The global healthcare ecosystem has made great advances over several past decades. Outcomes of treatments for serious illnesses have improved as doctors and pharmaceutical companies have made great breakthroughs in developing new therapies and drugs for life threatening diseases. Advances in medical technologies and treatment procedures have shortened recovery times and improved the quality of lives for patients.
However, in the current scenario, especially after the outbreak of COVID-19 pandemic, the healthcare systems around the world are facing serious sustainability challenges. Global sustainable healthcare theme goes beyond traditional pharma and covers advanced, technology driven sub-themes like Medtech, Biopharma, Digital healthcare, healthcare equipment etc with focus on sustainability and affordability.
Why is the current healthcare system unsustainable?
- Cost of healthcare is sky-rocketing. Medical costs in India have seen inflation rates of 18 – 20% every year1. Due to high cost of healthcare, members of economically weaker sections of the population are deprived of high quality healthcare.
- The current model of large investments in R&D for superior clinical outcomes has driven the costs very high. With ageing population, healthcare costs for Government and households are expected to keep growing at a rapid pace. It will be difficult for Governments to sustain the level of healthcare spending required for large sections of the population who depend on Government healthcare infrastructure / support.
- Two-thirds of the world’s middle class population is expected to be in Asia by 2030. With increased longevity and ageing populations, countries in this region (including India) are going to see unprecedented demand in healthcare straining Government resources.
- COVID-19 pandemic was a trigger for increasing healthcare demand as well as costs. The cost of ICU hospitalization is equivalent to seven months of income of average salaried Indian2. However, the pandemic has raised awareness about healthcare and at the same time, exposed weaknesses in our healthcare system.
- The current healthcare paradigm as far as chronic diseases like cancer, heart disease, stroke, diabetes, arthritis etc, are concerned is on managing the disease, i.e. focus on slowing the progress of the disease and reducing the patient’s pain. This has long term economic implications for different stakeholders like healthcare providers, insurance companies, Government and the patient. For example, insurance companies are now becoming more involved in managing the patient’s long term health beyond their traditional role of risk management. With increasing chronification of diseases with demographic and lifestyle changes, current paradigm may be unsustainable in the long term. On the other hand, therapies that aim to cure the disease through innovation instead of managing the symptoms will be sustainable in the long term.
The WHO defines sustainable healthcare as a system that maintains or restores health while minimizing negative impacts on the environment. While environmental themes garner most of the headlines in the current theme of ESG (Environmental, Social and Governance) investments in any industry sector, in this era of stretched health budgets and growing demands of care, the Social impact of healthcare matters the most.
Ensuring broadest possible access to quality healthcare across communities (including economically weaker sections of the population) within tight financial constraints of the Central and local Governments, will be the most important priority in most regions of the world e.g. Europe, United States and beyond. It will be relevant for India too. Our healthcare infrastructure is weaker compared to the developed markets and a growing ageing population will increase healthcare spending in the future. In such scenarios, cost becomes an important factor to sustain healthcare.
A healthcare megatrend in the future will have to be focus on value. The current R&D focus is on clinical innovation. However, companies seeking to maximize price of products will not prosper in the era of high prices and strained budgets. Sustainable healthcare investments aims at identifying companies that provides affordable and high quality healthcare. Innovations in sustainable healthcare must address the economic cost of healthcare – provide value to all stakeholders i.e. patients, healthcare providers, health insurance companies, Government, Investors etc.
Examples of few basic innovations in value
- A therapy that reduces hospital stay and returns the patient to work before not only reduces cost for the patient, it also contributes to the economy by making the patient productive again.
- New colon cancer screening techniques that allow for less invasive and more regular testing have multiple benefits for all stakeholders i.e. patients, healthcare providers and payer (patient, insurance company, Government).
- Integrating diagnostic services and therapy through technology e.g. glucose monitor paired with insulin pump can improve diabetes management and potentially reduce costs in the long term.
- Wearable devices e.g. fit bits, smart watches, wearable ECG and blood pressure monitors that provide real-time data to clinicians can help quicker medical intervention and reduce hospital stay.
- Telemedicine / digital health which enables patients to recover at homes while being remotely monitored remotely by doctors / healthcare providers can substantially reduce cost of healthcare. Telemedicine / digital health can save you visit to hospital emergency ward / room and costs thereof. COVID-19 pandemic provided a huge boost to adoption of telemedicine which reduced the strain on healthcare infrastructure (hospital beds).
Telemedicine / digital health saw rapid adoption in India as well. Thousands of COVID patients recovered in home quarantine while being monitored remotely by healthcare professionals. Through online healthcare you can have access to General Practitioner doctors through phone, online chat, WhatsApp etc. You can schedule sample collection for diagnostic tests and arrange for emergency medical supplies like oxygen cylinders etc through online portal or mobile app.
Investing in sustainable healthcare
- Investing in healthcare is complex. You need to have deep domain expertise in the pharmaceuticals industry, raw materials, supply chain, competitive forces and regulations.
- Healthcare investment theme has expanded beyond traditional pharma to include advanced hospitals, innovative medical device manufacturers, diagnostic services providers, biotech and health insurance companies etc.
- Sustainable investment in healthcare covers all the players in the healthcare chain and seeks to identify companies that add value to all stakeholders i.e. patients, healthcare providers and payer (patient, insurance companies, Government and investors).
- It will involve investing in companies which manufacture products or provide services that will reduce costs either directly (e.g. lower priced drug) or indirectly (e.g. reduce hospital stay, re-hospitalization etc); refer to the examples in the section above.
- Many of the companies at the forefront of innovations in value are likely to be in the global small and midcap segment ($500 million to $20 billion market cap in the US). A bulk of the healthcare innovations in value, taking place at this time are in the US, but this may change in the future. In the future, Asia may also become an important source of value innovations in the healthcare space.
- Sustainable investments in healthcare should also include emerging trends in digital. Experts believe that digital / online healthcare is here stay even in the post COVID scenario and likely to grow further.
The old proverb, “Health is wealth” has gained even further importance in the current times. Taking care of your health, should be among your New Year resolutions. While COVID has created an urgency to look at health, a sustainable form of providing healthcare should be center stage of human existence. Affordable healthcare should not just be the social responsibility of the different stakeholders in healthcare; it will have to be way of the future because the current system will not be sustainable in the long term. We, as a society, need to look at making healthcare more beneficial for the entire ecosystem of hospitals, pharma companies, diagnostic services, medical equipment makers, insurance companies, patients, investors and tax payers. This should be core focus of sustainable investments in healthcare.
Notes: 1. Source: HDFC Ergo, August 2021. 2. Source: Times of India, 22nd July 2021
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