Medium-Term opportunities in a post-pandemic world
In this series we look at the structural growth trends that have emerged and how they are captured in our thematic mega-trend framework.
The COVID pandemic has had a sizeable impact on the healthcare sector which is traditionally inertia prone. The short-term impact has largely been seen on the supply side, with patient’s ability to access various settings disrupted, for example hospitals, physician offices and dental clinics. This resulted not only in the rapid uptake of digital services and remote patient monitoring, with reticent physicians offered little choice but to adopt new technology. It also led to the establishment of reimbursement for services delivered digitally.
In the last week of March 2020, the number of US telehealth ‘visits’ increased 154% YoY1. Another impact of ‘disruption of access’ has been to clinical trials, while vaccines were also prioritised in advancing through regulatory pathways, benefiting those with an ability to be nimble in their development programs. Over the long term we see the pandemic as only highlighting the existing and increasing pressure on healthcare systems which will serve to draw focus further on cost control and efficiency. We see low cost centres structurally benefiting, including an expanded use and reimbursement of at home monitoring and testing. To be better prepared for future pandemics, we expect society to put greater investment into vaccines, more efficient use of health infrastructure and an increase healthcare infrastructure generally - such as intensive care units.
Adoption of virtual healthcare applications
Top initiatives to optimize adoption of virtual healthcare in the U.S. in 2020
Telehealth visits as a share of total visits in the U.S. in 2020
Source: Statista and Deloitte, February 2021. Survey period 2020, clinical leaders from 50 large health systems.
Over the next 10 years, we expect several trends to unfold to serve growing healthcare needs, lower the cost burden, and improve patient outcomes. One key premise to bend the cost curve is to move away from “fee-for-service” (FFS) models which incentivise utilisation of the healthcare system and move to “value based care” (VBC) which takes a move holistic view of cost. We expect over the medium and long term that improvements in technology, data and regulatory sophistication will allow for more appropriate reimbursement of prevention instead of treatment.
To further the aim of VBC, demand for “Real World Evidence” (RWE) will continue to drive the ongoing shift from in-house R&D to outsourcing to contract research organisations. In a similar vein, other winners from the VBC trend are differentiated leaders (those that utilise software/AI, wearables/sensors and connectivity/automation) which can use measurable data to evidence outcomes and costs and thus receive proportional reimbursement.
Large areas of unmet need include 21st Century diseases such as obesity, chronic diseases and cancer. The old traditional business models and channels in healthcare will be disrupted, in particular, high cost centres of care will be displaced or circumnavigated, with COVID having only accelerated the existing trends towards digital health provision, home health and remote monitoring described previously.
As technology improves, the ability to personalise healthcare will have long term effects on some health industries. We expect the pharmaceutical market to continue to become more complex with greater use of life science & tools (such as genomics and spatial technologies) in drug development. Further, we view the market for therapeutics as fragmenting. For example, personalised cell and gene therapies which will support the outsourcing industry, in particular Contract Development & Manufacturing Organisations (CDMO’S). Finally, while developed markets are more budget constrained, there is significant scope to increase healthcare spending at a system level in emerging markets. We highlight China as a major opportunity in finding investment ideas as they scale up their healthcare infrastructure. As in other areas of the economy, the lack of existing infrastructure necessitates and perhaps enables China to ‘skip’ the Western development pathway, achieving rapid digital integration with physical assets.
Healthcare – percentage of current expenditure
Source: World Bank Data Bank and World Health Organization Global Health Expenditure database as at 19 March 2021.
Online healthcare market in China 2012-2020
Source: Statista and Forward Intelligence (Qianzhan) as at March 2020. *2020 uses a projected figure.
1 Centres for Disease Control and Prevention – Morbidity and Mortality Weekly Report, 30 October 2020. https://www.cdc.gov/mmwr/volumes/69/wr/mm6943a3.htm
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