Globally, the Healthcare and Life Sciences sector is facing many challenges that are resulting in disruption along management, technological, and regulatory lines. While the quality and access of healthcare remains uneven among regions, there are more opportunities than ever to provide better value to patients while being more cost-effective.
Many countries are under increasing pressure to stretch their dollars as a greater proportion of the populace ages and is diagnosed with chronic diseases. Consequently, governments, pharmaceutical and medical technology companies, and healthcare providers are breaking down traditional methods of treating patients. Thus far there has been measurable success in technological and supply-chain innovation, especially with the increased use of big data and evaluation of hospital efficiency based on patient outcomes, as opposed to traditional metrics such as the cost of each department, patient surveys, and wait times.
Executives in the sector will continue to face financial and regulatory challenges; at the same time they must look for enhanced ways to meaningfully connect with patients and improve operational effectiveness.
“The healthcare industry has shifted and is putting great emphasis on talent acquisition from fast moving consumer goods companies such as Procter & Gamble, Unilever and Reckitt Benckiser. These executives bring strong experience in change management, brand development and other areas important for mass marketing on a larger scale.” - Kerstin Roubin, Global Leader of Boyden’s Healthcare & Life Sciences Practice and Managing Partner, Boyden Austria
Various factors are converging to change the landscape of the traditional Healthcare and Life Sciences sector.
For one, the global healthcare industry is characterized by innovation and advancements in practices, treatments, and general business strategy across subsectors. This is illustrated by an increase in patent applications and overall investment and spending. Certain geographies and therapies outperform others. For example, North America and Europe are leaders with respect to the number of patent applications per year, primarily because the focus in developed countries has shifted to using “specific, personalized biologics and care” to treat complex and serious diseases. Specifically, oncology has become a major area in drug development and spending. Though not quite on the same par, Asia, Latin America and the Caribbean are also increasing their patent applications. However, instead of concentrating on specialized treatments, these developing countries or “pharmerging” markets are turning to “broad, chronic diseases” and more traditional therapy areas, like antibiotics and pain management.1 2 3
An aging population has posed interesting challenges for the industry in two distinct ways, with both consumers and employees fuelling an important transformation. On the consumer side, an increasingly elderly patient base has strained service providers operationally and financially. It has also, however, been the impetus for transforming the industry, by pushing the sector to find innovative therapies and treatments, as well as to rethink operations and business models. On the employer facet, hiring managers face difficulty in filling positions because the talent base has gradually aged itself out of the industry: “Between 1993 and 2010, the percentage of the scientific and engineering workforce over the age of 50 increased from 20% to 33%.”
In five years, approximately two million jobs in engineering and life sciences will be newly vacant, primarily due to an exodus of retirees. In addition to a dearth of younger employees, women are underrepresented in the industry. It is expected that the increasing popularity and promotion of STEM initiatives and programs, especially in the United States, will provide employers with an equally skilled but younger and more diverse talent base.5
The legal sphere also plays a role in the future of healthcare. Regulations, especially in the United States and Japan, are burdensome realities for the industry. Consequently, a number of firms recently relocated or began the purchase of other companies that are headquartered in areas abroad thought to be more tax friendly and offering greater long-term stability. According to Roger Humphrey, Executive Director of private equity firm JLL’s Life Sciences group, “Federal policy, such as corporate tax structures and regulatory frameworks, directly impacts life sciences companies’ ability to establish roots and flourish over time.” While many believe that regulation has contributed to the successes of the industry in the past, companies are now actively looking for ways around legal and regulatory limitations.6
Products, too, are changing the landscape. Generic drugs will become more prevalent in the years to come, especially in emerging countries, where generics will represent 63% of the market. While branded drugs will continue to dominate in developed countries, generics will slowly realize a larger market share. This is partly due to the number of patents expiring in the near future. Spending in pharmerging markets will increase drastically as well and reach nearly $400 billion by 2017. Spending on traditional pharmaceuticals is also expected to increase drastically in pharmerging markets, reaching $336 billion by 2017, a 69% increase from 2012. 7
In 2015 the pharmaceutical sector will be challenged to find new growth opportunities, decrease risk, and increase efficiency, especially as it is impacted by “new regulations, advances in technology and tighter revenues.” Five trends are expected to come to fruition this year:
Larger conglomerates still dominate the sector. Novartis, headquartered in Switzerland, stands out as the top pharma company; Pfizer, headquartered in the United States, closely follows. While “big pharma” is still the key force and leads the sector in drug sales, small biotechs are on the rise and driving innovation with unique products.9 Despite their increasing presence, the high costs and barriers to entry in the pharmaceutical industry make it difficult for small biotechs to compete with big pharma. Because of this, small biotechs tend to be acquired by big companies that want to expand their portfolios.10 CEOs and top executives from both big pharma and small biotechs must be able to think critically and make strategic decisions about such acquisitions going forward. Small biotechs also tend to have limited R&D budgets; some of these companies have received financing from big pharma, through deals and licensing, whereas others have created partnerships with academic institutions.11
As in many other industries, technology is being utilized in the healthcare and medical fields to a greater extent than any time in the past, changing products, services, and the manner in which the industry operates. To name some examples, portable and battery-powered devices are on the rise, and as such, “smarter and more intricate components are increasingly in demand.” In addition, advances in data management “can help facilitate new diagnostic and treatment options.” With the rise of technology, unfortunately, costs also rise; efficient use of resources is therefore critical. 12 13
Not unlike the healthcare industry overall, professionals and executives in the medical technology subsector require a highly technical skillset. Given the shortage of qualified professionals in other sectors, it is important for the information technology sector to attract and retain skilled employees and executives.
Big data in the healthcare industry is transforming the way the system currently operates. Increases in transparency, better patient outcomes, and accessible care are just a few of the results of big data implementations. Dwayne Spradlin, CEO of Health Data Consortium, elaborates, saying that “the power to access and analyse enormous data sets can improve our ability to anticipate and treat illnesses. This data can help recognize individuals who are at risk for serious health problems.” 14
There is still a long way to go and a number of challenges to overcome. Notably, while big data has made a great deal of information available, an overwhelming amount of data has not yet been consolidated and remains scattered. Aggregating all of this information will be a monumental undertaking, as will maintaining patient privacy throughout the process. However, opportunities exist, and experts see the potential of big data; in the first quarter of 2013, “venture capitalists invested nearly $700 million into digital health start-ups.” 15
A promising area in the field which presents exciting opportunities for both technical and management professionals is DNA sequencing. DNA (or gene) sequencing is the process of “finding a single gene amid the vast stretches of DNA that make up the human genome.”16 This innovative method has led scientists to medical discoveries and prompted new research in the field. In addition, scientists involved in big data are attempting to utilize DNA sequencing as a means of storing data.
Researchers at Harvard University have stated that it will “soon be possible to store the entire content of the entire World Wide Web within just 75 grams of DNA material.” This is still not a cost-effective approach, but scientists expect it will not be long before this theory becomes reality.17 Professionals with an eye toward innovating, especially, will be in high demand as companies specializing in this nascent field advance the science.
Funding for projects will be an issue for entrepreneurial device developers, though there are a number of astonishing advancements being made in this subsector. The most notable provide ample opportunities for specialists, investors and executives alike. A few noteworthy trends include:
In general “increasing efficiency in clinical development through excellence in operations and innovative study design” will be of critical importance through 2015. Recovering R&D costs and maintaining profit margins will be necessary, especially given payer resistance to pricing for new products. Strategies that aim to reduce costs and timelines will be essential. And, developing partnerships with experienced counterparts who can achieve higher operational efficiency will be important.18
Globally, providers are reacting to market-driven changes that render traditional approaches to healthcare obsolete. The global population is increasing and aging, resulting in a greater demand for medical staff.19 However, the industry faces a shortage, especially of physicians.20 The number of doctors per 1,000 people is expected to remain the same through 2015. In Europe and Asia, the shortage is expected to become more problematic over the next few years, which could affect the delivery of even the most basic forms of medical care. Asia overall seems to be faring better than Europe, although coverage across the continent is still uneven, with countries such as China, Indonesia, Vietnam and India struggling to keep up with the needs of patients.
In the United States, experts estimate that by 2025, there could be a shortfall of as many of 150,000 physicians. 21
To prevent this deficiency, some universities have attempted to make the medical profession more appealing. Harvard Medical School, for example, has invested in redesigning their curricula so medical residents train in small teams as opposed to alone, since many medical students are reluctant to pursue a career in primary care because it is too solitary. 22
There is also a lack of healthcare infrastructure to keep up with patient needs. Hospitals in both developed and emerging markets around the world cannot provide adequate basic care. For instance, in many nations there is a lack of hospital beds. According to studies by Deloitte, countries such as Brazil lack primary care infrastructure; this results in patients going directly to hospitals, raising both costs and hospitalization rates. Additionally, access to care may be difficult for those in underinvested areas, such as smaller towns and rural enclaves, where residents are also likely to have a high out-of-pocket expenditure. These patients are either unable to access healthcare or pay large amounts for treatment at a more advanced stage of the disease.
Given their limited resources, many hospitals are reconsidering traditional approaches to healthcare. Among providers, there is an influx of M&A activity. Increased horizontal integration is enabling hospitals to cut costs by better collaborating with one another, increasing their purchasing power, and consolidating services. Furthermore, vertical integration is resulting in hospitals buying offerings such as physician practices, ambulatory centres, and home care services. All of these efforts demonstrate a shift toward managing risks and costs “along the entire care continuum.”23
Cost efficiency of treatment is also being assessed in new ways. Traditionally, hospital efficiency has been measured by the separate cost of each department or unit, wait times, and patient surveys. Quality is assessed by surveys and compliance with treatment guidelines. The new “value-based hospital” model, however, measures cost efficiency and quality of service differently. Financial efficiency is measured by evaluating healthcare outcomes and costs and how those outcomes were achieved along the clinical pathway. As a result, the patient is the top priority, and different departments and units must communicate and take joint responsibility in order to deliver high-quality and cost-effective care.24
The novel approach of making the patient the focal point of care is also leading to the personification or “consumerization” of healthcare. Concrete patient needs are increasingly being put ahead of assumptions of those same needs traditionally made by providers.25
Some examples of this include allowing patients to customize their caregiving experience based on their language preference, diet, religion, communication preferences, and even what magazines they like to read.26
CEO turnover in the healthcare industry was at an all-time high in 2013, reaching 20%, up from an annual rate of 14% to 18% from 2003 to 2012. The recent increase can be attributed to consolidation in the industry, as well as “baby boomer CEOs seeking retirement”, according to Deborah J. Bowen, President and CEO, American College of Healthcare Executives (ACHE).27 Many hospitals are not equipped to identify and train new leaders after the baby boomers retire, and an insufficient talent pipeline is a looming threat to the industry. 28
For example, in just one week, a number of CEO and other executive-level transitions take place throughout the United States. 29
“Life science and healthcare companies, particularly in Europe, are looking for networked and solution-oriented executives, whereas in the past the focus was on product-oriented executives. Margins are smaller, so management with MBAs who can look at the cost side of business and evaluate emerging markets are in higher demand.” - Kerstin Roubin, Global Leader of Boyden’s Healthcare & Life Sciences Practice and Managing Partner, Boyden Austria
Given the array of other issues and changes likely to ensue, the increasing turnover rate raises a number of questions about leadership in the industry. For one, “if hospitals and health systems cannot retain leaders, how can they address the long-term goals they set for their institutions?” And, “how can CEOs establish culture and encourage change if they aren’t around long enough to see change realized?”30 Successful companies must look for strong leaders – and incentivize and retain them – to execute their strategic vision.
Succession planning has increased over the past decade. According to a report from ACHE, only 21% of hospitals used formal succession plans for the CEO position in 2004; now, 52% of hospitals have one in place.31
As in many other industries, CEO compensation has come under scrutiny and criticism in recent years. Now, many hospitals will add quality-based metrics to CEO and executive compensation packages. In an effort to incorporate and align physicians with hospital and health systems, executive compensation will be “tied to how well they integrate and collaborate with medical staff.”32
Health systems are expected to add chief marketing officers to their C-suite, as a focus on the patient becomes more important. Patient satisfaction is paramount, and government reimbursements depend on it. In addition, “healthcare companies will be forced to compete for consumer attention”. Patients demand information such as pricing and doctor ratings, similar to what they expect with products, likening the healthcare decision-making process to shopping.33
Healthcare CEOs express confidence in the global economy, according to PwC’s 18th Annual Global CEO Survey (2015). Nearly eight in 10 expect to increase sales in the next year, and almost nine in 10 expect this to happen in the next three years. Despite this confidence, over-regulation and changes in regulation are still a concern, as is the availability of necessary skill sets. Six in 10 express concern over shifting consumer behaviour as well.34
Healthcare CEOs expect headcounts to increase over the next year, at 59% vs. 50% of all CEOs. Asked about their company’s prospects for revenue growth over the next 12 months, a greater portion of healthcare CEOs reported being “very confident” (47% vs. 39% of all CEOs), although compared to CEOs in other industries, they are slightly less confident overall.35
“The healthcare service provider segment continues to grow in Brazil. A larger portion of the population now has access to private services, which increases the need for additional services throughout the business chain. To meet the new demand, hospitals are continuously hiring executives from several industries in an effort to upgrade their management teams and recover margins. In the OTC market, there’s increased demand for well trained executives, mostly coming from top consumer brands to meet the more dynamic and competitive environment.” - Alexandre Sabbag, Partner, Boyden Brazil
The following firms epitomize the changes taking place in the evolving healthcare industry.
Sanofi ranks fifth in the world among pharmaceutical companies in revenue.36 In March 2014, it named Dr Anne C. Beal as its first Chief Patient Officer, making Sanofi the first top-10 pharmaceutical company to hire for this position. Prior to joining Sanofi, Dr Beal was Chief Officer for Engagement at the Patient Centered Outcomes Research Institute (PCORI), the United States’ largest research institute focused on patient-centred outcomes research.37 Her appointment indicates a strategic shift with an eye toward value-based healthcare:
“I will use my experience as a physician, researcher, philanthropic leader, and advocate for patient access to high quality care to infuse the patient perspective into Sanofi’s work that will advance our ability to deliver healthcare solutions that matter most to patients and those who care for them.” - Dr Anne C. Beal, Chief Patient Officer, Sanofi
Johnson & Johnson
In March of last year, Johnson & Johnson hired Ernesto Quinteros to fill the newly created role of Chief Design Officer. The position – the equivalent of a Chief Marketing Officer – was created to generate products that look and work better across the company’s consumer, medical device, and pharmaceutical segments. He previously worked in the technology sector at Belkin International on products such as iPhone and iPad cases. According to the Wall Street Journal, design is a top priority for J&J as it could help the sales of some of the company’s healthcare products by making sure patients take their drugs appropriately and as needed, updating hospital equipment monitors to display information so doctors and nurses can read it more easily, and improving product websites to make them more appealing.38
“I think design thinking has the potential to redefine consumer experiences and fuel innovation inside an organization.” - Ernesto Quinteros, Chief Design Officer, Johnson & Johnson
Currently, the United States has the largest regional share of the global pharmaceuticals market, at 34%. EMAP (Emerging Markets and Asia Pacific) ranks second with a 31% market share, but is expected to surpass the United States by 2018.39 And, in 2014, U.S. medicine approvals reached the highest level in nearly two decades.40
“In the US, all the life sciences sectors are experiencing a broad upswing after a tough first three years following the recession. This growth, coupled with the renewed strength of the M&A and IPO markets, is resulting in aggressive investing and executive hiring in both larger companies and venture-backed concerns. We expect 2015 to deliver an even stronger growth curve than what we experienced over the last couple of years.” - Trevor Pritchard, Partner, Boyden San Francisco
The biopharmaceutical industry is one of the leading job generators for the United States. It employs over 810,000 people and supports another 3.4 million jobs nationwide. Notably, it invests the most capital for R&D per employee than any other industry, which is thought to drive its huge economic impact. Since 2000, PhRMA (Pharmaceutical Research and Manufacturers of America) members have invested over half a trillion in R&D, with $51.1 billion in 2013 alone.
Citing measurements from the Battelle Technology Partnership Practice, PhRMA states that “the overall economic impact of the biopharmaceutical sector on the U.S. economy totals about $790 billion on an annual basis when direct, indirect, and induced effects are considered.”41
The pharmaceutical industry in the United States is extensive, and comprised of four subsectors. First, the innovative pharmaceutical industry is responsible for producing “chemically derived drugs developed as a result of extensive R&D and clinical trials in both humans and animals.” This is the pharma industry in its most traditional sense, and it relies heavily on intellectual property and patent protection. Only a few major global companies produce the majority of products, but they have begun to rely on external groups (partners, smaller manufacturers, etc.) for research.
Next, the biopharmaceutical industry “produces medical drugs derived from life forms (biologics)”, including proteins and nucleic acids. This subsector also relies on research from small companies and/or academic institutions. Then there are biologics (including biosimilars), which encompass a wide range of different products including “vaccines, therapeutic proteins, blood and blood components, tissues, etc.” Big pharma companies tend to diversify their portfolio with biologics by acquiring smaller biotech companies, “in-licensing of products, and R&D alliances.”
Finally, the generic pharmaceutical industry makes copies of “innovative pharmaceuticals that contain the same active ingredient, are identical in strength, dosage form, and route of administration.” Pricing is usually lower than the original drug, and manufacturing relies on efficiency of production methods and distribution.42
PwC predicts 10 issues the United States should watch for in 2015:
The Affordable Care Act (ACA) has and will continue to drastically change the industry. Ten million Americans have already signed up for health insurance, and Congress will likely make more decisions regarding changes, implementation and funding.44 A more sizable workforce will be required to meet the new need, and predictions claim that the nation is unprepared to fill this demand.45 Employers face an obstacle as well – under an ACA mandate which went into effect on January 1 of this year, firms with more than 100 employees are required to offer health insurance to their employees.46 More Americans will have to deal with the ACA on an individual level, therefore legislatures and government leaders “will be increasingly pressured to simplify its implementation.”47
Many U.S.-based companies are now attempting to relocate their headquarters abroad, in order to avoid the strict tax burden at home. This process, called inversion, is discouraged by the U.S. government. In fact, regulations from the Treasury Department will block certain techniques being used to lower corporate tax bills, and make it harder to move overseas by “tightening the ownership requirements (companies) must meet.”48 Critics in the industry insist that a change in U.S. tax structure must take place, as the nation is at risk of losing huge, revenue-generating and job-generating corporations.
With its single-payer healthcare system, Canada sees a continuing demand for executives who are successful at leading large, complex healthcare systems. Additionally, healthcare executives must find ways to manage costs and create alternative sources of revenue, since healthcare spending in the country has slowed. Projections for 2013-2014 put it at its slowest growth rate since 1997 at 2.1%. For the period of 2014-2018, spending is forecast to rise slightly, by an average of 4.5% a year.49 The long-term sustainability of publicly funded healthcare is the number one challenge facing governments today; this has resulted in a variety of initiatives, including system consolidation, enhanced use of technology in clinical practice and administration, and discussions regarding scope of practice for healthcare professionals in order to bring about new ways of delivering healthcare services.
“Increasing consolidation of governance and administrative structures for healthcare providers has also decreased the number of ‘training grounds’ for senior level executives in this sector, making it more difficult to recruit and hire individuals who have had experience with a full range of responsibilities at the senior level.” - Ken Werker, Managing Partner and Chair, Boyden Canada
Spending on big-ticket items such as drugs, hospitals, and physician compensation is decelerating, indicating that the focus will shift to innovative resource management.50 Furthermore, Canada will not likely be as financially impacted as other nations to care for its aging population, as the aging of its population has been more gradual.51 52 Canada currently does well in areas of primary care and health outcomes, which play a role in preventing costly hospital admissions for bigger health issues. However, wait times – especially for specialists or elective surgery – are still one of the system’s most pressing problems.53
“The impact of overall healthcare consolidations on recruiting in Canada means that there are fewer executives and boards, and more regional executives are taking on various responsibilities. Candidates of the future must understand how the varied puzzle pieces fit together and be able to connect to a number of different stakeholders. They must be innovative, inclusive and highly intelligent, emotionally and intellectually, to succeed in this increasingly complex and collaborative ecosystem. “In today’s new structure, Canada’s healthcare leaders must be more collaborative to avoid duplication and create the seamless systems that funders, patients and the Canadian public are demanding.” - Michael Naufal, Managing Partner, Boyden Canada
All of these factors drive the need for healthcare executives at the provincial, regional, and hospital facility levels who are adept at strategic leadership, change management, and implementing best practices. Supply of these executives is limited due to system consolidation, as the number of development opportunities at the senior level has declined.
The European healthcare and life sciences sector faces challenging prospects for the near term. At best, experts agree that the future of the sector is undefined. Although the economic environment has stabilized since the 2008 financial meltdown, countries in the region are under extreme pressure to cut costs.54 Even with greater demand for healthcare services due to the aging population and rise in chronic diseases, annual growth in healthcare spending is expected to slow down because of the necessary cost-cutting measures. Currently, Europe has the largest proportion of older individuals (aged 60 or older) in the world and, according to Deloitte, will hold that distinction for the next 50 years.55 Spending, however, is expected to remain flat in the -1 to 2% range through 2016 in the European Union Five (EU5): France, Germany, Italy, Spain, and the United Kingdom.56
“Efficiency has become even more important with the sharp rise of the Swiss franc. Thus, life science and healthcare companies headquartered in Switzerland are focused on attracting executives from the traditionally lower margin industries such as consumer, high tech and telecoms for finance, marketing, HR and other management roles. “In terms of recruitment from outside healthcare, Boyden partners’ more generalised instead of highly specialised experience has become a benefit for clients. We’re able to think ‘out of the box’ and not focus on the same 10 candidates who are currently in similar roles with other industry competitors.” - Sabine Brunthaler, Partner, Boyden Switzerland
Thus far, efforts have been made to cut costs through the greater adoption of generics. While this has made a lot of medicines cheaper and more accessible for the population, the adoption of generics along with more restrictive policies has resulted in the region’s limited access to more innovative medicines.57
While the state of the healthcare sector is uncertain throughout Europe, southern Europe is expected to suffer the most over the next few years. For example, health spending in Portugal is not expected to recover until 2017, and in Greece and Spain, until 2016. In Western Europe, the United Kingdom is also suffering due to constraints on medical spending, which will lead to tighter reimbursement policies, and as a result, higher out-of-pocket costs for patients.
Germany is one of the few exceptions in the entire European region, as the number of doctors remains stable and the nurse to population ratio is high, with healthcare spending expected to rise an average of 2.8% per year.58
The Indian healthcare industry has seen tremendous growth and become one of the country’s largest sectors. This growth can be attributed to “strengthening coverage, services, and increasing expenditure” from both public and private actors. India’s market value is expected to reach US $280 billion in the next five years. According to PwC, the fastest growing segment of India’s healthcare industry is the diagnostic market. Due to the new availability and affordability of healthcare in this country, services like diagnostics, pharmacies, and equipment are now also in demand. Notably, India has become a base for many clinical trials due to the low cost of procedures.
“With Indian pharma companies investing heavily in joint collaborative research for new drug discoveries, senior-level professionals with niche skills in the areas of drug discovery, regulatory affairs, quality systems/compliance, clinical research and development and R&D program management are being sought after and well compensated. “There are very strong macro drivers that will ensure growth of the sector in India, despite recent challenges such as stringent government price control mechanisms, compulsory licensing, ambiguous patent laws and regulatory compliance mandates. The sheer size of the population, increasing prevalence of chronic lifestyle diseases, rising disposable incomes along with better penetration of healthcare and access to medical insurance are some of the factors driving pharma growth.” - Sushil Gulati, Head of Life Sciences Practice and Partner, Boyden India
Despite its tremendous growth, there are still some obstacles the country must overcome. For example, “optimal utilization of resources, minimizing operational costs, maximizing performance and efficiency, scaling of business, rapidly evolving technology and globalization of healthcare delivery quality and standards” are all focus areas for India in the near term.59 60
“Clinical services are now a global opportunity for India with a strong competitive edge based on speed and quality of clinical development”. 61 - Dr Wolfgang Beier, CEO, Oncology Services Europe
Furthermore, India has been scrutinized for its lack of patent protection. According to a report by the U.S. International Trade Commission, “28% of drug makers feel that India doesn’t do enough to protect intellectual property.” The U.S. is pressing India to make a change, and Prime Minister Narendra Modi has agreed to form a working group on intellectual property. On the other side, consumer advocates argue that this change in policy could restrict access to medicine for the Indian people and for other countries that import generic drugs from India.62
China, the world’s most populated country, has an equally massive healthcare industry. In fact, according to McKinsey & Company, healthcare spending in China will reach $1 trillion in the next five years, from $350 billion in late 2014. The Chinese government itself predicts it will reach $1.3 trillion in the same time. While massive, these figures equate to only around $1,000 per person, considerably less than the United States, which spends approximately $9,000 per person.63
“In Southeast Asia, we expect growth in executive hiring with the increase in developing medical suites in hubs such as Singapore, Bangkok and Phuket. This will also result in the development of new insurance products as well as changes in the medical provision to account fora surging affluent population. - Roger Wilson, Managing Partner, Boyden Singapore
There are two major reasons for this incredible growth trajectory. For one, per capita incomes are rising due to urbanization, leading to conspicuous consumption, among other phenomena. And, consumers are demanding more from the medical field. With a greater consumer culture, more people are affected by cancer, heart disease, diabetes and other chronic illnesses, due to poor diets and pollution.64 China’s growing elderly population is also a concern; however it is driving demand for products and services.65
China is home to 22,000 hospitals, a significant number of which will require major renovations and upgrades in the next few years. Foreign-owned hospitals are being called upon by the Chinese government to help “fill some of the void.” Moreover, the government plans to double the contribution of private hospital services and increase foreign investment in the hospital system.66
China is one of the world’s most attractive markets for foreign investors, but according to McKinsey, companies should still be cautious. Executives and decision-makers should ask the right questions, and decide if they are able to compete in this quickly changing marketplace.67
“Healthcare companies are increasingly focused on executives who have the ability to differentiate products to attract new customers. Organizations are also seeking leaders who are able to navigate government and compliance issues at the highest level of global standards. In addition, in Latin America, clients are increasingly concentrating on C-level executives and country manager level executives who can combine brand name experience with an ability to run generic pharma enterprises.” - Antonio Sanchez, Boyden Board Member and Managing Partner, Boyden Colombia
By 2020, the population of Latin America will reach 665 million, with the urban populace accounting for 80% of the total.68 Latin American healthcare spending is expected to rise by an average of 6.8% per year from 2013-2017.69 The healthcare sector in the region must continue to adapt to rising demand resulting from an aging population, high rates of chronic diseases, increased urbanization, and government inefficiencies. These factors pose risks to providing high-quality, affordable healthcare, especially to underserved populations.
“Overall, healthcare organizations are pursuing executives with a holistic view of business for roles to lead specialty drugs franchises or to serve as general managers of medical device companies. The Brazilian pharmaceutical market has faced a loss of patents, forcing large organizations to downsize their structures. “At the same time, these businesses are developing better strategies to sell to government entities, and companies are focusing on developing specialty drugs. Thus, there’s an increased demand for managers with strong track records in business development with the federal government and marketing and sales professionals who are able to migrate to the OTC market, which is growing at a higher rate.” - Áurea Imai, Managing Partner, Boyden Brazil
According to Americas Market Intelligence, the population of seniors (aged 60 or above) is expected to increase to 83 million by 2020. This is nearly double the senior population in Latin America in the year 2000.70 A larger population, along with high rates of chronic diseases such as diabetes, cancer, and cardiovascular diseases, means that the private and public healthcare sectors must adapt to the consequential increased demand for healthcare services.
Some changes have already taken place to improve access to care in Latin America. In countries such as Brazil and Mexico, for example, the introduction of universal and low-cost insurance has already proved to considerably improve the health of these countries. Since universal healthcare was introduced in Brazil in 1988, infant mortality rates, AIDS and tuberculosis are no longer major threats, and healthcare has become available to a greater extent in remote areas of the country. In Mexico, low-cost health insurance and preventive medicine has led to greater life expectancies. However, these countries, and the rest of Latin America, continue to face challenges to ensuring that care that is both cost-effective and high-quality is accessible to large populations.71
For government-subsidized healthcare to be more effective, long wait times and high out-of-pocket costs must be decreased. Additionally, the process of obtaining government-subsidized medicine in some countries like Brazil must be made shorter and easier to navigate; often patients who need medication immediately must pay the entire out-of-pocket cost to obtain it from a private distributor.
Consistent with other parts of the world such as Africa and Asia, Latin America has also had to face challenges arising from rapid urbanization over the last decade. This has led to the creation of more shantytowns and slums lacking proper access to health services, fresh water, and sanitation services.72
To compound matters, in hard-to-reach rural areas, capable physicians are hard to come by. Primary care physicians in these areas often lack the opportunity to continue their education or are simply not motivated to develop their skills due to a lack of performance-based incentive systems. They may also be young and inexperienced doctors who graduated recently and are waiting to find jobs in urban areas. Given that about 120 million people in Latin America reside in rural areas, the aforementioned culminate in serious problems for underserved communities.73
Fortunately telemedicine, the practice of using telecommunications technology to deliver care, could be part of the solution.74 It would enable general practitioners in rural areas to connect with a central hub of experienced medical experts and send patient data, which would then be analysed remotely. Highly qualified physicians at the hub could diagnose the patient, request further examinations, and provide other advice from hundreds of miles away.
Brazil, the chief medical market in Latin America, is not only a domestic player, but also a global force. It ranks first in Latin America and is the third-largest pharmaceutical market in the world, behind the United States and Canada.75 Spending is projected to rise to $255.5 billion by 2017. The local generics industry is a booming business as a result of government initiatives to provide low-cost medicines to consumers, and has rapidly captured significant market share since its inception in the early 2000s. Furthermore, the private health insurance industry is rife with opportunities. A quarter of Brazilians can currently afford private health insurance, and this number is expected to increase as more Brazilians become part of the middle class.
Similar to other developing regions, the Middle East and North Africa (MENA) faces new chronic diseases, an aging population, and seismic socioeconomic change. These factors have increased the need for quality and access to healthcare to improve. The Association of Academic Health Centers International identified the following key growth and economic challenges for the region:
“Despite some progress, the pharmaceutical industry in the MENA region is still in the emerging phase, with a vast majority of its products being branded and imported. However, we’re seeing an upturn in demand for management as governments are enacting measures to boost local drug manufacturing. Additionally, companies are developing partnerships with Indian and other foreign companies to grow the generic segment.” - Athena Tavoulari, Partner, Boyden Middle East
Despite such challenges, the MENA region has made significant improvements in healthcare in the past few decades. Infant mortality rates and maternal deaths have dropped significantly. Women are actually the largest users of health services, and policymakers should think about addressing “the cultural constraints to women’s reproductive health access.”77
Healthcare IT is also on the rise. As Gartner had predicted, the region saw a huge increase in spending on internal services, software, IT services, data centres, devices, and telecom services in 2014.78 While improvements have been made, MENA still must significantly accelerate development to be on par with its neighbours to the north and west. Executives should be aware of this and work towards establishing a strong foundation and focus on providing the healthcare necessities to a population in need.
3 Further data analysis and summaries by FTI Consulting, presented at FTI Healthcare Summit, Fall 2014
4 Further data analysis and summaries by FTI Consulting, presented at FTI Healthcare Summit, Fall 2014
26 http://www.theihcc.com/en/communities/health_care_consumerism/the-consumerization-of-healthcare-what-patient-exp_h333dkhj. html
39 FTI Consulting, Healthcare Summit 2014
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