is health recession proof? - an analysis of current state of health sector in some developed nations

Is Health Recession Proof? - An Analysis of Current State of Health Sector in Some Developed Nations

Somya Datta, Consultant

Economic Research and Analytics Division

Healthcare,

November 18, 2009

© 2009 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan.

2

Agenda

Global Economy and Healthcare Industry

Healthcare Systems and Industry Issues

Global Economic Trends

Global Healthcare Industry Overview

Healthcare Industry Performance

Healthcare Industry – Key Drivers and Outlook

Europe – Germany, France and United Kingdom

Japan

United States

33

Global Economic Overview

United States

Housing crisis, credit crunch,

fall in consumer confidence and demand,

lower investment and higher unemployment

United Kingdom Financial sector crisis, fall in consumer confidence, collapse of Pound, rise in

unemployment

FranceManufacturing output contracted

because of fall in demand

Germany Suffered because of excessive

dependence on exports

JapanDecline in exports, fall in corporate profits,

downward trend in wages and higherunemployment

44

Way to Recovery - Developed Economies and Stimulus Measures

Japan

Total Stimulus Package- more than $700.00 billion

Focus areas- Consumer electronics, auto replacement, housing, infrastructure and health

Healthcare – Improvement in health services

Japan

Total Stimulus Package- more than $700.00 billion

Focus areas- Consumer electronics, auto replacement, housing, infrastructure and health

Healthcare – Improvement in health services

United Kingdom

Total Stimulus Package - $35.00 billion

Tax cuts and focus on improving financial sector, lending and confidence

United Kingdom


Tax cuts and focus on improving financial sector, lending and confidence

Germany


Tax cuts, increases in state benefits, and aid for troubled businesses

Healthcare - Reduction in health care contributions

Germany


Tax cuts, increases in state benefits, and aid for troubled businesses

Healthcare - Reduction in health care contributions

United States


Tax relief, funds for - energy, education, training, infrastructure, science and healthcare

Healthcare – Improving and preserving health, healthcare IT, community services

United States


Tax relief, funds for - energy, education, training, infrastructure, science and healthcare

Healthcare – Improving and preserving health, healthcare IT, community services

More than $2.0 trillion in 2009 via fiscal stimulus injected by Governments worldwide to spur aggregate demand

France


Focus areas - housing, defense, research ,and infrastructure

France


Focus areas - housing, defense, research ,and infrastructure

5

Global - Healthcare Industry Overview

5

Global Medical Devices Sales (2008) - $206.00 billion

Sales Growth - 5.7%Europe Market

Germany - 22.4%France - 14.4 % U.K. - 12.3% Italy - 10.0 % Spain - 4.1%

Global Pharmaceutical Sales (2008) - $775.00 billion

Sales Growth - 4.8 %Europe

Germany - 5.7%France - 5.5%U.K. - 3.7%Italy - 3.5%

Asia

Japan - 8.8 % China - 2.8%

49.1%49.1%

14.9%14.9%

Global Pharmaceuticals Market

Global Medical Devices Market

Source : Frost & Sullivan


6

Healthcare System

Geographical Scope

United States

Japan

Germany

France

United Kingdom

7

United States - Healthcare System and Expenditure

Private Expenditure

8.3%

7.6 %Public

Expenditure

15.9 %

$7,290

• Highest health spending in the world

• Health spending more than twice of France,

Germany and U.K.

• High Per capita health spending

• Public health spending rising rapidly than private

• Highest health spending in the world

• Health spending more than twice of France,

Germany and U.K.

• High Per capita health spending

• Public health spending rising rapidly than private

• Largely private funded

• Mostly employer provided health insurance

• Government health plans - for elderly, disabled, poor, and young

• Government programs covers 27% population

• Largely private funded

• Mostly employer provided health insurance

• Government health plans - for elderly, disabled, poor, and young

• Government programs covers 27% population

Per capitaPercentage of GDP

Healthcare Expenditure

Healthcare System



8

United States - Health Sector Issues

• Huge wastage in health service

delivery

• Overuse of antibiotics and lab tests

• Uncontrolled diabetes

• Medical mistakes

• Administrative inefficiency and

redundant paperwork

• Healthcare frauds

• Huge wastage in health service

delivery

• Overuse of antibiotics and lab tests

• Uncontrolled diabetes

• Medical mistakes

• Administrative inefficiency and

redundant paperwork

• Healthcare frauds

• High incentives on insurance

• Expense of treating uninsured or

under-payments

• Constrained supply of health

providers

• Expense of litigating and/or settling

malpractice lawsuits

• High obesity rate contributing to

health problems

• High incentives on insurance

• Expense of treating uninsured or

under-payments

• Constrained supply of health

providers

• Expense of litigating and/or settling

malpractice lawsuits

• High obesity rate contributing to

health problems

• Health spending cut

• Competitive bidding for Medicare

• Adjusting Medicare payments to

economic productivity gains

• Increase supply of health

professionals

• Health spending cut

• Competitive bidding for Medicare

• Adjusting Medicare payments to

economic productivity gains

• Increase supply of health

professionals

• Population increase until 2030 but growth rate will decline

• Aging faster than developed countries, but slower than developing countries

• By 2030, 1out of 5 Americans will be above 65 years

• Population increase until 2030 but growth rate will decline

• Aging faster than developed countries, but slower than developing countries

• By 2030, 1out of 5 Americans will be above 65 years

Demographic Challenges

High health cost Drivers of health cost Efforts to cut cost

9

United States - Health Sector Issues (Cont.)

• Prevents insurance companies from

dropping coverage when people are

sick

• Caps out-of pocket expenses

• Eliminates extra charges for

preventive care

• Protects Medicare beneficiaries

• Prevents insurance companies from

dropping coverage when people are

sick

• Caps out-of pocket expenses

• Eliminates extra charges for

preventive care

• Protects Medicare beneficiaries

• New insurance marketplace for those

without insurance to compare plans

and buy at competitive prices

• New tax credits to help people buy

insurance

• Offers public health insurance option to

uninsured at affordable prices

• New low-cost coverage for those with

pre existing conditions

• New insurance marketplace for those

without insurance to compare plans

and buy at competitive prices

• New tax credits to help people buy

insurance

• Offers public health insurance option to

uninsured at affordable prices

• New low-cost coverage for those with

pre existing conditions

• Identify waste, fraud and abuse in

health system

• Medical malpractice reform

• Encourage those who can afford to buy

insurance

• Identify waste, fraud and abuse in

health system

• Medical malpractice reform

• Encourage those who can afford to buy

insurance

• More Stability and Security

• Quality and Affordable Choice for all

• Improve Health Services

• More Stability and Security

• Quality and Affordable Choice for all

• Improve Health Services

Health Plan ObjectivesHealth Plan Objectives

Obama’s Health PlanObama’s Health Plan

For those with health insurance For those without insurance For all citizens

10

United States - Health Sector Issues (Cont.)

Stimulus Package - Healthcare

• Medicaid

• Health Professionals

• Children

• Tribals and Vulnerable

sections of the society

• Healthcare and IT

Companies

• Medicaid

• Health Professionals

• Children

• Tribals and Vulnerable

sections of the society

• Healthcare and IT

Companies

Key Beneficiaries

Programs Funding ($ Billion)

Improving and Preserving Healthcare 90.4

Healthcare IT 48.8

Children and Community Services 12.4

Scientific Research and Facilities 10.0

Community Health 2.8

Comparative Effectiveness Research 1.1

Prevention and Wellness 1.0

Accountability and IT Security 0.1

Source : US Department of Health and Human Services and Frost & Sullivan

• Incentives for using EHR

• Facilitate regional adoption

• Interoperable EHRs

• Incentives for using EHR

• Facilitate regional adoption

• Interoperable EHRs

Healthcare IT Initiatives

• Temporary increase in

Medicaid

• Assistance to hospitals

• Tribal protection

• Health professions training and

support

• Temporary increase in

Medicaid

• Assistance to hospitals

• Tribal protection

• Health professions training and

support

Improving and Preserving Healthcare Initiatives

11

United States - Healthcare Industry Trends and Opportunities

Healthcare Industry Trends Emerging Opportunities

• Retail drug sales increased by more than 2.0% since August 08

• In 2009, investment surged in biopharmaceuticals, medical devices, health care services and medical information services

• Overall industry growth was slightly sluggish in 2009 but will rise moderately starting 2010

• Increased R&D spending with patent expiry being the driving force

• Huge health sector stimulus plan allocation to be a major support to industry growth

Pharmaceuticals

• Embryonic Clinical Trials

• Cardiovascular Drugs

• Oncology Drugs

• Diabetes Drugs

Medical Devices

• Wireless Implantable Devices

• Remote Patient Monitoring Devices

• Digital Medical Imaging Devices

Healthcare Services

• Healthcare IT

• Health Insurance

• Home Healthcare

Source : US Federal Reserve and Frost & Sullivan

12

Japan - Healthcare System and Expenditure

Private Expenditure1.4 %

6.5 % Public Expenditure

7.9 %

$2,514

• Financing by government, employers, employees and co-insurance

• Health spending half of U.S.

• Annual negotiation to maintain low cost

• Financing by government, employers, employees and co-insurance

• Health spending half of U.S.

• Annual negotiation to maintain low cost

Per capita Percentage of GDP

• Co-payment is 30%• Co-payment is 30%

• Cost shared between employer and employee

• Co-payment is 20 - 30%

• Cost shared between employer and employee

• Co-payment is 20 - 30%

• Patients pay 10% cost • Patients pay 10% cost

• Covers agricultural, forestry,

fishery workers, self-

employed, and unemployed

• And pregnant women,

students, and pensioners

• Covers 37% population

• Covers agricultural, forestry,

fishery workers, self-

employed, and unemployed

• And pregnant women,

students, and pensioners

• Covers 37% population

• Covers employees in

companies, national or local

governments, and private

schools

• Covers employees in

companies, national or local

governments, and private

schools

• Covers 75 years and above

and bed-ridden patients aged 65

years and above

• Covers 75 years and above

and bed-ridden patients aged 65

years and above


Healthcare System

Employees’ Health Insurance Scheme or Social Insurance Scheme (SIS)

National Health Insurance Scheme (NIS)

Special Healthcare System for Seniors (SHSS)

Coverage

HealthCost

Sharing


13

Japan - Health Sector Issues

• High prescription drug usage

• Over utilization of health resources

• Diet and lifestyle changes

contributing to health problems and

cost

• High prescription drug usage

• Over utilization of health resources

• Diet and lifestyle changes

contributing to health problems and

cost

• Rapid aging population

o Highest % of elderly

population in the world

• Severe population decline

o Fall in world population share by 0.5% until 2030

o Ratio of workers to pensioners to reduce drastically by 2030

• Rapid aging population

o Highest % of elderly

population in the world

• Severe population decline

o Fall in world population share by 0.5% until 2030

o Ratio of workers to pensioners to reduce drastically by 2030

• Economic slowdown and affect on

healthcare industry

• Stimulus Package

• $17.00 billion for health and

welfare

• Focus- Improvement in

health services, nursing and

child care

• Economic slowdown and affect on

healthcare industry

• Stimulus Package

• $17.00 billion for health and

welfare

• Focus- Improvement in

health services, nursing and

child care

Stimulus PackageDemographic ChallengesHealth Cost

14

Japan - Healthcare Industry Trends and Opportunities

Healthcare Industry Trends Emerging Opportunities

• Healthcare industry suffered set back

• Medical devices sales declined in 2008-2009

• Retail sales of drugs and hygiene products increased by

more than 5% between Jan 09 - July 09

• Japan ‘s domestic demand rise will be slow and industry

production will reach its pervious levels only by Q3 2010

Pharmaceuticals

• Cardiovascular Drugs

• Oncology Drugs

• Diabetes Drugs

• Biopharmaceuticals

• Genetic Research

• Regenerative Drugs

• Dietary Supplements

Medical Devices

• Digital Medical Imaging

• CT and MRI Equipments

Healthcare Services

• Healthcare IT

• Electronic Health Records

• Remote Patient Monitoring

• Robotic Medical Services

Source : Japan Ministry of Economy ,Trade and Industry and Frost & Sullivan

15

Select European Countries - Healthcare System and Expenditure

• Provision of universal healthcare

• Single health care system - National Health Service (NHS)

• Financing - Taxes, Contributions and Patient charges


• Single health care system - National Health Service (NHS)

• Financing - Taxes, Contributions and Patient charges


• Statutory Health Insurance o Covers more than 90%

population

• Financing - Employer, Employee and Government


• Statutory Health Insurance o Covers more than 90%

population

• Financing - Employer, Employee and Government


• Public Health Insurance and Supplementary Insurance

• Financing - Government, Employer, Employee and Individuals


• Public Health Insurance and Supplementary Insurance

• Financing - Government, Employer, Employee and Individuals

10.4 % 11.1 %

8.4 %


Germany France United Kingdom

Healthcare System

Source : Frost & Sullivan Source : Frost & Sullivan

16

Select European Countries - Health Sector Issues

• Millennium Development Goals related to health

o Commitment of $9.00 billion to achieve them by 2015

• Proposed reforms over ten-year -

o Increase in patients' choice

o Provider incentives

o Setting quality standards

o Encourage e-medical billing

• Easier access to healthcare by NHS

o Personal health budget

• Millennium Development Goals related to health

o Commitment of $9.00 billion to achieve them by 2015

• Proposed reforms over ten-year -

o Increase in patients' choice

o Provider incentives

o Setting quality standards

o Encourage e-medical billing

• Easier access to healthcare by NHS

o Personal health budget

• Stimulus Plan

o Reduction in social health contribution by 0.6%

o Investment Programs

• New More Centralized Social Fund System on 1 January 2009

• Increase in Government loan subsidy to social health insurance

• Stimulus Plan

o Reduction in social health contribution by 0.6%

o Investment Programs

• New More Centralized Social Fund System on 1 January 2009

• Increase in Government loan subsidy to social health insurance

• Stimulus Plan

o Commitment of massive state

investment in 2009-10

• High health cost

• Healthcare system running deficits

• Stimulus Plan

o Commitment of massive state

investment in 2009-10

• High health cost

• Healthcare system running deficits

• Large population decline in Italy, Spain and Germany while France, Ireland, Luxembourg and U.K. to witness population increase until

2030

• Natural population increase will be negative for EU by 2010

• By 2030, Germany, France and U.K. likely to witness significant high elderly population

• Large population decline in Italy, Spain and Germany while France, Ireland, Luxembourg and U.K. to witness population increase until

2030

• Natural population increase will be negative for EU by 2010

• By 2030, Germany, France and U.K. likely to witness significant high elderly population


Demographic Challenges

17

Select European Countries - Healthcare Industry Trends

• Europe’s medical imaging revenues likely to drop due to

low replacement but will start rising from Q1 2010

Pharmaceuticals Industry Trends Medical Devices Trends

• Little Affected by slowdown. Overall Europe’s retail

pharmacy sales increased between August 08 to 09

• Pharmaceutical and Medical devices manufacturing in

France, Germany and U.K. are showing signs of recovery.

They are likely to reach their previous levels by Q2 2010

Source : Eurostat and Frost & Sullivan Source : Eurostat and Frost & Sullivan

18

Select European Countries - Healthcare Industry Opportunities

• Pharmaceuticals

o Generic Drugs

o Cardiovascular Drugs

o Oncology Drugs

o Diabetes Drugs

o Regenerative Drugs

• Medical Devices

o Nanotechnology

o Medical Imaging Devices

• Healthcare Services

o Homecare Services

• Pharmaceuticals

o Generic Drugs


o Oncology Drugs

o Diabetes Drugs

o Regenerative Drugs

• Medical Devices

o Nanotechnology



o Homecare Services

• Pharmaceuticals

o Active Pharmaceuticals

Ingredients (API)

o Generic Drugs

• Medical Devices


o Radiotherapy Equipments

o Surgical Equipments

o Pacemakers


o E-health Services

o Remote Patient Monitoring

• Pharmaceuticals

o Active Pharmaceuticals

Ingredients (API)

o Generic Drugs

• Medical Devices


o Radiotherapy Equipments

o Surgical Equipments

o Pacemakers


o E-health Services

o Remote Patient Monitoring

• Pharmaceuticals

o Generic and Biotechnology

Drugs

o Life Sciences

o Clinical Trials in Stem Cell

Research

o Innovative Drugs


o Oncology and Diabetes

Drugs

• Medical Devices

o X-ray Equipments

o Electro Medical

Equipments

o Orthopedic Equipments

o Nanotechnology



o Telemedicine

o Services using Wireless

Technology

• Pharmaceuticals

o Generic and Biotechnology

Drugs

o Life Sciences

o Clinical Trials in Stem Cell

Research

o Innovative Drugs


o Oncology and Diabetes

Drugs

• Medical Devices

o X-ray Equipments

o Electro Medical

Equipments

o Orthopedic Equipments

o Nanotechnology



o Telemedicine

o Services using Wireless

Technology


19

Healthcare Industry Performance

Source : US Federal Reserve, US Census Bureau, Japan Ministry of Economy ,Trade and Industry, Japan Ministry of Internal Affairs and Communications, Eurostat and

Frost & Sullivan

Country Pharmaceuticals Medical Devices

United States Retail sales of Health and Personal

Care stores increased by 2.0%

between January 09 – August 09

Retail sales of Pharmacies and

Drug stores increased by 2.0%

between January 09 – August 09

Production remained largely

unaffected and continued to grow

Japan Retail sales of Drugs and Personal

Hygiene products have increased

by more than 5% between January

09 – July 09

Production declined sharply

starting Q3 2007

Germany Volume of Production - % Change

over last year

Q1 2009 – (0.6)

Q2 2009 – (3.4)

Q3 2009 – (4.0)

Volume of Production - % Change

over last year

Q1 2009 – (2.3)

Q2 2009 – (0.9)

Q3 2009 – (1.3)

France Volume of Production - % Change

over last year

Q1 2009 – (5.4)

Q2 2009 – 1.2

Q3 2009 – 2.8


over last year

Q1 2009 – (2.3)

Q2 2009 – 0.5

Q3 2009 – 0.6

United Kingdom


over last year

Q1 2009 – 2.7

Q2 2009 – 2.4

Q3 2009 – 0.6


over last year

Q1 2009 – (0.8)

Q2 2009 – 1.3

Q3 2009 – (3.7)

20

Healthcare Industry Outlook - Select Developed Countries

United Kingdom

Improving health services of utmost

priority for NHS

United States

Huge funds for health in stimulus

package will support industry growth in

long run

Germany

Stimulus package investment program funds

and reform initiatives to drive industry growth in

2010

Japan

Stimulus package funds for health and social factors

would drive industry growth in 2010

France

Country’s commitment of massive state investment

in 2009-10 is likely to benefit health sector

21

Global Healthcare Industry - Drivers and Outlook

• Improving economic condition in most countries

• Stimulus plans and allocated funds

• Increased R&D because of patent expiry

• Growth of the generic drugs markets

• Strong government support to health sector

• Health industry growth in emerging markets

• Aging population and rising lifestyle diseases

• Increase in usage of IT in healthcare

• Improving economic condition in most countries

• Stimulus plans and allocated funds

• Increased R&D because of patent expiry

• Growth of the generic drugs markets

• Strong government support to health sector

• Health industry growth in emerging markets

• Aging population and rising lifestyle diseases

• Increase in usage of IT in healthcare

• Pharmaceutical companies likely to shift from

fragmented approach that focus on multiple diseases

to specialized business model to cut cost

• Pharmaceutical companies to focus on biologics and

vaccines

• Generic drug companies, in response to competition

likely to make use of innovative selling strategies

• Observed production trends are partly due to structural

shifts – Pharmaceutical outsourcing

• Health companies increasingly considering to offer

more personalized health solutions

• Medical Devices market more sensitive to economic

cycles – Japan Medical devices output declined sharply

• Pharmaceutical companies likely to shift from

fragmented approach that focus on multiple diseases

to specialized business model to cut cost

• Pharmaceutical companies to focus on biologics and

vaccines

• Generic drug companies, in response to competition

likely to make use of innovative selling strategies

• Observed production trends are partly due to structural

shifts – Pharmaceutical outsourcing

• Health companies increasingly considering to offer

more personalized health solutions

• Medical Devices market more sensitive to economic

cycles – Japan Medical devices output declined sharply

OutlookKey Drivers

22

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is health recession proof? - an analysis of current state of health sector in some developed nations

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