that is over 900 pages in length and written for professionals.Besides being bestsellers, the DSMs have inspired games and even music awards. DSM-IV the Game is available for free online. It is described as “beautiful way to engage and learn about yourself, family, and friends and as an ice breaker at your next holiday gathering.”Several years ago, Dr. Jill Squyres, a clinical psychologist in San Antonio, created the DSM-IV Music Awards for her professional society’s fall social. The DSM-IV Music Awards are modeled on the Academy Awards. She chooses categories based on a DSM diagnosis and then nominates songs that are reflective of disorders such as Major Depression (Jagged Little Pill by Alanis Morisette, King of Pain by the Police), Mania (Wake Me Up Before You Go Go by Wham, Life in the Fast Lane by the Eagles), Obsessive-Compulsive Disorder (I’m In Love With My Car by Queen, Pinball Wizard by the Who), and Borderline Personality Disorder (Isn’t life Strange by Jim Morrison, Addicted to Love by Robert Palmer).How does a medical book about psychiatric disorders inspire games and awards let alone become a bestseller? There are not enough medical professionals or people with vested interests, such as the pharmaceutical or insurance industries, to account for these sales figures. What is behind the fascination with the DSM among the general public? I believe it is because our mental state goes to the core of who we are as human beings and our fascination with the link between mental illness and creativity.Mental illness went “public” long before cancer and AIDS. Although mental illness is still considered a stigma by the general public, writers and artists have been talking publicly about their bouts of depression and struggles with alcohol and drugs for hundreds of years. Ernest Hemingway, Virginia Woolf, Sylvia Path and Vincent van Gogh committed suicide. The poets T.S. Eliot and Ezra Pound were committed to mental institutions. The 27 club is comprised of musicians who died at age 27; Janis Joplin, Jimi Hendrix, Brian Jones, Kurt Cobain, and Amy Winehouse. The public breakdowns and rants of Mel Gibson, Alec Baldwin, Lindsay Lohan, Charlie Sheen and Mel Gibson have been televised and viewed by millions on YouTube.The style and language of the DSM is another reason for its popularity. Unlike most medical textbooks , there is relatively little medical terminology and diagnoses are described in terms that are easily understandable to the nonmedical reader. Each diagnosis includes a list of symptoms, referred to as criteria, that typify the disorder. The list of symptoms is exhaustive, but not all symptoms necessarily occur in the disorder. The format and clear non-technical language invite the reader to examine and apply this new knowledge to themselves and others. A parent who worries that his child might have Attention Deficit Hyperactivity Disorder (ADHD) or a spouse concerned that their loved one is displaying symptoms of Alzheimer’s disease can easily look up these disorders and review the symptom check list.Psychiatric disorders consist of behaviors that are extreme. The same behaviors occur with less intensity or frequency in everyday living. A key symptom of Major Depression Disorder is anhedonia, a failure to find pleasure in everyday life. Anhedonia was the working title of Woody Allen’s movie Annie Hall, which won four Academy Awards including Best Picture. In mild or moderate degrees, most of us have experienced “mild anhedonia” (a.k.a being in a funk) at some point in our lives.Obsessive-compulsive disorder (OCD) is an anxiety disorder marked by obsessions, which consist of unwanted and repeated thoughts, or behaviors, and compulsions that make those with OCD feel compelled to perform a behavior to lessen their anxiety. Although most of us are not paralyzed by OCD, we all have some traits. We go back and check to see if we locked our doors or left the tea kettle on. And although we might wish to have the detective skills of Adrian Monk or the writing skills of Jack Nicholson in As Good As It Gets , these fictional characters inability to cope with OCD causes them great anguish and the inability to have significant relationships.I believe that today’s films and TV shows that portray mental illness are popular because they present characters we can relate to, unlike earlier films such as Psycho, a film that scared people so much they stopped taking showers. We laugh at the neurotic mother-son relationships portrayed in Everyone Loves Raymond and Seinfeld because we can relate to them. And we worry about our children. Are we pushing them so hard that they will end up like Natalie Portman’s crazed ballerina in the Black Swan?Brain scans have shown that that creativity and “madness” light up similar pathways in the brain. However, the overwhelming majority of mentally ill people are not artists and most artists are not mentally ill. Edgar Allen Poe, Vincent Van Gogh and Ernest Hemingway were gifted artists who happened to be mentally ill. Their mental illness did not make them artists. In fact, mental illness interferes with the artistic process. William Styron was not able to write in the throes of his depression. The mathematician John Nash did his greatest work before he was diagnosed with schizophrenia.I have no doubt that some gifted people are able to function by “throwing themselves into their art.” However, their legacy is their work, not their mental illness. People may fantasize about being able to play guitar like Jimi Hendrix, write like Hemingway, and sing and dance like Michael Jackson. But they don’t fantasize about being clinically depressed, overdosing on drugs, being homeless, or being institutionalized.To answer to my question of why we are so fascinated by the DSM, I believe it is because it presents and explains extremes of behavior, related to and connected with the more normal levels of behavior we experience. We read the DSM to find ourselves in its pages.Images: Vincent Van Gogh; Janis Joplin; MONK cover by author.

Follow Scientific American on Twitter @SciAm and @SciamBlogs.Visit ScientificAmerican.com for the latest in science, health and technology news.
© 2012 ScientificAmerican.com. All rights reserved.
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Pelosi slams House GOP for taking break amid debt talks

House Minority Leader Nancy Pelosi today ripped House Republicans for scheduling a five-day break amid the " fiscal cliff" debate, asking why the chamber is not in session "trying to build confidence" and "find common ground" with only 26 days left until a mix of steep tax hikes and spending cuts take effect.

"Here we are, Thursday in December. The talk around here is what's going on at the negotiating table. Is anything going on at the negotiating table?" Pelosi, D-Calif., wondered at her weekly news conference. "I can't even explain to my constituents why Congress isn't in session now trying to at least build bridges of understanding and representing."

The GOP-controlled House concluded legislative business Wednesday afternoon after a light floor schedule this week. House Majority Leader Eric Cantor cancelled one day of legislative business previously scheduled for today, and also cut next Friday from the calendar. Cantor, however, announced Wednesday that he has added an unspecified number of days to the legislative calendar the week of Dec. 17.

"I'm really surprised that the Republicans would leave," Pelosi said. "With all that needs to be done, [are House Republicans] avoiding the conversation? Sounds like people don't want to be in town for some reason."

At least one top House Republican, however, stayed at the Capitol: House Speaker John Boehner.

President Obama and Boehner spoke on the phone Wednesday afternoon, but no details were released about the conversation. An aide to the speaker said that "the lines of communication are open" today.

Pelosi, who said she remains in close contact with the president, has repeatedly described a Republican counter-proposal this week as "an assault" on the middle class, seniors and the country's future. She also criticized the proposal for failing to detail how Republicans would specifically achieve savings if they refused to raise tax rates on the wealthiest taxpayers.

"Why are we not here getting information?" Pelosi said. "What are we talking about here? What are we talking about when we say restructure entitlements? What does restructure mean? Destroy? Wither on the vine? Voucherize? Or does it mean let's work together to make these stronger and improve benefits for the beneficiaries?"

But with a stalemate on tax rates, even negotiations between White House and congressional staffs seem to have ground to a halt.

"It's hard to explain to anyone why there's even a mystery in the conversation that we shouldn't be having the upper 2 percent of our population paying its fair share," she said. "How do you start by saying we want to know what you're going to do to seniors before we will do what we know we have to do, which is make the wealthy pay their fair share?"

Pelosi also doubted whether the GOP proposal, which called for $600 billion in health-care savings through changes such as increasing the eligibility age for Medicare, would create adequate savings.

"Show me the money. I don't even know why that is something that people think is going to produce money. What are we going to do with people between 65 and 67?" she said. "It's not even the right thing to do, first and foremost, but is it a trophy that the Republicans want … to raise the rates for the wealthiest people in our country?"

Lawmakers return to the House for legislative business Tuesday, three weeks before the "fiscal cliff" kicks in.

The Senate is in session today.

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Death toll from Philippine typhoon nears 300

NEW BATAAN, Philippines (AP) — Stunned parents searching for missing children examined a row of mud-stained bodies covered with banana leaves while survivors dried their soaked belongings on roadsides Wednesday, a day after a powerful typhoon killed nearly 300 people in the southern Philippines.

Officials fear more bodies may be found as rescuers reach hard-hit areas that were isolated by landslides, floods and downed communications.

At least 151 people died in the worst-hit province of Compostela Valley when Typhoon Bopha lashed the region Tuesday, including 78 villagers and soldiers who perished in a flash flood that swamped two emergency shelters and a military camp, provincial spokeswoman Fe Maestre said.

Disaster-response agencies reported 284 dead in the region and 14 fatalities elsewhere from the typhoon, one of the strongest to hit the country this year.

About 80 people survived the deluge in New Bataan with injuries, and Interior Secretary Mar Roxas, who visited the town, said 319 others remained missing.

“These were whole families among the registered missing,” Roxas told the ABS-CBN TV network. “Entire families may have been washed away.”

The farming town of 45,000 people was a muddy wasteland of collapsed houses and coconut and banana trees felled by Bopha’s ferocious winds.

Bodies of victims were laid on the ground for viewing by people searching for missing relatives. Some were badly mangled after being dragged by raging flood waters over rocks and other debris. A man sprayed insecticide on the remains to keep away swarms of flies.

A father wept when he found the body of his child after lifting a plastic cover. A mother, meanwhile, went away in tears, unable to find her missing children. “I have three children,” she said repeatedly, flashing three fingers before a TV cameraman.

Two men carried the mud-caked body of an unidentified girl that was covered with coconut leaves on a makeshift stretcher made from a blanket and wooden poles.

Dionisia Requinto, 43, felt lucky to have survived with her husband and their eight children after swirling flood waters surrounded their home. She said they escaped and made their way up a hill to safety, bracing themselves against boulders and fallen trees as they climbed.

“The water rose so fast,” she told AP. “It was horrible. I thought it was going to be our end.”

In nearby Davao Oriental, the coastal province first struck by the typhoon as it blew from the Pacific Ocean, at least 115 people perished, mostly in three towns that were so battered that it was hard to find any buildings with roofs remaining, provincial officer Freddie Bendulo and other officials said.

“We had a problem where to take the evacuees. All the evacuation centers have lost their roofs,” Davao Oriental Gov. Corazon Malanyaon said.

The International Federation of Red Cross and Red Crescent Societies issued an urgent appeal for $ 4.8 million to help people directly affected by the typhoon.

The sun was shining brightly for most of the day Wednesday, prompting residents to lay their soaked clothes, books and other belongings out on roadsides to dry and revealing the extent of the damage to farmland. Thousands of banana trees in one Compostela Valley plantation were toppled by the wind, the young bananas still wrapped in blue plastic covers.

But as night fell, however, rain started pouring again over New Bataan, triggering panic among some residents who feared a repeat of the previous day’s flash floods. Some carried whatever belongings they could as they hurried to nearby towns or higher ground.

After slamming into Davao Oriental and Compostela Valley, Bopha roared quickly across the southern Mindanao and central regions, knocking out power in two entire provinces, triggering landslides and leaving houses and plantations damaged. More than 170,000 fled to evacuation centers.

As of Wednesday evening, the typhoon was over the South China Sea west of Palawan province. It was blowing northwestward and could be headed to Vietnam or southern China, according to government forecasters.

The deaths came despite efforts by President Benigno Aquino III’s government to force residents out of high-risk communities as the typhoon approached.

Some 20 typhoons and storms lash the northern and central Philippines each year, but they rarely hit the vast southern Mindanao region where sprawling export banana plantations have been planted over the decades because it seldom experiences strong winds that could blow down the trees.

A rare storm in the south last December killed more than 1,200 people and left many more homeless.

The United States extended its condolences and offered to help its Asian ally deal with the typhoon’s devastation. It praised government efforts to minimize the deaths and damage.

___

Associated Press writers Jim Gomez, Teresa Cerojano and Oliver Teves in Manila contributed to this report.

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Kathie Lee Gifford’s “Scandalous” musical to close after three weeks

LOS ANGELES (TheWrap.com) – So much for Kathie Lee Gifford‘s career as a playwright. The former “Live!” co-host’s Broadway musical “Scandalous: The Life and Times of Aimee Semple McPherson,” is shuttering a little after three weeks after it opened.

The musical, which opened November 15, will have its final performance December 9 at the Neil Simon Theatre in New York.

Gifford wrote the book and lyrics for “Scandalous,” which chronicled the life of evangelist and proto-celebrity Aimee Semple McPherson, who rose to prominence in the 1920s, only to fall from public grace amid scandalous love affairs and other controversies.

In all, “Scandalous” will have played 29 regular performances before it goes dark and 31 previews. The musical stars Carolee Carmello (left) and George Hearn, among others, and is directed by David Armstrong (“A Christmas Story the Musical,” “Catch Me if You Can”).

Though Gifford had ample opportunity to plug the production via her “Today” co-hosting duties – and she certainly took advantage of the opportunity – critics were generally unkind in their appraisal of the show.

“‘Scandalous’ isn’t so much scandalously bad as it is generic and dull,” wrote the New York Times’ Charles Isherwood.

Newsday’s Linda Winer took specific aim at Gifford’s “bombardment of nursery-rhyme lyrics.”

Talkin’ Broadway’s Matthew Murray, meanwhile, scoffed that the play “is not distinctive in one positive way.”

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Asthma symptoms may vary during menstrual cycle

NEW YORK (Reuters Health) – Some women may have more or fewer asthma symptoms, such as coughing and wheezing, depending on their time of the month, a new study suggests.

Researchers said spikes and dips in estrogen and other hormones likely affect the lungs and other physiological responses involved in breathing. However, it’s still unclear whether the findings could improve doctors’ treatment of women with asthma.

The menstrual cycle “is a very important cycle… with all the biological changes and physiological things that happen,” said Dr. Samar Farha from the Cleveland Clinic, who studies asthma and other respiratory diseases but wasn’t involved in the new research.

“(Some) asthmatics describe that just before their menses, they get a worsening of their symptoms,” she told Reuters Health – but more scientific assessments of what’s going on have come to conflicting conclusions.

For the new study, researchers surveyed close to 4,000 women in Northern Europe who had normal periods and weren’t taking birth control pills.

Along with other health and lifestyle questions, they asked women to report when their last period started, as well as whether they’d had any breathing-related problems in the past three days – such as wheezing or waking up with a coughing attack.

Just under eight percent of women in the study had been diagnosed with asthma. Between two and six percent reported recent wheezing, coughing and/or shortness of breath.

Dr. Ferenc Macsali of Haukeland University Hospital in Bergen, Norway, and colleagues found the number of women with of each of those symptoms changed depending on where they were in their menstrual cycle.

For example, wheezing spiked just before and just after mid-cycle (ovulation). The dip in between corresponds to peaks in estrogen, follicle stimulating hormone and luteinizing hormone, the researchers write in the American Journal of Respiratory and Critical Care Medicine.

Complaints of shortness of breath and coughing both declined just after women got their periods, and shortness of breath was also more rare right before menses started.

Macsali’s team saw cyclical patterns in breathing symptoms in women with and without asthma.

What explains those patterns is still up for debate. Estrogen may affect the lungs directly, the researchers said. Insulin resistance and markers of general inflammation are known to vary during the menstrual cycle, which could also play a role in when breathing symptoms get better or worse.

“The observed patterns in our study are most likely a result of… complex hormonal processes,” the researchers wrote, “and it does not seem plausible that one sex hormone should explain the variation in respiratory symptoms during the menstrual cycle.”

Women with asthma should “be aware of a possibility that their symptoms are influenced by day in cycle,” Macsali told Reuters Health in an email.

Not all asthmatics will notice those changes, Farha pointed out.

For women whose symptoms do get a little worse at certain times of the month, it’s also unclear whether that ever puts them in serious danger, she added. But Farha said it may still be worth bringing up the issue with their doctor.

“It could lead to more personalized therapy, based on where their symptoms are getting worse, in which phases of their menstrual cycle,” Farha said. “You could change therapy and escalate therapy based on (those) phases.”

SOURCE: http://bit.ly/SGe7b0 American Journal of Respiratory and Critical Care Medicine, online November 29, 2012.

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White House preps Plan B if debt talks fail

White House press secretary Jay Carney (Charles Dharapak/AP)President Barack Obama's budget office is preparing for the possibility that "fiscal cliff" talks will fail, triggering painful automatic cuts to domestic and defense programs that he and his Republican foes officially want to avoid. White House press secretary Jay Carney described the planning as an abundance of caution, not pessimism about the seemingly stalled negotiations.

The White House's Office of Management and Budget this week "issued a request to federal agencies" for information needed to finalize calculations on the spending cuts required under what is technically known as "sequestration," Carney told reporters at his daily briefing. OMB is "acting responsibly," he added.

"The administration remains focused on reaching agreement, as we've been discussing, on a balanced deficit-reduction plan that avoids sequestration" he said. "This action should not be read … as a change in the administration's commitment to reach an agreement and avoid sequestration."Leaders of both parties have pledged to work together in the coming weeks, and we are confident, as I just said, that we can reach an agreement. However, with less than one month left before a potential sequestration order would have to be issued, the Office of Management and Budget must take certain steps to ensure the administration is ready to issue such an order should Congress fail to act."

Carney's comments came as talks on the fiscal cliff—a series of tax hikes and government spending cuts that could plunge the economy into a new recession—seemed to be making no headway. Obama and congressional Republicans have each put a proposal on the table but do not appear to be actively involved in negotiating a compromise.

"If our offer is not acceptable to the president, then he has an obligation to show leadership by presenting a credible plan of his own that can pass both houses of Congress," Republican House Speaker John Boehner said. Boehner accused Obama of snubbing spending cuts he accepted in the past (notably in failed 2011 negotiations) and failing to lay out "serious spending cuts."

"This is preventing us from reaching an agreement," Boehner continued. "With the American economy on the brink of the fiscal cliff, we don't have time for the president to continue shifting the goal posts. We need to solve this problem."

Obama, meanwhile, flatly dismissed the idea that Republicans might use next year's vote on raising the country's debt limit as leverage in current fiscal cliff negotiations, saying it won't be entertained by the White House.

While talks between Obama and Boehner appeared to be in a deep freeze, the president and congressional leaders met separately with top executives of the Business Roundtable association in Washington. A BRT official said the group met with Republican House Majority Whip Kevin McCarthy, then Democratic Senate Finance Committee Chairman Max Baucus and Republican Sen. John Thune, who sits on the Finance and Budget committees.

BRT Chairman Jim McNerney, president and CEO of Boeing, described the discussion with Obama as "candid and constructive" and the chat with congressional leaders as "constructive."

He noted that "we encourage both sides to work around the clock, if necessary, to avoid the severe repercussions that inaction would have on U.S. economic growth and job creation."

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WestJet embraces tech to woo business travelers

TORONTO (Reuters) – WestJet Airlines Ltd will use technological innovation, including a new Internet ticket booking system, to help it transform from a no-frills carrier to a lower-cost full-service airline courting lucrative corporate travelers, its chief executive said on Monday.

Canada’s second-biggest airline plans to launch a series of technology systems, most notably the new online booking engine, which will sell three tiers of tickets, in the next two months.

“Companies evolve or they die,” Chief Executive Gregg Saretsky told Reuters in a phone interview from the company’s Calgary head office.

“We’re 16 and going on 17 years old and we can’t stay just as we were 17 years ago. The world has changed. And we are changing to be more relevant for a broader segment of guests.”

The new Internet booking system, which WestJet hopes to launch in late January, will sell economy, mid-tier and premium tickets. That is a major shift from its current system, which sells only the lowest-priced ticket available.

Economy tickets under the new system will continue to sell the lowest available fare, but the cancellation fee for them will jump to C$ 75 ($ 75.48) from C$ 50. Mid-tier tickets will have a C$ 50 cancellation fee.

Premium tickets, unavailable until late March when WestJet finishes reconfiguring its 100 Boeing 737 planes to allow more leg room, will include priority screening and boarding, free cancellations and flexibility on ticket changes.

Pricing for those tickets, which may include free meals and drinks and an extra baggage allowance, has not yet been determined. Fares will be well below half the price for business class at WestJet’s bigger competitor, Air Canada, Saretsky said.

“It’s time for us to be more serious with respect to going after business travelers because frankly, they’re the ones who are booking last-minute and are happy to pay for the conveniences,” Saretsky said.

WestJet will launch its premium economy service with 24 seats per plane, but will consider expansion if it proves “wildly successful,” he added.

POISED FOR CHANGE

WestJet, which has spent about C$ 40 million over the past two years on technology projects, is poised for major changes in 2013 as it readies to launch a new regional airline, Encore.

Saretsky hopes that WestJet’s switch in coming weeks to a new Internet phone system will allow ticket reservation agents to work from home and help make room for Encore staff.

Some 750 reservation agents work at WestJet’s Calgary offices, which house about 2,400 staff. Space will be needed for Encore employees over the next 18 months while their office, hangars and maintenance stores are constructed at the WestJet campus.

Encore will be launch in the second half of 2013, “probably closer to July than December,” Saretsky said, with seven Bombardier Q400 planes.

While WestJet won’t announce Encore’s schedule until Jan 21, the carrier will initially serve only “a handful” of new cities, with ticket prices up to 50 percent below Air Canada’s, he added.

Over the next two months, WestJet will also roll out a guest notification system that alerts travelers via email about their flights, allowing them to check in remotely.

Such self-service technology will be critical as WestJet faces increasing labor costs, Saretsky said.

Wage and benefit costs, which represent about a third of operating costs, have climbed 50 percent since WestJet was founded in 1996.

“You can see that creates a little bit of drag on earnings,” Saretsky said. “We’ve got to find ways of reducing our component costs.”

If WestJet can increase self service options for travelers, that could limit the need for new employees, Saretsky said. Management also wants to improve attendance management, so that fewer employees book off sick around long weekends, and more quickly clean and process planes between flights, he said.

(Reporting By Susan Taylor; Editing by Peter Galloway)

(This story was corrected to show that WestJet is replacing its Internet booking engine, not entire reservation system, in the first and second paragraphs)

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Disney, Netflix sign exclusive TV distribution deal

(Reuters) – Walt Disney Co agreed to give Netflix exclusive TV distribution rights to its movies, becoming the first major studio to stream its movies to TV viewers via Netflix instead of distributing them to HBO, Showtime or other premium TV channels.

The agreement begins in 2016, after Disney‘s current deal with Liberty Media’s pay-TV channel Starz expires.

The deal gives Netflix streaming rights to movies from Disney‘s live action and animation studios, including those from Pixar, Marvel, and the recently acquired Lucasfilms. Disney bought the famed studio founded by George Lucas and responsible for the “Star Wars” franchise for $ 4 billion on October 30.

Movies from Steven Spielberg’s DreamWorks studios are not included in the deal, as that studio distributes its movies through CBS’s Showtime on TV. Disney recently signed a deal to distribute DreamWorks’ films theatrically after the studio’s deal with Viacom’s Paramount Pictures expired.

Under the deal’s terms, Netflix can stream Disney movies beginning seven to nine months after they appear in theaters, as Starz had done in Disney’s prior agreement. The deal does not cover DVD rentals of Disney movies.

The agreement follows similar deals Netflix has inked with smaller studios, including Relativity Media, The Weinstein company and DreamWorks Animation.

Netflix shares were up 12.9 percent to $ 85.83 in afternoon trading following news of the agreement.

(Reporting By Ronald Grover; Editing by Peter Lauria and Tim Dobbyn)

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Baxter to buy Sweden’s Gambro for $4 billion

(Reuters) – Baxter International Inc said on Tuesday that it would buy privately held Swedish kidney dialysis product company Gambro AB for about $ 4 billion, a tie up that would put it in the No. 2 position in the dialysis market.

Baxter, whose shares were down more than 1 percent in afternoon trading, will finance the acquisition with debt and cash. The deal, which is expected to close in the first half of next year, marks Baxter’s biggest acquisition since Chief Executive Robert Parkinson took the helm in 2004.

Baxter manufactures kidney dialysis equipment, drug infusion pumps and blood therapy products. The Gambro acquisition will round out Baxter’s renal business, which accounted for almost one-fifth of the company’s 2011 revenue of $ 13.89 billion.

Gambro is one of the largest makers of equipment for hemodialysis, which is generally performed in a hospital or clinic. The dialysis from Baxter’s machines is called peritoneal and can be performed at home.

Gambro’s sales have been flat to weaker in recent years, undermined partly by capacity constraints, but Baxter executives voiced confidence during a conference call with analysts that the business can be turned around.

“It is a big market and it is going to continue to grow for a long time. There are only so many kidney transplants available in the world,” Parkinson told analysts.

Hemodialysis is a method that is used to remove waste products from the blood when the kidneys fail. Another method is peritoneal dialysis, a treatment for severe chronic kidney disease that uses the patient’s own membrane inside the body as a filter to clear waste. The third treatment option is a kidney transplant.

“At the end of the day, this is an acquisition that is not dependent on any one pathway for value creation. It is not dependent on a major new product launch or technological advancement, and is not dependent on commercial assumptions that our overly optimistic. This is an acquisition that is dependent on execution,” he said. “This is something we know we can do and do well.”

He said the planned acquisition did not represent a change in the direction for the company, which has invested in stem cell research and a treatment for Alzheimer’s disease.

Shares of Baxter were down 1 percent at $ 65.14 on Tuesday afternoon on the New York Stock Exchange.

TOO PRICEY?

Some analysts said they were concerned by the price tag and that the company will scale back its share buyback program in order to acquire Gambro.

“I think the deal makes sense. I think it does fit well with their existing renal business and I think there probably are synergies, but at the same time it is a lot of cash they are paying for this thing. They are taking on a significant amount of debt,” said Michael Matson, an analyst at Mizuho Securities USA.

Moody’s, the credit rating agency, said it put Baxter’s A3 rating on review for downgrade following Gambro announcement.

Derrick Sung, an analyst with Bernstein Research, noted that Baxter will be paying 2.5 times sales, which is not “unreasonable” but appears to be on the high end of comparable deals.

The Gambro deal marks further consolidation in the kidney dialysis market, where Gambro and Baxter compete against companies including U.S.-based DaVita HealthCare Partners Inc and Germany’s Fresenius Medical Care AG & Co KGaA, the biggest player in the hemodialysis market.

“I think in the longer term, the ambition is to try to challenge Fresenius,” currently the market leader, analyst Kristofer Liljeberg of Sweden’s Carnegie investment bank said.

However, he said, Gambro, which is owned by Swedish investment holding company Investor AB and its partly owned private equity company, EQT, had been struggling in recent years with slow growth and price competition.

Liljeberg said the deal was a good one for family-owned Investor, which controls several of Sweden’s top companies. Since they bought Gambro, Investor and EQT have sold off its clinics and a blood component business.

“This is a good long-term home for Gambro,” Borje Ekholm, CEO of Investor, said. “These two companies have a lot of things in common. They share similar values to improve the lives of patients. They have a very complementary geographic fit.”

A GROWING MARKET

More than 2 million patients globally are on some form of dialysis, and that has been increasing more than 5 percent annually, in part because of the rising rates of diabetes and hypertension.

Excluding special items, Baxter expects the Gambro transaction to reduce earnings per diluted share by 10 to 15 cents in 2013 and be neutral or add modestly to them in 2014. The deal is expected to close in the first half of next year.

Excluding the impact of special items and estimated amortization of intangible assets, the company said the deal should not affect earnings in 2013 and add 20 to 25 cents a diluted share in 2014.

Baxter said it expected the deal to add to earnings per diluted share, excluding special items, after 2014.

The suburban Chicago company said it expected over five years to increase sales by 7 to 8 percent, excluding the impact of currency fluctuations, on a compound annual basis, with earnings per diluted share, excluding special items, rising by 8 to 10 percent.

“Companies like Baxter can unlock a fair amount of value when they find strategic use for their overseas cash,” said Piper Jaffray analyst Matt Miksic.

Indeed, Baxter said it planned to finance the deal with cash overseas. Multinational companies that have large international sales often have difficulties moving that cash back to the United States where they can put it to use.

J.P. Morgan was Baxter’s financial adviser for the deal.

(This story has been corrected to remove ticker EQT.N that is not associated with EQT, the private equity firm, in paragraph 17. Also corrects paragraph two to add dropped word “down”)

(Reporting by Esha Dey in Bangalore, Debra Sherman in Chicago, Caroline Humer in New York, and Patrick Lannin and Mia Shanley in Stockholm; editing by Joyjeet Das, Lisa Von Ahn, Matthew Lewis and Marguerita Choy)

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Conservative Republicans booted from House budget panel

WASHINGTON (Reuters) - Two of the most conservative Republicans in the House of Representatives have been kicked off the House Budget Committee, a rare move that could make it easier for the panel to advance a deal with Democrats to cut fiscal deficits.

Representatives Tim Huelskamp of Kansas and Justin Amash of Michigan - both favorites of the anti-tax Tea Party movement - are among those Republicans voting most often against House Speaker John Boehner.

Huelskamp and Amash, who both will begin second terms in the House next month, voted against last year's deal to raise the federal debt limit and staunchly oppose any tax increases. Boehner has now included new revenue in his latest offer to avert the "fiscal cliff" of year-end tax hikes and automatic spending cuts. Given their voting records, winning support from Huelskamp and Amash for such a compromise seemed an uphill battle.

Huelskamp released a statement saying the Republican leadership "might think they have silenced conservatives but removing me and others from key committees only confirms our conservative convictions.

"This is clearly a vindictive move and a sure sign that the GOP establishment cannot handle disagreement," he said.

Huelskamp and Amash had said that despite sweeping changes to the Medicare and Medicaid healthcare programs, committee chairman Paul Ryan's budget did not make deep enough cuts to entitlement programs and military spending.

Boehner spokesman Michael Steel declined to be specific on the reasons for their ouster by the House Republican Steering Committee, which occurred Monday in a closed-door meeting.

"The Steering Committee makes decisions based on a range of factors," Steel said.

Huelskamp said he was given "limited explanation" for his removal from the Budget Committee, a move he called "vindictive." A spokesman for Amash could not be immediately reached for comment.

Huelskamp and Amash cast the only House Budget Committee votes against Ryan's budget plan earlier this year.

While there is often wrangling over committee chairmanships just before a new Congress takes office, it is rare for rank-and-file committee members to be stripped of their assignments.

The 34-member Republican steering committee is headed by Boehner and includes members of House leadership, committee chairs and other lawmakers representing different regions of the country.

The same group last week recommended that Ryan, the conservative former Republican vice presidential candidate, be renewed as Budget Committee chairman.

(Editing by Bill Trott)

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