The global healthcare outlook was turned on its head after the outbreak of COVID-19. To stay up-to-date on the impacts to your business, follow our latest coronavirus coverage. Outside of the persistent uncertainty resulting from the epidemic, we see four core factors influencing the healthcare sector:
- Persistent tariffs
- Managed trade purchases
- Enhanced IP protections
- Deal enforcement resolution
A handful of key regions will have a large impact on the global healthcare sector. While China continues to manage unforeseen changes to its 2020 government priorities, Russia, India, and the UK are driving change in the healthcare sector through regulatory improvements, consumer purchasing power, and increased government spending.
The coronavirus outbreak has reconfigured government priorities in China, particularly for the healthcare sector; this will require persistent market monitoring and government engagement efforts. The phase one US-China trade deal will drive heavy commitments from the Chinese that will be difficult to achieve. Companies should expect continued uncertainty over its likely medium-term impact, even as it has reduced the likelihood of further tariff escalation this year. The increasing shift toward centralized tenders for off-patent medication is merely another step toward cost-containment for the Chinese government, which will seek to roll out more such efforts and take advantage of the sizable volumes it can offer suppliers to drive down prices and foster competition.
An improving economic outlook should help boost consumer purchasing power and sentiment, with the potential impact of reducing pricing pressures in the private commercial market. A recovery in the supplementary private insurance space should also come as investor sentiment slowly improves. The Russian government will attempt to incentivize improvements in the public healthcare system in 2020 but will continue to confront challenges based on institutional frailties, insufficient funding, and corruption. A persistent focus on localization is likely, particularly in the innovation-driven pharmaceutical sector. The Russian government is likely to continue to prioritize self-sufficiency in their upcoming Pharma 2030 plans.
The Indian economy’s weak fundamentals will undermine out-of-pocket spending expectations for the healthcare sector, which will only drive growing impetus for the government’s signature healthcare insurance schemes, infrastructure spending, and other stimulus measures announced in the 2020-2021 budget. Despite the need for the government to focus attention on restoring economic growth, the government will confront conflicting pressures from local industry for protection, from the public for price controls, from private hospitals for reimbursement, and from the domestic and foreign business sectors for improvements in the foreign investment environment. The government will confront ever growing challenges on these fronts as an economic recovery remains muted.
Following an underwhelming 2.4% budget increase in the 2019-2020 period, we expect a faster rate of increase in the 2020-2021 budget to be released in February, given the strong weight put on National Health Service (NHS) financing during the December 2019 election. Promised spending increases for the NHS, particularly toward capital investment, through 2024 could bring new opportunities, but we remain cautious about execution. Given the likely negative economic impacts of Brexit and the fiscally conservative stance of this government, expect continued efforts to reduce costs while the government is elevating spending.
FrontierView’s Healthcare team is at the forefront of key trends impacting the global healthcare outlook. Our analysts constantly monitor events as they unfold to ensure our clients can prepare for every scenario. How can we help you deliver better outcomes for your business in 2020? Contact us to connect with a healthcare expert.