Global Healthcare Outlook & Supply Chain Implications Gene Huang, VP Chief Economist MedSC 2013 Spring Meeting May 15, 2013
Global Healthcare Outlook & Supply Chain Implications Gene Huang, VP Chief Economist MedSC 2013 Spring Meeting May 15, 2013
Global Healthcare Outlook & Supply Chain Implications: Themes
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Structural Growth Drivers – Global demographic trends – Income growth, development stage – Innovation
Industry Outlook Production & Trade Patterns Supply Chain Implications
Healthcare Sector Performance Through the Great Recession
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80
90
100
110
120
130
140
150
160
170
180
S&P 500
S&P 500 HEALTHCARE EQUIPMENT & SUPPLIES
Source: Bloomberg
Sales per Share (Index, 2004=100)
Aging Global Population – A Structural Tailwind for Healthcare
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9%
11%
13%
15%
17%
19%
21%
2011 2021 2031 2041 2051Source: United Nations
Share of World Population Aged 65 and Over (%)
9.1%
20%
UN World Population Growth (%/yr)65+ 85+ Total
to 2021 3.2% 3.8% 1.1% to 2031 3.2% 3.4% 1.0% to 2041 3.1% 3.9% 0.9% to 2051 2.8% 3.8% 0.8%
Demographic Shift is Global
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124
463
378
62 58 45 -
50
100
150
200
250
300
350
400
450
500
More developed
regions
Less developed
regions
Asia Europe Latin America
North America
Source: United Nations
Total Additions to 65 and Over Population to 2032 (millions) • Over the next 20 years, less
developed regions expected to add >3.5x more to 65+ population than developed regions
• China will add more to 65+ population than entire developed world combined
• Asia to have 60% of world’s population over 65 years of age by 2040
Health Expenditures Increase Significantly with Age
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-
5,000
10,000
15,000
20,000
25,000
30,000
0-18 19-44 45-54 55-64 65-74 75-84 85+Age Group
Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group. 2004 data.
Per Capita U.S. Personal Healthcare Spending by Age Group (in dollars)
-
500
1,000
1,500
2,000
2,500
3,000
3,500
0-18 19-44 45-54 55-64 65-74 75-84 85+Age Group
Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group. 2004 data.
Per Capita U.S. Spending on Drugs & Medical Products by Age Group (in dollars)
Healthcare Spending a Greater Priority as Development Advances
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4
6
8
10
12
14
16
18
20
10,000 20,000 30,000 40,000 50,000 60,000
2010
Hea
lth E
xpen
diture
s %
of G
DP
2010 GDP per Capita (PPP)Source: OECD
Healthcare Expenditure Share vs. Income in OECD Countries
USA
• Strong relationship between income and healthcare expenditures’ share of GDP
• Spending priorities change with incomes
• Social safety nets become more prevalent with development
• Health spending % of GDP: –OECD Average 9.5% –China 5% –India 4%
• Suggests global opportunity as development stage advances
Global Economic Outlook
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0
1
2
3
4
5
6
7
APAC US CAN EMEA LAC
trill
ions
of 2
005
US$
, mar
ket e
xcha
nge
rate
s
$ Change in Real GDP, 2013-2023
Source: Economist Intelligence Unit, Haver Analytics
China
India
Other APAC
Eurozone
Other EUR
Brazil
+2.5%/yr
+2.5%/yr
+2.0%/yr
+3.4%/yr
+2.8%/yr
Other APAC
Other Europe
MEA
Japan
Mexico
Other LAC
Innovations Promise Huge Growth Potential for the Industry
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•Healthcare innovation: supply creates its own demand
•Customization in treatment: the economics of genomics
•The human condition: no matter how much progress we make, we will never lack for ailments to treat
Medical Device Manufacturing is Booming in the United States
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Productivity Growth in the Medical Device Manufacturing Sector has Been Impressive
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Industry Overview & Outlook – Medical Devices & Supplies
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U.S. Medical Devices & Supplies AnnualGrowth
2013-2018
Source: IBISWorld 2013 estimates & forecasts
7.0%
3.9%
4.8%
Medical Device ManufacturingMedical Instruments & Supplies MfgMedical Supply/Device Wholesaling
$35,195
$91,720
$157,436
2013 Sales ($millions)
• Attractive growth rates expected for Medical Devices
• Aging populations, technological advances support growth
• Healthcare cost containment measures, customer consolidation challenging to industry pricing
• Emerging markets (esp. China and India) big opportunities
0
2
4
6
8
10
12
14
2007 2008 2009 2010 2011 2012Source: USITC, ITA
Export Growth
U.S. Trade in Medical Devices
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(10)
(5)
0
5
10
15
2007 2008 2009 2010 2011 2012Source: USITC, ITA
Import Growth
60%Other
13%Japan
10%Netherlands
9%Canada
8%Germany
Exports To...
Source: USITC, ITA
48%Other
15%Mexico
13%Ireland
13%China
11% Germany
Imports From...
Source: USITC, ITA
Industry Overview & Outlook - Pharma
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•Global pharmaceuticals and medicine manufacturing a ~$1 trillion business
•Near term growth challenged by patent expirations •Solid growth in biologics, generics •Growth strongest outside developed world Global Pharmaceutical Market
2007-2011 2012 2012-2016North America 347.1 3.5% 1 - 2% 1 - 4%Europe 265.4 4.9% 0 - 1% 0 - 3%Asia / Africa / Australia 165.2 15.5% 10 - 11% 10 - 13%Japan 111.2 3.9% 0 - 1% 1 - 4%Latin America 66.7 12.3% 13 - 14% 10 - 13% Total World 955.6 6.1% 3 - 4% 3 - 6%Source: IMS Health Market Prognosis, May 2012
Annualized Growth Rates2011 Sales ($billions)
North America
Europe
North Asia
Other
Global Production & Trade - Pharma
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PercentageNorth America 43.0 Europe 35.0 North Asia 15.0 India & Central Asia 3.0 Oceania 1.5 South America 1.5 Africa & Middle East 0.5 South East Asia 0.5 Source: IBISWorld 2011
Global Pharma Production by Region
Germany 14% Germany 11%Switzerland 9% United States 9%United States 9% India 9%Ireland 8% United Kingdom 8%United Kingdom 7% Belgium 6%France 7% France 6%Belgium 6% Ireland 6%Italy 5% Switzerland 6%Netherlands 4% China 6%Spain 3% Netherlands 4%Source: Global Insight
Top 10 Exporters of Drugs & Medicines2012 Share 2030 Share
Increasing Supply Chain Complexity
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•Regulation increasing complexity •Geographic activity centers moving from developed to emerging markets (China, India, Brazil)
•M&A driving consolidation, supply chain optimization
•Biologics growth = more cold chain shipping, storage
Several Opcos Support Healthcare Strategy at FedEx
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FedEx Commitment to Healthcare
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