The Economy of Health Care: Why Breakthroughs in Medicine Create Growing Demand
How old is the oldest person you know personally? 80? 90? 100?
These numbers are well within reach given today’s life expectancy. Had I asked the same question in 1913 instead of 2013, the answers may have been more like 50 or 55. The average life expectancy continues to rise, and with it, new trends in the global health care industry.
The Great Recession showed us that the health care industry could stand up to the sharp economic downturn. While sales of health care supplies and equipment still faced economic decline—about three percent— the industry fared much better than others included in the S&P 500, many of which saw business decline 20 percent.
The health care industry stood firmer because it is still relatively new and continues to develop innovative products that improve our lives. In fact, the numbers show that long term prospects for health care are favorable—a topic I recently discussed before the Medical Device Supply Chain Council in Denver, Colorado.
Demographics are a powerful driver for the global health care industry. According to the United Nations, the 65 and older population is growing three times faster than the overall world population, and will more than triple by 2051. The 85 and older population will more than quadruple in that same time frame. This trend is not just happening in developed markets, rather all over the world. For example, China will add more to the 65+ population than the entire developed world combined. Since health care spending increases as we age, there is no doubt the industry will continue to see growth.
Globalization of the medical device industry should also increase in the coming years as the economies of major emerging markets such as China, India and Brazil continue to evolve, and their expanding middle class populations (with higher incomes) look for better health care. The Census and the Bureau of Economic Analysis note that in the U.S., medical device manufacturing has grown by almost 50 percent in the last decade, while other manufacturing has been mostly flat. The importing and exporting of medical devices in the U.S. is also growing faster than overall merchandise imports and exports.
As I touched on earlier, the health care industry continues to innovate, creating another major driver for growth in the industry. The development of new treatment options creates demand for more health care. Minimally invasive surgery, which has greatly decreased trauma and recovery times, will continue to increase the demand for elective surgeries. While people used to suffer from chronic conditions with few options for relief, new drug therapies now treat everything from anxiety to allergies.
The sequencing of the human genome has led to an explosion of genomics-based innovation and technology. These advancements are at the core of personalized health care that is tailored to a patient’s genetics and other unique characteristics. BRCA gene testing for breast cancer is one high profile (albeit expensive) example that recently got a publicity boost from movie star Angelina Jolie. PricewaterhouseCoopers estimates the U.S. personalized medicine market to be about $232 billion and projected it to grow 11 percent annually, nearly doubling in size by 2015 to over $450 billion.
Naturally, FedEx plays a role in health care industry growth as we continue to invest in our portfolio of delivery services, including the FedEx Deep Frozen Shipping solution, a service for temperature-sensitive healthcare shipments. SenseAware, a first-of-its-kind FedEx service, provides near real-time access to a critical shipment’s vital statistics while in transit. FedEx also continues to deliver lifesaving medical shipments through our charitable work with DirectRelief International, Orbis and American Red Cross, to name a few.
We cannot innovate our way out of frailty and death. Nothing short of a “fountain of youth” will stop this process, but the burgeoning health care industry offers new possibilities that can help us get closer to the ripe old ages of 80, 90 or 100.
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June 27, 2018
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