Consumer Staples
The healthcare industry is primarily responsible for providing the necessary goods and services to maintain public health standards.
This sector includes provider services (e.g.doctors providing health services), health insurance services, pharmaceutical manufacturing, healthcare IT, pharmacy services, medical technology manufacturers, and medical device manufacturers.
There are a lot of different areas of the healthcare industry that you can invest is the heavy amount of M&A between mega players with high barriers to entry. This consolidation will allow companies to benefit from economies of scale and fight off declining revenues in the short run, but also fuel R&D expenditure which will allow them to capitalize on hyper market growth in the long run that has been accelerated due to COVID.
The government also may play a role in the sector by providing guidelines and standards, and, may, in the future, provide health insurance beyond Medicare and Medicaid.
Industry Drivers
6.2%
According to the US Census Bureau, from 2021 to 2060, the percentage of the population that is aged 65 and over is expected to grow from 17.4% to 23.6%. Due to greater life expectancy for the US population, there is an increases the incidence of age-related illnesses which means that demand for medical treatments will increase.
5.5%
Medicaid spending is expected to reach 5.5% of GDP by 2027, up from 2.0% in 2017. Increased healthcare funding programs (such as the Patient Protection and Affordable Care Act) result in more available funding for the replacement of medical equipment and supplies, increasing industry demand.
3.6%
Federal funding for Medicare and Medicaid is expected to rise at an annualized rate of 3.6% over the five years to 2026. Medicare and Medicaid reimbursements constitute an estimated one-third of industry revenue. Federal funding for these programs affect demand for doctors' services and the cost of those services.
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