Global outlook: Healthcare - Economist Intelligence Unit

Global outlook: Healthcare

March 2014

healthcare

1

Today’s presenters

Ana Nicholls Lauren Brayshaw
Managing Editor, Industry Briefing Marketing executive
Economist Intelligence Unit
Economist Intelligence Unit

22

Contents healthcare

Explanation of global outlooks
The global economy

Overview for healthcare spending
Overview for pharma spending
Regional outlooks
Value-based healthcare

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Explanation of our global outlooks

The Economist Intelligence Unit’s global outlooks:

• Form part of the our industry briefing service,
available on www.eiu.com;

• Cover six industries: automotive, consumer goods,
energy, financial services, healthcare and telecoms;

• Are compiled from our 60+ country forecasts and
reports, aggregated into regions;

• Are designed to help companies plan ahead, by
analysing growth drivers and potential risks in each
region;

• Are published quarterly, updating our forecasts and
tracking notable trends in each industry.

• For healthcare, forecasts are in nominal dollars and
driven by factors such as GDP growth, population
growth and political trends.

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The global economy

Synchronised upturn in the major GDP growth, %, 2013-14
developed economies
Sub-Saharan Africa 4
• US recovery is deepening; Mid East/N Africa 3.7
broad-based Latin America
Asia 3.7
• Europe is growing, though 2.5
fitfully Transition economies
3.2
• Japan: Abenomics helping, but 2.7
no panacea
3.9
• China, India, Brazil: slowdown 3.9
is both cyclical and structural
3
1.5

Western Europe 1.5

Tighter financial conditions globally 0.3
• Less liquidity from the Fed
• Is there risk of an emerging North America 2.9 2014
markets crisis? World 1.9 2013

2.9
2

012345

Overview of health spending: global healthcare

In all regions, health spending is Health spending, US$ bn
rising as populations grow and age, 10,000
World
technologies improve and patients 9,000
N America
become better informed. 8,000
7,000 Asia
• Global health spending rose by Europe
2.6% in nominal dollar terms in
In order:
2013, a slight acceleration from 6,000 Latin America,
Transition economies,
2012. 5,000 Middle East/Africa

• We expect average growth of 4,000 SPONSORS
5.3% a year in 2014-18. Given

population growth, spending per 3,000

head will rise by 4.5% a year. 2,000

• But global spending growth 1,000
slower than in past decade 0
(7%), and will lag GDP falling

from around 10.6% to 10.3%.

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Overview of health spending: regional

• Fastest growth will be in the Middle Health spending, annual average growth, %
East/Africa, followed by Asia. China,
India, Nigeria and Indonesia likely to 10 9.5 9.3
see double-digit growth. 8.3 8.6
2008-13
• Slowest growth will be in Western 7.7
Europe, with heavy government debts 9
and constraints on tax revenue.
2014-18
• Asian spending still low as a
percentage of GDP, but in total 8 7.5
dollars will overtake Europe in 2016.
7
• North American growth will be strong,
buoyed by health reforms. Latin 6 5.3
America is already quite a heavy 4.9 5 4.4
spender but political pressures are
increasing. 5 4.5

4 2.9
3 2.5

2

1 0.5

0

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Overview of pharma spending: global healthcare

Pharma spending is rising faster Pharma spending, US$ bn
than health spending. Partly
consumer demand, partly higher 1800 World
prices of innovative drugs. 1600
1400 N America
• But not true in Western Europe, 1200 Asia
where pharma being squeezed. 1000
Asia has already overtaken Europe
Europe in terms of total spend. 800
600 In order:
• Globally we expect average 400 Latin America,
growth of 6.7% pa in 2014-18. 200 Transition economies,
With population growth, spend Middle East/Africa
per head will rise by 5.9% pa. 0
SPONSORS
• By 2018 Western Europe’s
share of global market will be
17%, while Asia-Pacific’s will
near 29%. North America’s
stable at over 41%.

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Overview of pharma spending: regional

• Fastest growth forecast to be in Pharma spending, annual average
the Transition Economies. But growth, %
already heavy spenders on
pharma―25% of health spending. 14 12.2

• Asian growth is also likely to 2008-13 9.9
strengthen. In China and Russia, 12 2014-18 9.3
where sales will more than double
in US-dollar terms by 2018 . 10

• Slowest growth will be in Western 8 6.8 6.7
Europe, but still a recovery after 6.1 4.6
recent slumps. 6.4

• North America and Latin America 6 5.6 5.2
should see similar growth rates,
but in the first this will be 4
acceleration and in the second a
slight slowdown. 2.2
2

0

-2 -1.6
-4

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Regional outlook: North America

• Growth in health and pharma spending similar Annual average growth, %, 2014-18
in the US and Canada, but for Canada this is
a slowdown and for the US an acceleration. 8 Pharma

• US health reforms the big driver, but so far just 7 US
4.2m signed up. 6 Canada

• Canada’s spending likely to rise in line with 5
GDP. Few federal mechanisms to bring down
spending. 4

3

2

1

0
Health

• Express Scripts data show that US pharma
markets are polarising. Branded drug prices
are rising fast while generic prices fall.
Particularly strong price growth for cancer
therapies (up 21%).

• But volume growth for generics means that in
terms of overall sales it is the middle that is
being squeezed. Traditional therapies for high
cholesterol, heart disease etc.

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Regional outlook: Western Europe

• In all cases apart from the UK, pharma is Annual average growth, %, 2014-18
coming from a decline while health spending
has been constrained. Pharma has been Pharma
squeezed by price-cuts, patent expiries, pro-
generic policies. Greece
France
• Most severe effects in Greece, where IMF is UK
trying to restrict health spending to 6% of GDP. Spain
Germany
• Pharma spending in general is likely to remain
slower than health spending. Exception likely to Health
be Spain, with OTC boost and debt
repayments. -6 -4 -2 0 2 4 6

• Political backlash against rationing and in some
cases co-payments. Regulators being forced to
ease access to medicines.

• Fiscal deficits starting to narrow again, allowing
more room for spending rise, although region
remains indebted.

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Regional outlook: Asia

• Health and pharma spending growth Annual average growth, %, 2014-18
rapid, but slower. Pharma expected to
rise faster than overall healthcare Japan
spending.
Australia
• Expansion will be driven largely by China,
thanks to the rollout of public health Indonesia
programmes.
Pharma India
• By 2016 China’s pharmaceutical market China
will be bigger than that of Japan, where
growth will be minimal, owing to rising Health
use of generics and market competition. 0 5 10 15 20

• India, Indonesia, Malaysia, South Korea
and Thailand will also see double-digit
growth, despite efforts to bolster cheap
local production and reduce drug prices.

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Regional outlook: Latin America

• Forecasts heavily affected by exchange Annual average growth, %, 2014-18
rate shifts to dollars.
Argentina
• Drag is Argentina, where we have
downgraded our US dollar forecast Mexico
sharply to reflect currency weakness.
Brazil
• The large Brazilian and Mexican markets
will also be slightly dampened by a Pharma Colombia
strong supply of cheap generics. Both Chile
countries are also making efforts to
increase local supplies of branded drugs. Health
-2 0 2 4 6 8 10
• The fastest growth will be in Chile,
although the government is making
efforts to control spending.

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Value-based healthcare healthcare

BENEFITS New EIU report available from:
http://www.eiu.com/pharmastrategy
• Cost-containment: maximum value for money,
funding goes further.

• Outcomes improve: evidence-based approach
to treatment, best practice spreads.

• Integrated care pathways: greater efficiency,
clearer workload, faster patient throughput.

Main beneficiaries = Payers and patients

DISRUPTIVE EFFECTS

• Pricing pressures: uncertainty over ROI
• May deter innovation and R&D investment
• Changes to care pathways, payments,

relationships.
• Increased paperwork/investment in IT systems
Onus on providers/suppliers (inc pharma, medtech)

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About EIU Healthcare healthcare

In 2012, the Economist Intelligence Unit, a world-leading provider of industry, country, and market
insight to multinational corporations, acquired two healthcare businesses, Clearstate and Bazian.

•Bazian specialises in evidence-based analysis of drugs, devices and healthcare services. It works
with organisations such as NICE to evaluate new technologies and treatment methods.

•Clearstate is the market leader in Asia-Pacific in providing data and analysis on the medtech and
pharmaceutical industries through its network of 28,000 medical professionals and 20,000 hospitals
across Asia.

These acquisitions complement the EIU’s existing analysis of the healthcare and pharmaceuticals
industries in 60 major markets.

Dr Vivek Muthu
Healthcare Director, Economist Intelligence Unit
Chief Executive, Bazian
20 Cabot Square, London E14 4QW
Tel: +44 20 7576 8366

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healthcare

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