Necessary changes in global healthcare systems bring long-term investor opportunities

The graph below shows health expenditure per capita across the globe and highlights the enormous difference in spend in the western world compared to emerging markets – by Daniel Mahoney and Gareth Powell of Polar Capital Global Healthcare Trust.

The US, Switzerland and Norway are at one extreme – generating challenges that the amount of spend is too high – while at the other end of the spectrum India, Indonesia and China have problems from spending too little.

The US health expenditure is 50x India’s, on a per capita basis. This is unsustainable. Changes need to happen to reflect this challenge, and there are investment themes that are highly relevant to the outlook ahead for healthcare systems around the globe.

_{Source: OECD Health Statistics 2019, WHO Global Health Expenditure Database. Note: Expenditure excludes investments, unless otherwise stated. 1. Australia expenditure estimates exclude all expenditure for residential aged care facilities in welfare (social) services. 2. Includes investments.}

For the developed world, healthcare systems need to become more productive with the spend they have available. The key opportunities here are disrupting healthcare delivery, innovation and prevention. 

For healthcare delivery, shifting the location of care from the in-patient hospital is critical, with increased investment in technology driving this change. Innovation is also key as this should increase productivity.

Ultimately, an increased focus on prevention is the best form of healthcare. From an industry perspective, this drives the themes of consolidation and outsourcing in reaction to the likely changes ahead in the provision of healthcare.

For emerging markets, the expansion of healthcare systems and increased investment drives broad-based bullish trends across the relevant universe. 

While complexity in different countries will add challenges to the progression of increased healthcare spending, learning lessons from the history of developed market healthcare systems should provide advantages and the adoption of digital technologies earlier in the expansion of healthcare systems should provide numerous growth opportunities for relevant companies.

This will all take a long time and thus offers a tremendous investment opportunity across the globe. The pandemic has only accelerated the impact of these themes on healthcare and will be our focus for the next 5-10 years

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