8/8/2019 Health Care sector overview
1/36
Sector overview
By Pierre Cosquer
8/8/2019 Health Care sector overview
2/36
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
8/8/2019 Health Care sector overview
3/36
8/8/2019 Health Care sector overview
4/36
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!!
8/8/2019 Health Care sector overview
5/36
8/8/2019 Health Care sector overview
6/36
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.
8/8/2019 Health Care sector overview
7/36
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
8/8/2019 Health Care sector overview
8/36
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)
8/8/2019 Health Care sector overview
9/36
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).
8/8/2019 Health Care sector overview
10/36
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)
8/8/2019 Health Care sector overview
11/36
8/8/2019 Health Care sector overview
12/36
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.
8/8/2019 Health Care sector overview
13/36
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.
8/8/2019 Health Care sector overview
14/36
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.
8/8/2019 Health Care sector overview
15/36
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.
8/8/2019 Health Care sector overview
16/36
8/8/2019 Health Care sector overview
17/36
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.
8/8/2019 Health Care sector overview
18/36
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.
8/8/2019 Health Care sector overview
19/36
8/8/2019 Health Care sector overview
20/36
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.
8/8/2019 Health Care sector overview
21/36
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.
8/8/2019 Health Care sector overview
22/36
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.
8/8/2019 Health Care sector overview
23/36
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.
8/8/2019 Health Care sector overview
24/36
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.
8/8/2019 Health Care sector overview
25/36
Imp act of cove ra ge e x pansion (2/3)
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.
8/8/2019 Health Care sector overview
26/36
Imp act of cove ra ge e x pansion (3/3)
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.
8/8/2019 Health Care sector overview
27/36
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.
8/8/2019 Health Care sector overview
28/36
Imp act of slowing t he g rowt h ra te
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.
8/8/2019 Health Care sector overview
29/36
Imp act of slowing t he g rowt h ra te
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.
8/8/2019 Health Care sector overview
30/36
8/8/2019 Health Care sector overview
31/36
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.
8/8/2019 Health Care sector overview
32/36
8/8/2019 Health Care sector overview
33/36
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
8/8/2019 Health Care sector overview
34/36
8/8/2019 Health Care sector overview
35/36
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
8/8/2019 Health Care sector overview
36/36
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
Top Related