Global Healthcare Industry Overview
Global healthcare expenditure was $7.6 trillion in 2013, rising at a 4% compound annual growth rate (CAGR) from $6.2 trillion in 2009, according to estimates based on World Health Organization (WHO) data.
Globally, government spending contributed 55% of total healthcare expenditure in 2013, while private spending, largely funded through insurance, accounted for the remaining 45%. However, the range is wide: in Europe government spending accounted for 74% of total expenditure in 2013, whereas in South East Asia for only 38%, according to WHO.
Healthcare industry growth was driven by increased spending in both general and specialty medicine to treat chronic diseases, including cancer, diabetes and hypertension. These now account for 75% of illness across the world.
Healthcare includes all the services, products, equipment and facilities involved in the prevention, treatment and management of illness and the preservation of mental and physical well-being. The whole industry cover varied sectors such as the business of alternative medecine, the organization of medical facilities, organ supplies and, more indirectly veterinarian services.
Healthcare Key Markets
The U.S. had by far the highest healthcare expenditure, at $2.9 trillion in 2013, according to estimates based on WHO data. This was distantly followed by Japan and China with expenditures of $670 billion and $484 billion respectively. Europe, too, is a major market, with the five largest countries, Germany, France, the U.K., Spain and Italy making up more than $1 trillion in spending between them.
Healthcare Key Players
The key non-government players in the healthcare sector are the insurance companies. Healthcare providers such as hospitals, acute care centers and primary care centers are mainly small scale, though some chains are growing. The largest health insurers in the world are in the U.S.: UnitedHealth Group Inc. and Anthem Inc. (former WellPoint). were the two largest insurance providers in 2013, with revenues of $122 billion and $70 billion respectively.
UnitedHealth Group provides insurance and managed care services. It offers its members access to healthcare services through a network of doctors, hospitals, clinics and medical equipment vendors. It splits its services between corporate and personal schemes, Medicare and Medicaid (state provided health programs), and military and veteran schemes. It has more than 85 million customers across the U.S. and 125 other countries, including nearly 5 million in Brazil.
Anthem (previously WellPoint) is a provider of insurance and managed care. It offers its services to national and local companies, private individuals, as part of government sponsored Medicare and Medicaid programs, and federal employees. It had 35.7 million members enrolled in its programs in 2013 and more than 35,000 employees.
Healthcare Expenditure Forecast
Global expenditure on healthcare is expected to grow to $9.5 trillion in 2018 from $7.6 trillion in 2013 (at a CAGR of 4%), according to forecasts based on WHO data.
The healthcare industry will be driven by increases in the elderly population.
Healthcare Sector Trends and Strategies for Growth
Four key trends are shaping the healthcare market.
Older Populations will Need More Healthcare
The size of the aging population will continue to increase over the next few decades. In 2010, individuals over the age of 65 were 8% of the total population. This is expected to increase to 16% by 2050 according to the WHO. Older people generally spend more on healthcare.
Healthcare companies should therefore increase their focus on age-related diseases.
Emerging Markets’ Healthcare Sectors are Expanding
Rising income levels and demand for improved healthcare in emerging economies is prompting growth of the healthcare industry in these regions. India and China, for example, have seen a rapid rise in the middle- to high- income level population and are seeing increases of healthcare expenditure per head of nearly 10% per annum, according to the World Bank.
Healthcare companies should therefore focus on business expansion in emerging economies.
Many Countries are Introducing Healthcare Reforms
Led by the U.S., major healthcare reforms are occurring in many countries. In 2010, the U.S. passed into law the Affordable Care Act (ACA) or Obamacare as it is known, which aims to provide unrestricted access to healthcare for all and to regulate healthcare financing. The European Union has also been focused on cost containment measures. Examples include the implementation of Arzneimittelmarkt-Neuordnungsgesetz (Germany, 2011) and value based pricing systems (U.K., 2014).
These reforms are creating huge opportunities and risks for healthcare companies; the winners will be those that understand the reforms best and react to them fastest.
More Patients will be Treated at Home
Home monitoring and telemedicine (including E-healthcare services) will assume increasing importance in the coming years. Insurance companies and governments will attempt to reduce healthcare costs by treating patients at home. The market for home healthcare devices was valued at $5.7 billion in 2013 and is expected to grow at a CAGR of 17% to reach $12.6 billion in 2018. The currently small telemedicine market is expected to grow at a CAGR of 59% over the forecast period to reach $4.5 billion in 2018.
Healthcare companies should explore opportunities in telemedicine and home monitoring.
Leading Industry Associations