A pandemic can surely put worldwide healthcare in the spotlight, showing the strengths and weaknesses of different nation’s systems, or lack thereof. How then can global healthcare learn and progress? We discuss the options and the potential implications for investors.
Beyond the challenges posed by COVID-19, healthcare will continue to be a key issue for the global economy. A growing global population, for instance, will need cheap and efficient diagnosis, treatment and healthcare facilities to successfully combat new and existing conditions. Moreover, there will have to be greater parity between developed and emerging market economies, particularly in terms of access.
Reaching this panacea will not be easy, however. Such progress will depend on political, financial, regulatory and commercial considerations aligning with the personal nature of healthcare.
THE CLINICAL PICTURE OF GLOBAL HEALTHCARE
What does worldwide healthcare really look like? We’re living longer, and today’s treatments keep improving life expectancy and survival rates for previously untreatable conditions. These are obviously victories to celebrate, but they can also put an undeniable strain on a country’s finances.
Maintaining today’s hospitals – fully equipped and ready for us 24/7, whether we need them or not – is expensive. The democratisation of affordable healthcare is a tricky balancing act.
Cost advantages do lie in lowering the need for cure altogether by increasing the awareness of healthy lifestyles and boosting prevention. The more we prevent, the better the system can cope, but curative care will still require massive investment to provide faster and better treatments when needed.
What to focus on and how to provide funding are questions to which countries, companies, regulators and investors may answer differently – influenced by changes in a political and economic landscape that is far from predictable.
FROM RESHAPING THE LARGEST MARKET…
While most developed economies aren’t considering revolutionary changes to their healthcare policies, the debate about the nationalisation of the US system – the world’s largest healthcare market – is getting more and more animated.
With its world-leading facilities and its role as a major employer in a free-market economy that fuels innovation, the current system makes many Americans proud. Too much government intervention could be politically tricky to manage, especially with a looming election, and hamper the sector’s growth.
On the other hand, the recent global rise of healthcare expenses hit the US harder than others, due to the lack of significant incentives to control price inflation. Considerable savings can be made by conducting care outside of expensive hospital admissions, placing tighter controls on drug pricing and price inflation, and restructuring bio-similar regulations to open the competition.
But, concerned over the affordability of a healthcare system that risks putting profits before patients, many are calling for urgent reform. The challenge will be to enable transformation without sacrificing the wide-spread, well-funded and world-leading powerhouse that the US healthcare currently is.
…TO MAKING WAY FOR THE NEW PLAYER
While the US experiences some headaches, what about its main political and trade rival? Not so long ago the wealthiest in China had to go abroad for medicines and treatments, while the poorest people had very limited options on receiving a negative diagnoses. But things are changing, and the competitive power of China may soon advance to the healthcare sector, too.
The growing Chinese middle classes are pushing the government to meet its ambitious target: more than doubling the value of its healthcare industry to $2.3 trillion by 20301, and providing better, faster and cheaper healthcare than anywhere else on the globe.
The drug industry is playing a vital role in achieving this ambition. Some foreign drugs and medical trials are now getting approved in China quicker than in the US, and pharma companies have much to gain from tapping into this market. Still, lowering their prices by up to 80% may be a bitter pill to swallow. Will the chance to access such a vast patient pool sweeten it enough?
On the service front, in the last five years China has doubled the funding of public hospitals to $38 billion2. But the number of its patients is higher than in any other country, and they spend on average a fraction of what American patients spend on healthcare. Satisfying their needs, controlling costs and avoiding stress on the country’s medical insurance fund, while still encouraging cutting-edge research, will be a challenge. As China works its way through this unprecedented ambition, the outcomes won’t just affect billions of Chinese patients, but the whole global healthcare industry.
THE HIPPOCRATIC OATH 2.0
In such a scenario, what role can technology have in reforming both faces of today’s healthcare?
Our increasing use of personal tech is transforming the way to deliver diagnosis and sometimes treatment, as well as enabling do-it-yourself care. Virtual healthcare services, such as telemedicine, are being used more and more, especially during the COVID-19 induced lockdown. If care is shifting to lower-cost settings, it’s also thanks to how tech enables and improves its coordination.
Tech is also an incredible ally of wellbeing, as effective prevention goes beyond providing better, more affordable and broadly available medicines. Not only has wearable tech made monitoring our real-time health affordable and even fashionable, but it revolutionised the way the healthcare system connects and communicates with people. No wonder, then, that it has grown from 84 million units in 2015 to 245 million units in 20193 – and it’s likely to continue growing.
Artificial intelligence is also enabling the analysis of highly complex biological data, and tech can make a massive difference in areas like diagnostics, genetics, innovative drug delivery, advanced materials, robotics, haptics and miniaturisation for precision diagnostics. Such a revolution, though, will require significant investment. To maximise the benefits, governments and regulators will need to create the right environment to encourage new entrants and for new technology to be affordable and widely available.
HOW TO OPERATE
At BNP Paribas Asset Management, we believe healthcare, will be a key investment theme for this decade. Secular trends such as ageing populations and changing lifestyles should support strong growth potential, while the power of healthcare innovation should continue to create new markets and disrupt others. Healthcare can also provide downside protection in risky periods as we have seen this year.
For investors seeking to harness the benefits of the healthcare sector, our Health Care Innovators Fund may be a suitable option. Managed by an experienced team in Boston, the team incorporates strategic and ESG considerations to target innovative healthcare companies that are recognising and reacting to the drivers for healthcare now, and for years to come.
1Source: bloomberg.com; China Is Striving for the World’s Best, Cheapest Healthcare 2Source: bloomberg.com; China Is Striving for the World’s Best, Cheapest Healthcare 3Source: forbes.com; Wearable Tech Market To Treble In Next Five Years
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