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

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  • 1. 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 Global Economic Trends Global Healthcare Industry Overview Healthcare Systems and Industry Issues United States Japan Europe – Germany, France and United Kingdom Healthcare Industry Performance Healthcare Industry – Key Drivers and Outlook 2
  • 3. Global Economic Overview United Kingdom France Germany Financial sector crisis, fall in consumer Manufacturing output contracted Suffered because of excessive confidence, collapse of Pound, rise in because of fall in demand dependence on exports unemployment United States Japan Housing crisis, credit crunch, Decline in exports, fall in corporate profits, fall in consumer confidence and demand, downward trend in wages and higher lower investment and higher unemployment unemployment 33
  • 4. Way to Recovery - Developed Economies and Stimulus Measures More than $2.0 trillion in 2009 via fiscal stimulus injected by Governments worldwide to spur aggregate demand United States United States United Kingdom United Kingdom Germany Germany Total Stimulus Package - $789.00 billion Total Stimulus Package - $789.00 billion Total Stimulus Package - $35.00 billion Total Stimulus Package - $35.00 billion Total Stimulus Package - $108.70 billion Total Stimulus Package - $108.70 billion Tax relief, funds for - energy, education, Tax relief, funds for - energy, education, Tax cuts and focus on improving financial Tax cuts and focus on improving financial Tax cuts, increases in state benefits, and aid Tax cuts, increases in state benefits, and aid training, infrastructure, science and training, infrastructure, science and sector, lending and confidence sector, lending and confidence for troubled businesses for troubled businesses healthcare healthcare Healthcare - Reduction in health care Healthcare - Reduction in health care Healthcare – Improving and preserving Healthcare – Improving and preserving contributions contributions health, healthcare IT, community services health, healthcare IT, community services France France Japan Japan Total Stimulus Package - $31.70 billion Total Stimulus Package - $31.70 billion Total Stimulus Package- more than $700.00 Total Stimulus Package- more than $700.00 billion billion Focus areas - housing, defense, research Focus areas - housing, defense, research ,and infrastructure ,and infrastructure Focus areas- Consumer electronics, auto Focus areas- Consumer electronics, auto replacement, housing, infrastructure and replacement, housing, infrastructure and health health Healthcare – Improvement in health services Healthcare – Improvement in health services 44
  • 5. Global - Healthcare Industry Overview Global Pharmaceuticals Market Global Pharmaceutical Sales (2008) - $775.00 billion Sales Growth - 4.8 % Europe Germany - 5.7% France - 5.5% 14.9% U.K. - 3.7% Italy - 3.5% Asia Japan - 8.8 % China - 2.8% Source : Frost & Sullivan Global Medical Devices Market Global Medical Devices Sales (2008) - $206.00 billion Sales Growth - 5.7% Europe Market Germany - 22.4% France - 14.4 % 49.1% U.K. - 12.3% Italy - 10.0 % Spain - 4.1% Source : Frost & Sullivan 55
  • 6. Healthcare System Geographical Scope United States Japan Germany France United Kingdom 6
  • 7. United States - Healthcare System and Expenditure Healthcare System • Largely private funded • Largely private funded • Mostly employer provided health insurance • Mostly employer provided health insurance • Government health plans - for elderly, disabled, poor, • Government health plans - for elderly, disabled, poor, and young and young • Government programs covers 27% population • Government programs covers 27% population Source : Frost & Sullivan Healthcare Expenditure Percentage of GDP Per capita 15.9 % • Highest health spending in the world • Highest health spending in the world Private • Health spending more than twice of France, 8.3% $7,290 • Health spending more than twice of France, Expenditure Germany and U.K. Germany and U.K. • High Per capita health spending • High Per capita health spending Public 7.6 % • Public health spending rising rapidly than private Expenditure • Public health spending rising rapidly than private Source : Frost & Sullivan 7
  • 8. United States - Health Sector Issues High health cost Drivers of health cost Efforts to cut cost • Huge wastage in health service • High incentives on insurance • Health spending cut • Huge wastage in health service • High incentives on insurance • Health spending cut delivery delivery • Expense of treating uninsured or • Competitive bidding for Medicare • Expense of treating uninsured or • Competitive bidding for Medicare • Overuse of antibiotics and lab tests under-payments • Overuse of antibiotics and lab tests under-payments • Adjusting Medicare payments to • Uncontrolled diabetes • Adjusting Medicare payments to • Uncontrolled diabetes • Constrained supply of health economic productivity gains • Constrained supply of health economic productivity gains providers providers • Medical mistakes • Increase supply of health • Medical mistakes • Increase supply of health • Expense of litigating and/or settling professionals • Expense of litigating and/or settling professionals • Administrative inefficiency and malpractice lawsuits • Administrative inefficiency and malpractice lawsuits redundant paperwork redundant paperwork • High obesity rate contributing to • High obesity rate contributing to • Healthcare frauds health problems • Healthcare frauds health problems Demographic Challenges • Population increase until 2030 but growth rate will decline • Population increase until 2030 but growth rate will decline • Aging faster than developed countries, but slower than developing countries • Aging faster than developed countries, but slower than developing countries • By 2030, 1out of 5 Americans will be above 65 years • By 2030, 1out of 5 Americans will be above 65 years 8
  • 9. United States - Health Sector Issues (Cont.) Obama’s Health Plan Obama’s Health Plan For those with health insurance For those without insurance For all citizens • Prevents insurance companies from • New insurance marketplace for those • Identify waste, fraud and abuse in • Prevents insurance companies from • New insurance marketplace for those • Identify waste, fraud and abuse in dropping coverage when people are without insurance to compare plans health system dropping coverage when people are without insurance to compare plans health system sick and buy at competitive prices sick and buy at competitive prices • Medical malpractice reform • Medical malpractice reform • Caps out-of pocket expenses • New tax credits to help people buy • Caps out-of pocket expenses • New tax credits to help people buy insurance • Encourage those who can afford to buy insurance • Encourage those who can afford to buy • Eliminates extra charges for insurance • Eliminates extra charges for insurance preventive care • Offers public health insurance option to preventive care • Offers public health insurance option to uninsured at affordable prices uninsured at affordable prices • Protects Medicare beneficiaries • Protects Medicare beneficiaries • New low-cost coverage for those with • New low-cost coverage for those with pre existing conditions pre existing conditions Health Plan Objectives Health Plan Objectives • More Stability and Security • More Stability and Security • Quality and Affordable Choice for all • Quality and Affordable Choice for all • Improve Health Services • Improve Health Services 9
  • 10. United States - Health Sector Issues (Cont.) Stimulus Package - Healthcare 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 Improving and Preserving Healthcare IT Initiatives Key Beneficiaries Healthcare Initiatives • Medicaid • Medicaid • Temporary increase in • Incentives for using EHR • Temporary increase in • Incentives for using EHR Medicaid • Health Professionals Medicaid • Health Professionals • Facilitate regional adoption • Facilitate regional adoption • Assistance to hospitals • Children • Assistance to hospitals • Children • Interoperable EHRs • Interoperable EHRs • Tribal protection • Tribals and Vulnerable • Tribal protection • Tribals and Vulnerable sections of the society sections of the society • Health professions training and • Health professions training and support • Healthcare and IT support • Healthcare and IT Companies Companies 10
  • 11. United States - Healthcare Industry Trends and Opportunities Healthcare Industry Trends Emerging Opportunities Pharmaceuticals • Embryonic Clinical Trials • Cardiovascular Drugs • Oncology Drugs • Diabetes Drugs Medical Devices Source : US Federal Reserve and Frost & Sullivan • Wireless Implantable Devices • Remote Patient Monitoring Devices • Retail drug sales increased by more than 2.0% since August 08 • Digital Medical Imaging Devices • In 2009, investment surged in biopharmaceuticals, medical devices, health care services and medical information Healthcare Services services • Overall industry growth was slightly sluggish in 2009 but will rise • Healthcare IT moderately starting 2010 • Health Insurance • Increased R&D spending with patent expiry being the driving • Home Healthcare force • Huge health sector stimulus plan allocation to be a major support to industry growth 11
  • 12. Japan - Healthcare System and Expenditure Healthcare System National Health Insurance Scheme Employees’ Health Insurance Scheme Special Healthcare System for (NIS) or Social Insurance Scheme (SIS) Seniors (SHSS) • Covers agricultural, forestry, • Covers employees in • Covers 75 years and above • Covers agricultural, forestry, • Covers employees in • Covers 75 years and above fishery workers, self- companies, national or local and bed-ridden patients aged 65 fishery workers, self- companies, national or local and bed-ridden patients aged 65 employed, and unemployed governments, and private years and above employed, and unemployed governments, and private years and above Coverage • And pregnant women, schools • And pregnant women, schools students, and pensioners students, and pensioners • Covers 37% population • Covers 37% population • Cost shared between employer Health • Cost shared between employer and employee Cost • Co-payment is 30% and employee • Patients pay 10% cost • Co-payment is 30% • Patients pay 10% cost Sharing • Co-payment is 20 - 30% • Co-payment is 20 - 30% Healthcare Expenditure Percentage of GDP Per capita • Financing by government, employers, employees and co-insurance • Financing by government, employers, employees and co-insurance 7.9 % Private • Health spending half of U.S. 1.4 % • Health spending half of U.S. Expenditure $2,514 • Annual negotiation to maintain low cost 6.5 % Public • Annual negotiation to maintain low cost Expenditure Source : Frost & Sullivan 12
  • 13. Japan - Health Sector Issues Health Cost Demographic Challenges Stimulus Package • High prescription drug usage • Rapid aging population • Economic slowdown and affect on • High prescription drug usage • Rapid aging population • Economic slowdown and affect on healthcare industry • Over utilization of health resources o Highest % of elderly healthcare industry • Over utilization of health resources o Highest % of elderly population in the world • Stimulus Package population in the world • Stimulus Package • Diet and lifestyle changes • Diet and lifestyle changes contributing to health problems and • Severe population decline • $17.00 billion for health and contributing to health problems and • Severe population decline • $17.00 billion for health and cost welfare cost welfare o Fall in world population o Fall in world population share by 0.5% until 2030 • Focus- Improvement in share by 0.5% until 2030 • Focus- Improvement in health services, nursing and health services, nursing and o Ratio of workers to child care o Ratio of workers to child care pensioners to reduce pensioners to reduce drastically by 2030 drastically by 2030 13
  • 14. Japan - Healthcare Industry Trends and Opportunities Healthcare Industry Trends Emerging Opportunities Pharmaceuticals • Cardiovascular Drugs • Oncology Drugs • Diabetes Drugs • Biopharmaceuticals • Genetic Research • Regenerative Drugs • Dietary Supplements Medical Devices Source : Japan Ministry of Economy ,Trade and Industry and Frost & Sullivan • Digital Medical Imaging • Healthcare industry suffered set back • CT and MRI Equipments • Medical devices sales declined in 2008-2009 Healthcare Services • Healthcare IT • Retail sales of drugs and hygiene products increased by • Electronic Health Records more than 5% between Jan 09 - July 09 • Remote Patient Monitoring • Robotic Medical Services • Japan ‘s domestic demand rise will be slow and industry production will reach its pervious levels only by Q3 2010 14
  • 15. Select European Countries - Healthcare System and Expenditure Healthcare System Germany France United Kingdom • Provision of universal healthcare • Provision of universal healthcare • Provision of universal healthcare • Provision of universal healthcare • Provision of universal healthcare • Provision of universal healthcare • Statutory Health Insurance • Statutory Health Insurance • Public Health Insurance and • Single health care system - National o Covers more than 90% • Public Health Insurance and • Single health care system - National o Covers more than 90% Supplementary Insurance Health Service (NHS) population Supplementary Insurance Health Service (NHS) population • Financing - Government, Employer, • Financing - Taxes, Contributions and • Financing - Employer, Employee and • Financing - Government, Employer, • Financing - Taxes, Contributions and • Financing - Employer, Employee and Employee and Individuals Patient charges Government Employee and Individuals Patient charges Government Healthcare Expenditure 10.4 % 11.1 % 8.4 % Source : Frost & Sullivan Source : Frost & Sullivan 15
  • 16. Select European Countries - Health Sector Issues Germany France United Kingdom • Stimulus Plan • Stimulus Plan • Millennium Development Goals • Stimulus Plan • Stimulus Plan • Millennium Development Goals related to health related to health o Reduction in social health Commitment of massive state o Reduction in social health o Commitment of massive state contribution by 0.6% o Commitment of $9.00 billion to contribution by 0.6% investment in 2009-10 o Commitment of $9.00 billion to investment in 2009-10 o achieve them by 2015 achieve them by 2015 o Investment Programs o Investment Programs • High health cost • High health cost • Proposed reforms over ten-year - • Proposed reforms over ten-year - • New More Centralized Social Fund • New More Centralized Social Fund Healthcare system running deficits System on 1 January 2009 • Healthcare system running deficits Increase in patients' choice System on 1 January 2009 • o o Increase in patients' choice o Provider incentives • Increase in Government loan subsidy o Provider incentives • Increase in Government loan subsidy o Setting quality standards to social health insurance o Setting quality standards to social health insurance o Encourage e-medical billing o Encourage e-medical billing • Easier access to healthcare by NHS • Easier access to healthcare by NHS o Personal health budget o Personal health budget Demographic Challenges • Large population decline in Italy, Spain and Germany while France, Ireland, Luxembourg and U.K. to witness population increase until • Large population decline in Italy, Spain and Germany while France, Ireland, Luxembourg and U.K. to witness population increase until 2030 2030 • Natural population increase will be negative for EU by 2010 • Natural population increase will be negative for EU by 2010 • By 2030, Germany, France and U.K. likely to witness significant high elderly population • By 2030, Germany, France and U.K. likely to witness significant high elderly population 16
  • 17. Select European Countries - Healthcare Industry Trends Pharmaceuticals Industry Trends Medical Devices Trends Source : Eurostat and Frost & Sullivan Source : Eurostat and Frost & Sullivan • Little Affected by slowdown. Overall Europe’s retail • Europe’s medical imaging revenues likely to drop due to pharmacy sales increased between August 08 to 09 low replacement but will start rising from Q1 2010 • 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 17
  • 18. Select European Countries - Healthcare Industry Opportunities Germany France United Kingdom • Pharmaceuticals • Pharmaceuticals • Pharmaceuticals • Pharmaceuticals • Pharmaceuticals • Pharmaceuticals Generic Drugs Active Pharmaceuticals o Generic and Biotechnology o o Generic Drugs o o Active Pharmaceuticals o Generic and Biotechnology Cardiovascular Drugs Ingredients (API) Drugs o o Cardiovascular Drugs Ingredients (API) Drugs Generic Drugs o Life Sciences o Oncology Drugs o Generic Drugs o Life Sciences o Oncology Drugs o o Clinical Trials in Stem Cell o Diabetes Drugs o Clinical Trials in Stem Cell o Diabetes Drugs Research Regenerative Drugs • Medical Devices Research o o Regenerative Drugs • Medical Devices o Innovative Drugs o Medical Imaging Devices o Innovative Drugs o Medical Imaging Devices o Cardiovascular Drugs Radiotherapy Equipments o Cardiovascular Drugs • Medical Devices o Radiotherapy Equipments Oncology and Diabetes • Medical Devices o o o Oncology and Diabetes Nanotechnology o Surgical Equipments Drugs o o Nanotechnology o Surgical Equipments Drugs o Medical Imaging Devices o Pacemakers o Medical Imaging Devices o Pacemakers • Medical Devices • Medical Devices • Healthcare Services • Healthcare Services o X-ray Equipments • Healthcare Services • Healthcare Services o X-ray Equipments Homecare Services E-health Services o Electro Medical o o Homecare Services o o E-health Services o Electro Medical Equipments o Remote Patient Monitoring Equipments o Remote Patient Monitoring o Orthopedic Equipments o Orthopedic Equipments o Nanotechnology o Nanotechnology o Medical Imaging Devices o Medical Imaging Devices • Healthcare Services • Healthcare Services o Telemedicine o Telemedicine o Services using Wireless o Services using Wireless Technology Technology 18
  • 19. Healthcare Industry Performance Country Pharmaceuticals Medical Devices United States Retail sales of Health and Personal Production remained largely Care stores increased by 2.0% unaffected and continued to grow between January 09 – August 09 Retail sales of Pharmacies and Drug stores increased by 2.0% between January 09 – August 09 Japan Retail sales of Drugs and Personal Production declined sharply Hygiene products have increased starting Q3 2007 by more than 5% between January 09 – July 09 Germany Volume of Production - % Change Volume of Production - % Change over last year over last year Q1 2009 – (0.6) Q1 2009 – (2.3) Q2 2009 – (3.4) Q2 2009 – (0.9) Q3 2009 – (4.0) Q3 2009 – (1.3) France Volume of Production - % Change Volume of Production - % Change over last year over last year Q1 2009 – (5.4) Q1 2009 – (2.3) Q2 2009 – 1.2 Q2 2009 – 0.5 Q3 2009 – 2.8 Q3 2009 – 0.6 United Volume of Production - % Change Volume of Production - % Change Kingdom over last year over last year Q1 2009 – 2.7 Q1 2009 – (0.8) Q2 2009 – 2.4 Q2 2009 – 1.3 Q3 2009 – 0.6 Q3 2009 – (3.7) 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 19
  • 20. Healthcare Industry Outlook - Select Developed Countries France Country’s commitment of massive state investment in 2009-10 is likely to benefit health sector Japan Stimulus package funds for United States health and social factors would drive industry growth Huge funds for in 2010 health in stimulus package will support industry growth in long run Germany Stimulus package United Kingdom investment program funds and reform initiatives to Improving health drive industry growth in services of utmost 2010 priority for NHS 20
  • 21. Global Healthcare Industry - Drivers and Outlook Key Drivers Outlook • Improving economic condition in most countries • Pharmaceutical companies likely to shift from • Improving economic condition in most countries • Pharmaceutical companies likely to shift from fragmented approach that focus on multiple diseases fragmented approach that focus on multiple diseases • Stimulus plans and allocated funds to specialized business model to cut cost • Stimulus plans and allocated funds to specialized business model to cut cost • Increased R&D because of patent expiry • Pharmaceutical companies to focus on biologics and • Increased R&D because of patent expiry • Pharmaceutical companies to focus on biologics and vaccines vaccines • Growth of the generic drugs markets • Growth of the generic drugs markets • Generic drug companies, in response to competition • Generic drug companies, in response to competition • Strong government support to health sector likely to make use of innovative selling strategies • Strong government support to health sector likely to make use of innovative selling strategies • Health industry growth in emerging markets • Observed production trends are partly due to structural • Health industry growth in emerging markets • Observed production trends are partly due to structural shifts – Pharmaceutical outsourcing shifts – Pharmaceutical outsourcing • Aging population and rising lifestyle diseases • Aging population and rising lifestyle diseases • Health companies increasingly considering to offer • Health companies increasingly considering to offer • Increase in usage of IT in healthcare more personalized health solutions • Increase in usage of IT in healthcare more personalized health solutions • Medical Devices market more sensitive to economic • Medical Devices market more sensitive to economic cycles – Japan Medical devices output declined sharply cycles – Japan Medical devices output declined sharply 21
  • 22. Next Steps Request a proposal for a Growth Partnership Service or Growth Consulting Services to support you and your team to accelerate the growth of your company. (myfrost@frost.com) 1-877-GoFrost (1-877-463-7678) Join us at our annual Growth, Innovation, and Leadership 2010: A Frost & Sullivan Global Congress on Corporate Growth, September 12-15 2010, San Jose, CA (www.gil-global.com) Register for the next Chairman’s Series on Growth: The CEO's Perspective on Market Research (December 1st) (http://www.frost.com/growth) Subscribe for Frost & Sullivan’s Growth Opportunity Newsletter and keep abreast of innovative growth opportunities (www.frost.com/news) 22
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  • 24. For Additional Information Jake Wengroff Angie Montoya Global Director Global Analyst Briefing Coordinator Corporate Communications Marketing (210) 247-3806 (210) 247-2435 Jake.wengroff@frost.com amontoya@frost.com T.J. Sivan Sandeep Maheshwari Industry Manager Vice President, E&S Economic Research and Analytics (ERA) Economic Research and Analytics (ERA) Division Division +91 (044) 420-44502 (210) 326-0456 jsivan@frost.com smaheshwari@frost.com 24 24

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