•  Carlos Lopez 

    Healthcare – Sector focus

    Author: Carlos Lopez, Relationship Director
    Publication date: 01.08.2010

     
    The healthcare sector continues to be resilient to recession, with the long-term prospects for the industry underpinned by favourable demographics (ie, an ageing population, a growing middle-class market demanding quality healthcare, and changing lifestyle factors). Here, we focus on pharmaceuticals, medtech companies and private hospital groups, all of which face distinct opportunities and challenges.

     
    Pharmaceuticals 

     
    Valued at around $790bn in 2009, the pharmaceuticals industry faces considerable change due to:
    • the expiry of drug patents, which will result in market share loss to generic products
    • waning drug pipelines
    • the increasing role of regulators demanding cheaper and better drugs
    All of the above are driving consolidation in the sector. M&A activity continues to flourish with a few transformational acquisitions in the works.

     
    Medtech
    In the US, healthcare reform continues to make its way into medtech’s BAU. Cash-rich companies are taking advantage of favourable multiples and more stable credit markets to expand their product portfolios and pipelines. It is clear that debt and equity markets continue to support these sectors given their above-average credit strength and prospects for growth. Large-cap dominance and M&A activity is likely to persist as the two main uncertainties (economy and reform) have now been removed.
    For both pharmas and medtechs, M&A-led financings require significant bank involvement, and I expect to continue supporting customers in achieving these strategic milestones, acting as their preferred conduit to the capital markets.

     
    Private hospital groups 

     
    The UK hospital groups continue to benefit from the government’s budgetary constraints, requiring the NHS to outsource to the private sector. The UK’s private medical insurance market appears to have stabilised, and the rise in employment and the resurgence of corporate insurance schemes favour the industry.

     
    Reforming the NHS 

     
    Recently in the UK, Andrew Lansley, the health secretary, presented his Liberating the NHS white paper, which represents the most comprehensive reform to this iconic institution in the last half century and has the potential to revolutionise the way acute care is delivered. Among the main changes are:

     
    • Introduction of GP consortia/elimination of primary care trusts (PCTs). The power and responsibility for commissioning services is passed to the professionals closest to the patients/public, resulting in the elimination of the 150 PCTs
    • The re-defining of desired outcomes/targets. Scrapping of targets with no clinical justification (such as reducing waiting times) to be replaced with ‘clinically credible and evidence-based outcome measures
    • Establishment of an NHS Commissioning Board, with responsibility to establish, monitor and promote adequate quality standards, as well as to act as the promoter of choice and patient involvement
    • Introduction of Monitor, the economic regulator responsible for price regulation and for promoting fair competition. The transition of some hospitals into Foundation Trust status will require heavy involvement from Monitor given that some of these are currently not financially viable on a stand-alone basis  

     
    We can expect a series of consultations and negotiations with interested parties throughout these changes.

     
    I believe this NHS reform has positive implications for the private market, as the commissioning of services will, in theory, is based on clinical merit, where the private sector fares far better when comparing similar procedures. The formal launch and reinforcement of choice will most likely translate into larger numbers of patients moving over to private healthcare. On average, and at the time of writing, the levels of clinical excellence seen in the private sector (concerning, for example, bacteria per 10,000 bed days, re-admissions, unplanned transfers) are unrivalled; if given a choice and the data needed to make informed decisions, patients with the financial means will follow the healthcare providers with the best credentials. Patients, above all, are the true winners of this reform.

     
    Source: This article was first published in Lloyds Banking Group - Perspective Magazine Edition 2.
     

2/23/2018 6:07:05 AM