What is the Healthcare Sector?
The Healthcare sector consists of companies that specialize in products and services related to health and medical care, including biotechnology companies, health insurance providers, pharmaceutical companies, companies that manufacture medical equipment, and companies that manage clinics and hospitals, etc. The Healthcare sector is one of the world's largest and fastest-growing industries. Demand for healthcare services is largely price inelastic (healthcare services are demanded regardless of the costs of these services). Due to the indispensable nature of healthcare at all levels of society, this sector is somewhat insulated from fluctuations in the overall market. Key growth drivers include demographic trends (e.g., population growth and ageing), medical progress and the resulting innovations, rising prosperity (especially in emerging markets), and improved access to medical products and services.
COVID-19 Impact on Healthcare Utilisation & Spending
Early in the COVID-19 pandemic, it was not clear how healthcare utilisation and spending would change. Although one might expect health costs to increase during a pandemic, there were other factors that actually drove down spending and utilization. In the spring of 2020, healthcare use and spending dropped precipitously due to cancellations of elective care to increase hospital capacity and social distancing measures to mitigate community spread of the coronavirus. Although telemedicine use increased sharply, it was not enough to compensate for the drop in in-person care. As the year progressed, healthcare use and spending began to rebound as in-person care resumed for hospital and lab services and COVID-19 testing became more widely available. However, overall health spending appears to have dropped slightly in 2020, the first time in recorded history. The drop in health spending in 2020 reflects a decrease in utilization for non-COVID medical care. Particularly, early in the pandemic, it appears that many people delayed or went without medical care they otherwise would have received. Although healthcare use picked up toward the end of the year, it was not enough to compensate for the missed care earlier in the year.
Healthcare Sector Key Trends
Growing Importance of Big Data & Analytics: Despite numerous challenges, there has been considerable progress in the digital transformation of health care, which we expect will continue in 2021 and beyond. Digitization has transformed medical data collection, storage, diagnostic techniques, treatment planning, remote patient monitoring, etc. Healthcare systems have witnessed a shift in data management: from storing data sets to extracting insights that can not only be monetized but can also support opportunity areas, including population health management. Big data and analytics have provided tools and solutions for us to analyze the unstructured and huge volumes of medical data, improving patient-based services, detecting diseases earlier, and generating new insights into disease mechanisms. The volume of health and medical data is only expected to increase exponentially in the coming years. Amidst this growth, however, there have also been challenges to digitization in health care. These challenges are primarily related to high costs, the complexity of new technologies, constantly evolving business needs and scenarios, as well as cybersecurity.
Rise of Telemedicine: The COVID-19 pandemic has accelerated the adoption of telemedicine by many governments, healthcare systems, clinicians, and patients. To tackle the pandemic, governments began issuing telemedicine guidelines to decongest healthcare facilities, which minimised the load on facilities while reducing bed space and conserving clinical supplies. With the global roll-out of 5G wireless technology and the shifting demands from patients, we are already seeing a huge uptick in telemedicine. China, for instance, aims to get at least 70% of their near 1.4 billion citizens on their telemedicine program by 2022, while countries like the United Arab Emirates and Singapore are already rolling out or at least putting regulations in place to support this growing approach. The telemedicine trend is expected to continue.
Increased Public & Private Sector Collaboration: Driven in part by demographic changes, such as an ageing population, a new paradigm of public and private sector collaboration has been developing to transform healthcare financing and delivery. Partnerships with new market participants from industries such as retail, technology, and fitness are expanding and reshaping the health systems. These partnerships have opened the door to a massive global market for these new commercial entrants, while giving governments access to the innovation and efficiency of new technologies they otherwise would not have been able to afford. This has resulted and will likely continue to result in long-term cost savings and better outcomes for patients, which is especially important at a time of depleting health resources.
Empowered Patients: Consumers are taking advantage of unprecedented access to information to become more diligent and informed about their health. The growing power of the patient as a discerning consumer is creating new global markets and informing new models for care. Patients are demanding more sophisticated, convenient, transparent, affordable and personalised services. As a result, an agile private sector has gained a strong foothold in the delivery and financing of healthcare. In a recent PwC consumer survey, almost half of respondents said they would consider having procedures like wound treatment, stitches or staples removed at a retail clinic or pharmacy. One-third said they would get an MRI at a retail venue. The underlying message is that patients are accepting greater accountability for their health.
Healthcare Subsectors & Key Players
The Healthcare sector is comprised of many sub-segments. The three key sub-industries that make up the backbone of this sector include:
Biotechnology: Biotechnology applies biology and biochemistry knowledge to technical processes or products. Biotechnology focuses on the development and production of enzymes, proteins, antibodies and other active substances for medical and other purposes. Biopharmaceutical products are usually produced in a bioreactor with the help of micro-organisms. Today, they play a very important role in the treatment of many diseases. These are often large molecule compounds for the treatment of cancer and other serious diseases. Key players in this sub-segment include Regeneron Pharmaceuticals, United Therapeutics Corp, and Incyte.
Pharmaceuticals: This includes companies active in the research, development, production, and marketing of active pharmaceutical ingredients. Pharmaceuticals eliminate the need for invasive care services. They are subject to a variety of laws and regulations regarding patenting, testing, and ensuring the safety and efficacy of drugs. Leading pharmaceutical companies include Johnson & Johnson, Pfizer, Novartis, Roche, etc.
Medical Technology & Diagnostics: Medical technology combines the technical knowledge from engineering with the medical expertise of doctors. The aim is to detect, prevent, monitor, treat, or alleviate injuries or disabilities. Medtech includes systems for the administration of drugs, cardiovascular equipment, orthopaedic devices and implants, and also operating materials, such as safety pins and syringes. Diagnostics comprises the various methods of medical and therapeutic diagnosis. Companies active in diagnostics develop new or improve existing diagnostic techniques. Medtronic, Abbot Laboratories, and Philips are all examples of key players in this space.