Head of Global Investment Lab and Chief Innovation Officer for the Private Bank
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Rising healthcare costs could be one of society’s biggest challenges in the 21st century. But medical advances could ease the strain and offer potential investment opportunities.
According to the old saying, you can’t put a price on your health. For society as a whole, though, we can certainly put a price on the provision of healthcare.
And that price is already painfully high and rising. In the US, total national healthcare spending hit US$2.9 trillion in 2013. That works out as more than US$7,500 for every American citizen, as the accompanying chart shows.
While healthcare spending is highest in the US, this isn’t just a US issue. In countries the world over, the costs of treating illness are straining governments’ budgets and patients’ pockets. This could worsen further still over the coming years, especially in developed nations. According to the United Nations, the number of people over the age of 60 globally will more than double between 2015 and 2050. And more elderly people will mean even greater demand for healthcare.
Put simply, healthcare costs could be one of the biggest challenges facing society in the twenty-first century. But we believe that advances in medical technology could offer some much-needed relief to the chronic ailment of high and rising costs. And we see particular areas of innovation that could benefit both patients and healthcare systems but also potentially investors.
Biosimilars are cheaper lookalike versions of some of today’s most effective but expensive big branded drugs. While still in their infancy, biosimilars could create savings of around 50% on biological drugs for western healthcare budgets by 2015, according to Citi Research. At the same time, improved technology could cut the cost of healthcare administration, as well as of monitoring patients’ conditions remotely via smart-watches and the like.
Despite the potential of these and other innovations, we do not believe that investors have fully grasped the magnitude of the changes underway in the healthcare industry. This is part of the thinking behind Transforming Healthcare, one of our key themes for 2016. You can read more about these transformative technologies and some of the investment possibilities here.