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The outlook for the global healthcare industry in the year ahead is stable, Moody's Investors Service says in its 2018 outlook for the sector. In most countries, healthcare will represent a rising proportion of GDP, presenting plenty of growth opportunities for healthcare companies, but squeezing government budgets.
"Global demand for healthcare products and services will continue to rise in 2018 due to aging populations in mature markets and improving access to healthcare in emerging ones, as well as new products and technologies," said Michael Levesque, a Moody's Senior Vice President. "But increasing spending on healthcare will also create budgetary pressures, which in turn will drive cost-containment efforts and other political risks."
As demand for healthcare goes up, payers will focus on the cost-effectiveness of products and services, Levesque says. Governments or legislators could enact actions that reduce pricing flexibility or reduce demand. Meanwhile, healthcare insurers will increasingly require patients to shoulder a greater burden of the cost of care.
Moody's expects the global pharmaceutical industry to see EBITDA grow between 1% and 2% next year, with the oncology market the largest contributor to growth. Patent expirations on traditional products will be moderate and in general will be limited, while the market for biotech products will modestly erode due to the entry of biosimilar ones. Generic drug prices will continue to fall as customers consolidate, while in the US net prices on branded drugs will rise despite growing price pressures.
US for-profit hospitals will see same-facility EBITDA growth of 2.5% to 3.0% in the coming year, Moody's says. The movement of patients to lower-cost settings will constrain inpatient volumes, while rising labor and other expenses will pressure margins. However, increases in reimbursement rates from private insurers will help offset reimbursement pressures from government payers.
And US medical products and device makers will see EBITDA growth of 3.0% to 3.5%, with new products, synergies from large mergers and acquisitions, and an aging population aiding growth. Offsetting factors include weak inpatient volumes, and the continuing drive to value-based reimbursement approaches that will pressure pricing.
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