global healthcare outlook & supply chain implications · healthcare spending a greater priority...

Global Healthcare Outlook & Supply Chain Implications Gene Huang, VP Chief Economist MedSC 2013 Spring Meeting May 15, 2013

Global Healthcare Outlook & Supply Chain Implications: Themes

May 15, 2013 2 Global Healthcare Outlook & Supply Chain Implications - MedSC 2013 Spring Meeting

Structural Growth Drivers – Global demographic trends – Income growth, development stage – Innovation

Industry Outlook Production & Trade Patterns Supply Chain Implications

Healthcare Sector Performance Through the Great Recession


80

90

100

110

120

130

140

150

160

170

180

S&P 500

S&P 500 HEALTHCARE EQUIPMENT & SUPPLIES

Source: Bloomberg

Sales per Share (Index, 2004=100)

Aging Global Population – A Structural Tailwind for Healthcare


9%

11%

13%

15%

17%

19%

21%

2011 2021 2031 2041 2051Source: United Nations

Share of World Population Aged 65 and Over (%)

9.1%

20%

UN World Population Growth (%/yr)65+ 85+ Total

to 2021 3.2% 3.8% 1.1% to 2031 3.2% 3.4% 1.0% to 2041 3.1% 3.9% 0.9% to 2051 2.8% 3.8% 0.8%

Demographic Shift is Global


124

463

378

62 58 45 -

50

100

150

200

250

300

350

400

450

500

More developed

regions

Less developed

regions

Asia Europe Latin America

North America

Source: United Nations

Total Additions to 65 and Over Population to 2032 (millions) • Over the next 20 years, less

developed regions expected to add >3.5x more to 65+ population than developed regions

• China will add more to 65+ population than entire developed world combined

• Asia to have 60% of world’s population over 65 years of age by 2040

Health Expenditures Increase Significantly with Age


-

5,000

10,000

15,000

20,000

25,000

30,000

0-18 19-44 45-54 55-64 65-74 75-84 85+Age Group

Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group. 2004 data.

Per Capita U.S. Personal Healthcare Spending by Age Group (in dollars)

-

500

1,000

1,500

2,000

2,500

3,000

3,500

0-18 19-44 45-54 55-64 65-74 75-84 85+Age Group

Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group. 2004 data.

Per Capita U.S. Spending on Drugs & Medical Products by Age Group (in dollars)

Healthcare Spending a Greater Priority as Development Advances


4

6

8

10

12

14

16

18

20

10,000 20,000 30,000 40,000 50,000 60,000

2010

Hea

lth E

xpen

diture

s %

of G

DP

2010 GDP per Capita (PPP)Source: OECD

Healthcare Expenditure Share vs. Income in OECD Countries

USA

• Strong relationship between income and healthcare expenditures’ share of GDP

• Spending priorities change with incomes

• Social safety nets become more prevalent with development

• Health spending % of GDP: –OECD Average 9.5% –China 5% –India 4%

• Suggests global opportunity as development stage advances

Global Economic Outlook


0

1

2

3

4

5

6

7

APAC US CAN EMEA LAC

trill

ions

of 2

005

US$

, mar

ket e

xcha

nge

rate

s

$ Change in Real GDP, 2013-2023

Source: Economist Intelligence Unit, Haver Analytics

China

India

Other APAC

Eurozone

Other EUR

Brazil

+2.5%/yr

+2.5%/yr

+2.0%/yr

+3.4%/yr

+2.8%/yr

Other APAC

Other Europe

MEA

Japan

Mexico

Other LAC

Innovations Promise Huge Growth Potential for the Industry


•Healthcare innovation: supply creates its own demand

•Customization in treatment: the economics of genomics

•The human condition: no matter how much progress we make, we will never lack for ailments to treat

Medical Device Manufacturing is Booming in the United States


Productivity Growth in the Medical Device Manufacturing Sector has Been Impressive


Industry Overview & Outlook – Medical Devices & Supplies


U.S. Medical Devices & Supplies AnnualGrowth

2013-2018

Source: IBISWorld 2013 estimates & forecasts

7.0%

3.9%

4.8%

Medical Device ManufacturingMedical Instruments & Supplies MfgMedical Supply/Device Wholesaling

$35,195

$91,720

$157,436

2013 Sales ($millions)

• Attractive growth rates expected for Medical Devices

• Aging populations, technological advances support growth

• Healthcare cost containment measures, customer consolidation challenging to industry pricing

• Emerging markets (esp. China and India) big opportunities

0

2

4

6

8

10

12

14

2007 2008 2009 2010 2011 2012Source: USITC, ITA

Export Growth

U.S. Trade in Medical Devices


(10)

(5)

0

5

10

15

2007 2008 2009 2010 2011 2012Source: USITC, ITA

Import Growth

60%Other

13%Japan

10%Netherlands

9%Canada

8%Germany

Exports To...

Source: USITC, ITA

48%Other

15%Mexico

13%Ireland

13%China

11% Germany

Imports From...

Source: USITC, ITA

Industry Overview & Outlook - Pharma


•Global pharmaceuticals and medicine manufacturing a ~$1 trillion business

•Near term growth challenged by patent expirations •Solid growth in biologics, generics •Growth strongest outside developed world Global Pharmaceutical Market

2007-2011 2012 2012-2016North America 347.1 3.5% 1 - 2% 1 - 4%Europe 265.4 4.9% 0 - 1% 0 - 3%Asia / Africa / Australia 165.2 15.5% 10 - 11% 10 - 13%Japan 111.2 3.9% 0 - 1% 1 - 4%Latin America 66.7 12.3% 13 - 14% 10 - 13% Total World 955.6 6.1% 3 - 4% 3 - 6%Source: IMS Health Market Prognosis, May 2012

Annualized Growth Rates2011 Sales ($billions)

North America

Europe

North Asia

Other

Global Production & Trade - Pharma


PercentageNorth America 43.0 Europe 35.0 North Asia 15.0 India & Central Asia 3.0 Oceania 1.5 South America 1.5 Africa & Middle East 0.5 South East Asia 0.5 Source: IBISWorld 2011

Global Pharma Production by Region

Germany 14% Germany 11%Switzerland 9% United States 9%United States 9% India 9%Ireland 8% United Kingdom 8%United Kingdom 7% Belgium 6%France 7% France 6%Belgium 6% Ireland 6%Italy 5% Switzerland 6%Netherlands 4% China 6%Spain 3% Netherlands 4%Source: Global Insight

Top 10 Exporters of Drugs & Medicines2012 Share 2030 Share

Increasing Supply Chain Complexity


•Regulation increasing complexity •Geographic activity centers moving from developed to emerging markets (China, India, Brazil)

•M&A driving consolidation, supply chain optimization

•Biologics growth = more cold chain shipping, storage

Several Opcos Support Healthcare Strategy at FedEx


FedEx Commitment to Healthcare


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