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Macroeconomics

14 June 2019

HEALTH IS GOING DIGITAL  

The global healthcare industry is growing fast – driven not only by ageing societies, but also by new technologies, innovations and growing awareness of well-being.

MAJOR DRIVERS

Demographic changes and the need to ensure health and welfare have become major drivers of the continued and rapid growth of the global health sector. Life expectancy has increased rapidly since the Enlightenment. Estimates suggest that in a pre-modern, poor world, life expectancy was around 30 years in all regions of the world. In the early 19th century, life expectancy started to increase in the early industrialized countries while it stayed low in the rest of the world. Since 1900 the global average life expectancy has more than doubled and is now approaching 70 years. Progress in the healthcare sector has been a key driver in this respect. Ageing is not the only force driving the sector, but the increasing wealth of the population also contributes to improving access to medication. Naturally, new diseases and emerging fields like chronic conditions are fueling the sector. Overall, it isn’t surprising that global healthcare costs are surging.

According to Bank of America Merrill Lynch (ML), three-quarters of the global healthcare expenditure is spent on the elderly. Total medical costs amounted to €338.2bn in 2015. Beyond chronic diseases, obesity is a growing concern for humans. As a result of increasing wealth, lack of exercise and poor diet, half of the OECD population has already become overweight and 20%has been diagnosed with obesity. The share of health expenditure in OECD countries’ GDP will increase to 9.5% in 2060, from around 6.2% in 2010. Overall, the health market in OECD countries is expected to double from 2010 to 2035, and to quadruple by 2060.

While these days people seem to be increasingly focused on detox therapies, intense fitness training programmes and extensive wellness activities, the trend towards a healthy work-life balance, awareness of sustainability and improved body well-being is in full swing. So it is not surprising that the market for mHealth (mobile health) apps and wearable devices is booming. About half of the 3.4 billion smartphone users are estimated to have already downloaded health applications.

NEW INVESTMENT OPPORTUNITIES IN THE FIELD OF MHEALTH

MHealth mainly includes medical procedures as well as private and public healthcare. It can be divided into two parts: first, technical features such as mobile computers, smartphones and other end devices. Second, modern methods of communication between doctors, doctors and patients, as well as patients between each other. The overall objective is to improve information and communication in the healthcare sector. An increasing number of  doctors and patients have been using this form of healthcare. Recent statistics show that demand has steadily increased in recent years. According to Arthur D. Little, the market for mobile health products is growing at an annual average rate of 36% from 2013 to 2020. 

MHealth simplifies communication and avoids long-distance travel by using remote treatments. In developing countries, for instance, mHealth provides new opportunities, as most people don’t have a computer with an internet connection, whereas much more people have access to a mobile phone or smartphone. In addition, not only patients – but also the population at large – use mobile devices like smartphones to collect, retrieve and analyse their health data. They are increasingly using these devices and their dedicated apps as a diagnosis performance assistant, medical device and lifestyle tool, with the aim of simplifying, individualizing and improving solutions.

Employees in health care institutions like physicians and nurses expect more effective and timely coordination of their patient care, such as networking between the outpatient and inpatient sectors, the prevention of treatment errors and the reduction of administrative costs. Hospitals are looking to improve efficiency, reduce healthcare costs through online consultation, coordinate appointments effectively and develop new markets. Health insurance companies have the opportunity to generate large amounts of data to help lower future costs.

A DOUBLE-EDGED SWORD

However, mHealth also has its drawbacks. Many people mention data privacy as a concern. But mHealth’ opportunities represent a considerable improvement in medical care. It is becoming increasingly clear that data collection can make a significant contribution to the development of medicines. Buoyed by big data, the innovation pipeline has never been as promising as it is today. With 55 new drugs licensed in the US and in Europe, a new record was achieved in 2018. Globally, there are now 7,000 new drugs under development. Of the various diseases, there are 1,813 drugs, many of which are under development to fight cancer. The second largest portion (1,329) is currently being developed and focuses on neurological diseases, slightly more than the 1,256 drugs used to cure infections.

Innovations and developments will not only be essential for our future, but also provide great long-term investment opportunities. According to ML, the US health club industry generated $27.6bn sales in 2016, a compound annual growth rate of 5.1% since 2009. As fitness spending is gaining market share, the number of fitness club members has also increased, with the number of fitness club members in the US increasing from 12.6% in 2000 to 17.6% in 2018. Wearable devices with health applications like the AppleWatch, including the Cupertino based giant’s AirPods, recorded growth of 30% in Q1, bringing sales in this segment to $5.1 billion from January to March 2019.