Health Care sector overview

8/8/2019 Health Care sector overview

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Sector overview

By Pierre Cosquer


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ContentsSlides

y Self introductiony

What is the health caresector?y Market overviewy Job outlooky The health care reformy News of the weeky Companies of interesty Bibliography and

recommended reading

y 3 4y 5 10y 11 15y 16 18y 19 29y 30 31y 32 33y 34 - 36


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y My name: Pierre Cosquer

y Nationality: French

y

2nd

year JMSB student

y Major in Finance

y Email: [email protected]

y Looking for an internship!!


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Wha t types of comp anies ar e included in

th is secto r?y H ospitalsy H ealth insurersy Biotechnology y

Drug manufacturersy H ome healthcare servicesy Long-term care facilitiesy Medical instruments, appliances and equipments

manufacturersy Medical laboratories(research)

It is a much diversified sector with different

fundamentals and growth opportunities.


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Some t rends affecting t hehea lthcar e secto r

Po sitive trends: Negative trends:y the aging population and

the baby boomersy people living longer with

chronic diseasey obesity and diabetes

epidemicsy technological advancesy the global reach of diseasey personalized medicine

y a single-payer system

(Medicare/U.S. government)y expenditure as an increasing

share of gross domesticproduct (GDP)

y the uninsuredy cost controlsy consumerism


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M ajor f acto rs cu rrently affectingneg a tively t he hea lthcar e secto r

y The weakness of the economy has forced mostcompanies and especially for-profit hospitals to cutcosts drastically, and rethink the way they controlthese costs.

y In the next few years many of the world s best sellingdrugs will come off patents. This will particularly affectthe major pharmaceutical companies such as Bristol-Myers Squibb Co., Eli Lilly & Co., and Pfizer becausethey own most of the patents that will expire.

y The healthcare reform. (discussed later)


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O the r inte resting f acts and figu res(1/2)

y H ealthcare is labor-intensive. The average annualrevenue per employee is estimated at $100 000.

y Federal and state governments have a tremendousinfluence on the sector. Not only do they provide fundsfor research, but they also take care of patent

regulations, operate health insurance programs suchas Medicare and Medicaid and ensure the quality of healthcare products and services through the Foodand Drug Administration (FDA).


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O the r inte resting f acts and figu res(2/2)

Among the American population:

y 60% have an employee-sponsored health insurancey 9% have private insurancey 15% are covered by Medicaidy 43% of Americans over 65 years old are covered by Medicarey 16% are uninsured (46 million Americans)


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Q uick f actsy There are 10 sub industry indexes in this sector, with

Pharmaceuticals being the largest, at 53.4% of thesector's market value.

y This sector represents 11.16% of the S&P 500 making itthe fourth industry after technology, energy andfinancial industries.


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Wh y would anyone invest in hea lth

car e?y This sector is usually considered a defensive play. Even

when the economy is going down, people will stillneed medicines, they will continue to go to thehospital and the government will continue to supportthis industry because it is a necessity to providemedical services.

y In other words, the demand for healthcare productsand services tends to remain steady.

y Investments in this sector helps medical research.


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The hea lth car e secto r comp ar ed

to t he S&P 500 (1/2)y O n this chart we can see that since

the end of the year 1998, thehealthcare sector has outperformedthe S&P 500 by far.

y From December 1998 to November2010, the healthcare sector hasincreased its market value by morethan 20%, while the S&P 500 hasnot increased at all.

y Since 1998, the market has been

through 2 major bear markets (2002and 2008).y While the S&P lost around 56%

between O ctober 2007 and March2009, the healthcare sector lostabout 38% over the same period, 18percentage points better.


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The hea lth car e secto r comp ar ed

to t he S&P 500 (2/2)y H owever, we can see from

this chart that since thebeginning of the rally inMarch 2009, the S&P 500has increased by roughly 30 percentage pointsmore than the health caresector.

y This is not due to a poorrecovery in the healthcareindustry but to the factthat this sector was lessimpacted by the crisis.


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y In 2008, healthcare provided 14.3 million jobs in theUnited States. It is expected to generate 3.2 millionnew jobs between 2008 and 2018, more than any other

industry, according to the US Department of Labor.y There is an increasing demand all over North America

for well trained practitioners and medical

administrative personnel. The rate of change inmedical breakthroughs, technology advances andaging population is putting a strain on the industry.


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Ex pected inc rease in individu a lsove r the age of 65

U nited States Canada

These are very interesting figures because it is after the age of 60 that people most utilizethe products and services of the healthcare industry. Thus, it is reasonable to assume thatthe need for healthcare workers will continue to increase for the next 2 decades atminimum. Not to mention the fact that a big proportion of the current healthcare

workforce will retire in the same period of time.


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Wh y was t he refo rm needed ? (1/3)y H ealth care expenditures in

the United States representedabout 18 percent of GDP as of June 2009.

y

If the healthcare costscontinue to increase athistorical rates, it will reach34% by 2040.

y This rise in healthcarespending is not sustainable

neither for the US economy, whose deficit is at all timehigh, nor for the Americanhouseholds who will pay anincreasing proportion of theirincome on health insurance.


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Wh y was t he refo rm needed ? (2/3)y Medicare and Medicaid

spending is estimated to reach15% of the GDP by 2040.

y The main issue here is thereason for such a highpercentage.

y It is logical to think that anincrease in Medicare andMedicaid spending comes froma weakened economy (Medicaiand demographical factors

(Medicare) such as the agingpopulation.y H owever these reasons actually

explain only a quarter of theincrease. The other 3 quartersare due to the rising healthcarecosts.


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Wh y was t he refo rm needed ? (3/3)

y The most visible sign of the need for the

healthcare reform is thenumber of uninsured.y They are 46 million

today and wereestimated to reach 72million by 2040 if thereform did not pass.


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Expected imp acts of t he refo rm

The reform has two objectives:

1. Expanding insurance coverage to those who don thave access to it.

2. Slowing the growth rate of health care costs.


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Imp act of cove ra ge e x pansion (1/3)

y The uninsured will have some basic insurance.y A 2002 study by the Institute of Medicine estimates

that if every American was insured, there would beapproximately 18 000 fewer deaths each year.y Moreover, it will significantly reduce individual s

chance of going bankrupt because of high medical

costs.y The US government estimates that covering the

uninsured will give a net benefit of $100 billion per year.


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y People who were out of the job market because of illness or disability would get health care that treats oreven prevent the illness or disability. They would thenbe able to enter the job market.

y Better health care would also improve labor sproductivity and people would be able to stay longer inthe job market.


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y It will increase efficiency in the job market.y Workers will be more tempted to change job because

they will not fear to lose their insurance (It wouldreduce the job lock phenomenon).y This will have a positive effect on small businesses and

start-ups that were not able to offer good employer-

sponsored insurance.y It will increase the competitiveness of small

businesses, which vital to the US economy.


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Imp act of slowing t he g rowt h ra te

of hea lth car e costs (1/3)y It is estimated that 30% of health care costs (or 5% of

the GDP) could be cut without affecting the quality of the health care system.y This is possible simply by reducing wastes and

inefficiencies.y Doing so would will free up a significant amount of

resources that will be used to produce other thingsthat add value to the economy.


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of hea lth car e costs (2/3)Lowering health care costs will have a direct impact on householdsannual income because they will pay smaller premiums to insurancecompanies.


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of hea lth car e costs (3/3)The reform would also reduce the Federal budget deficit over the long termthanks to cost cuts and increasing revenues.

H owever, this reduction in federal budget deficit does not take

into account the costs of coverage expansion.


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y Merck & Co., the world s second- largest drug maker, is

expecting to generate a quarter of its annual revenuefrom emerging markets by 2013. It is due to strongeconomic growth in developing countries. They havemore money to invest in their health care system andindividuals have higher incomes. These two factors will push up the demand for drugs.

y There is an epidemic of cholera running in H aiti. It has

caused the death of nearly 600 people so far and itcould kill over 200 000 more if the epidemic runs for afew years, according to the World H ealthO rganization.


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D rug Manufacturers F o r pr o fit H o spitals/Othersy Abbott Laboratoriesy

AstraZeneca PLCy Bristol-Myers Squibby GlaxoSmithKline PLCy Johnson & Johnsony Eli Lilly & Co.y Merck & Co. Inc.y Novartis AGy Pfizer Inc.y Sanofi-Aventis

y Lifepoint H ospitals Inc.y

Community H ealth Systemsy Inc. H ealth Management

Associates Incy WellPointy Unitedhealth Groupy United H ealth Services


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R ela ted to t he refo rmy http://www.cnn.com/2009/ H EALTH /06/18/ep.health.reform.ba

sics/index.html

y http://www.healthreform.gov/index1.html

y http://www.heritage.org/research/reports/2010/03/top-10-disasters-of-obamacare

y http://www.whitehouse.gov/assets/documents/CEA_ H ealth_Care_Report.pdf

y http://dpc.senate.gov/docs/sr-111-1-82.html

y http://www.whitehouse.gov/administration/eop/cea/chair-remarks-06232009


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O the rsy http://www.investopedia.com/articles/stocks/08/investing-in-healthcare.asp

y http://www.standardandpoors.com/indices/sp-500/en/us/?indexId=spusa-500-usduf--p-us-l--

y http://www.istockanalyst.com/article/viewiStockNews/articleid/4484181

y http://www.tradingmarkets.com/news/press-release/bax_bsx_mrk_ushcb_fitch-u-s-healthcare-sector-reports-varied-but-generally-stronger-1q-10-990718.html

y http://ezinearticles.com/? H ealthcare-Stock-Investing---Pros-and-Cons&id=4686313

y http://www.cmapdirect.com/hioverview.html

y http://www.bls.gov/oco/cg/cgs035.htm

y http://www.hoovers.com/free//ind/fr/profile/basic.xhtml?ID=120

y http://www.sectorspdr.com/eqsnaps/?do=snapshot&symbol=XLV

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Health Care sector overview