1. Guillaume Corpart +1 (305) 441-‐9300 x302
[email protected] www.globalhealthintelligence.com February 2015. © 2015, Global Health Intelligence. All rights reserved. Global Health Intelligence whitepaper Latin America’s 9 healthcare trends to watch in 2015 2. 4% 7% 7% 2% Emerging markets will shape healthcare growth …GHI delivers intelligence to win globally. Source: Global Health Intelligence analysis based on data from the OECD, CEPAL, WHO, the World Bank and certain local ministries Healthcare expenditure will grow 2 to 3x as fast in emerging markets… 3. Global Health Intelligence provides: Hospital demographics The world’s largest hospital demographics database focused on emerging markets Medical import data The most expansive healthcare equipment import staQsQcs in Mexico Tailored research Refined with 20+ years Market Intelligence experience • Market sizing and segmentaQon • Partner search & market due diligence • CompeQQve profiling • Pricing and cost analysis • Best pracQces • PosiQoning and opportunity idenQficaQon 2 4. Latin America’s 9 healthcare trends to watch in 2015 5. La/n America’s healthcare market is evolving in ways that will present new opportuni/es for firms willing to invest in the region. The report’s insights are intended to enable decision makers to seize the right opportuni/es and inform their go-‐to-‐market strategies throughout the region accordingly. This report outlines 4 key themes driving change in customer behavior and market context: 1. The aging populaQon 2. The prevalence of chronic diseases 3. The beginnings of healthcare technology innovaQon 4. Policy changes As well as 5 developments in specific segments of the healthcare market with important implicaQons for investors: 1. PharmaceuQcal sales growth 2. Predominance of generic drugs 3. ConsolidaQon of pharmacy retailing 4. OpportuniQes in the region’s 16,000+ hospitals 5. The appeal of the medical device market Forward 4 To learn more about Global Health Intelligence, our services, consulQng engagements and speaking opportuniQes, please contact: Guillaume Corpart, Managing Director +1 (305) 441-‐9300 gc@globalhealthintelligence www.globalhealthintelligence.com 6. 9 drivers and opportunities 5 EVOLVING CONTEXT AND CUSTOMERS OPPORTUNITIES IN A CHANGING COMPETITIVE LANDSCAPE 1. Demographics will create opportuniQes for the private sector 5. Pharmaceu/cal sales will grow 12% per year through 2017 2. Chronic disease prevenQon and treatment will drive growth in certain healthcare segments 6. Generics will account for 65% of LaQn America’s retail pharmaceuQcal drug sales by 2016 3. Technology advancement will create opportunity for new market developments 7. The consolida/on of pharmacy retailing will generate investment opportuniQes 4. Brazil invites foreign investment to private healthcare 8. The potenQal of LaQn America’s 16,000+ hospitals 9. Imported medical devices account for over $10 billion in LaQn America 7. Evolving Context and Customers 8. SHIFTING DEMOGRAPHICS LaQn America is basking in a 2-‐to-‐3 decade demographic sweet spot: • There is lower popula/on growth, driven by urbanizaQon, greater access to educaQon and a larger proporQon of women in the workforce • Popula/on aged over 65 will rise at a rate three Qmes higher than the growth rate for the populaQon as a whole in 2000-‐2025 This will shia healthcare needs moving forward OPPORTUNITIES 1. Private enterprise could play a greater role in coping with increased demand, parQcularly in non-‐hospital care such as clinics, ambulatory services, hospice care, nursing faciliQes, and home care 2. Technology, IT and the private sector have opportuniQes in lowering healthcare access costs (especially of an aging populaQon) in fields such as telemedicine, healthcare IT, medical devices and medical technologies 3. Preven/ve care and health promoQon are on the rise, expanding opportuniQes for healthy eaQng, exercise and diets 1. Demographics will create opportunities for the private sector 7 40% 41% 32% 23% 18% 56% 55% 62% 67% 64% 3% 4% 6% 10% 18% 1950 1975 2002 2025 2050 0-‐14 15-‐64 65+ Percentage of Latin American population by age group, historic and forecast Demographic bonus Demographic dividend Probability High Impact Regional Speed Slow 9. THE PREVALENCE OF CHRONIC DISEASES Non-‐communicable diseases will be the cause of 84% of deaths in La/n America by 2030 • Obesity is at the heart of the discussion as it is a trigger for condiQons such as diabetes, high blood pressure and cholesterol, heart disease, strokes and respiratory and gastrointesQnal diseases • Cancer is also on the rise – esQmates show that 1 million people will succumb to cancer annually by 2030, with 1.7 million cases diagnosed annually IMPLICATIONS FOR HEALTHCARE 1. Preven/on is a vast area of opportunity for pharmaceuQcal companies and food manufacturers 2. Improving healthcare access and the quality of detec/on methods is an area of future growth for medical imaging equipment manufacturers and providers of diagnosQcs services and equipment 3. The increasing demand for drugs designed to treat cancer, diabetes and heart disease will affect local and internaQonal laboratories 2. Chronic disease prevention and treatment will drive growth in certain healthcare segments 8 Adult obesity in the world, as a percentage of total population Probability High Impact Regional Speed Medium 2% 2% 3% 4% 14% 15% 17% 19% 19% 25% 31% 35% India China Japan Korea Poland Brazil Russia South Africa Turkey Chile Mexico USA 10. Two types of transformaQve changes to modern healthcare could eventually take LaQn America by storm: 1. EFFICIENCY GAINS IN PUBLIC HEALTHCARE EXPENDITURE • Telemedicine, which can help reduce the high cost of spreading healthcare infrastructure in rural areas, is a new area of growth for medical equipment manufacturers who supply integrated technology soluQons • “Big data” analysis, which can yield cost savings, remains costly and is not yet widespread even in U.S. hospitals, yet early movers may reap many dividends, especially with government customers looking to boost cost efficiencies 2. THE PERSONALIZATION OF MEDICAL TREATMENTS • Mobile health apps, which enable users to monitor their health and manage chronic diseases, are a growing market in the region, where smartphone use is expected to double by 2017, accounQng for 40% of the region’s populaQon • 3D prin/ng, beginning to be used in the medical technology industry, is unlikely to disrupt LaQn America’s healthcare sector in the near future, offering a longer horizon for maximizing profits from tradiQonal medical devices sales 3. Technology advancement will create opportunity for new market developments 9 Probability Medium-‐Low Impact Brazil, Mexico, Colombia Speed Medium 11. The Brazilian government announced in January 2015 that it would allow foreign investment in the private healthcare sector, marking a significant turning point with broad implica/ons for investment in the healthcare sector: INCREASED HEALTHCARE SPENDING • Aaer growing from 8.9% of GDP in 2011 to 9.1% in 2013, healthcare spending is now projected to rise to $255.5 billion by 2017. FOREIGN FIRMS TO PLAY IN THE HOSPITAL MARKET • Hospitals and clinics, to be open to foreign investment for the first Qme, have great potenQal – Brazil’s concentrated hospital market and their revenue streams make for rich pickings. PROTOCOL STANDARDIZATION • Foreign investment is likely to accelerate the professionalizaQon of hospital management pracQces, which will create opportuniQes for investment in IT systems, management skills, and tools to monitor, control, and report key performance indicators. SUSTAINABILITY OF THE SUS • Investment in the private healthcare sector has the potenQal to shia the burden away from the public healthcare system, the Sistema Único da Saúde (SUS), which could gradually stabilize the SUS’s long-‐term financial health. 4. Brazil invites foreign investment to private healthcare 10 Probability High Impact Brazil Speed Medium-‐Fast 12. Opportunities in a Changing Competitive Landscape 13. 38% 35% 24% 21% 18% 23% 12% 11% 8% 10% $954 bi $1,172 bi North America Europe Asia / Afirca / Australia Japan LaQn America DEFINING DEVELOPMENTS The growing middle class will spend more on healthcare, as: • An increased use of generics will conQnue to be the main consumpQon papern • Local producers of generic drugs are becoming the driving force of the pharmaceuQcal market • The consolida/on of pharmacies and the conQnued expansion of retail/supermarket chains will accentuate MARKETS THAT STAND OUT 1. Brazil, accounQng for 43% of the region’s pharmaceuQcal sales between 2013-‐2017, is expected to become the world’s fiah largest pharmaceuQcal market by 2016 2. Mexico is the second largest market in LaQn America with 17% of the region’s sales 3. Colombia and Peru present strong growth prospects, albeit from a small base 5. Pharmaceutical sales will grow 12% per year through 2017 12 Probability High Impact Brazil, Mexico, Colombia, Peru Speed Fast Share of global pharmaceutical spending by region 2013-2017 Ý 12% Ü 3% Ý 12% Ü 2% Ü 3% CAGR 2013-‐2017 2013 2017 14. GROWTH OF THE GENERIC MARKET As healthcare expenditure grows in the region, two market forces will drive the growth of the generic drugs market: • The expira/on of 46 patents in the U.S. will invite greater compeQQon to provide low-‐cost alternaQves for popular drugs • Governments who heavily subsidize the health system, notably Brazil, ArgenQna and Colombia, turn to generics as their opQon of choice The use of generics is expected to increase 16% per year, unQl reaching 65% of all drug sales by 2016 THE WINNERS 1. Local generics manufacturers have been growing 28% per year, selling generics 70% more economically than their patented counterparts 2. Large pharmacy and retail chains have leveraged their buying power and logisQcs networks to sell greater volumes of generics at the expense of smaller medical distributors and pharmacies $79 $86 $466 $631 $62 $234 $122 $417 $14 $40 $88 $143 $0 $300 $600 $900 $1,200 ROW Pharmerging markets Developed economies Global Spending Branded Generic Other $78 $58 $458 $602 $45 $111 $88 $239 $12 $25 $82 $115 $0 $300 $600 $900 $1,200 ROW Pharmerging markets Developed economies Global Spending 6. Generics will account for 65% of Latin America’s retail pharmaceutical drug sales by 2016 13 Pharmaceutical spending by class of drug and type of market, 2011 vs. 2016 forecast Probability High Impact Brazil, Mexico, Chile, Colombia Speed Fast 15. 7. The consolidation of pharmacy retailing will generate investment opportunities 14 Probability High Impact Regional Speed Slow Dominant local pharmacy chains, which are expanding both in terms of geography and breadth of services, will become ever more appealing to foreign investors – the sector’s consolidaQon and diversificaQon is playing out in three ways: 1. DIVERSIFICATION INTO BASIC MEDICAL SERVICES The expansion of low-‐cost and, in some cases, free medical checkups and exams onsite within the premises of pharmacy outlets is set to conQnue 2. VERTICAL INTEGRATION OF THE PRODUCTION CHAIN Pharmacy chains are venturing into the producQon of private label generic drugs, becoming producers and distributors of pharmaceuQcals 3. CONSOLIDATION OF THE DISTRIBUTION CHANNELS The trend of medical distributors and pharmacy retailers forging Qghter bonds is beginning to take place in LaQn America as well Pharmaceutical sales in leading Latin American countries, US$ millions $36 $37 $38 $40 $42 $45 $49 $16 $17 $18 $19 $20 $21 $22 $2 $4 $4 $4 $5 $6 $6 $0 $20 $40 $60 $80 $100 2011 2012 2013 2014 2015 2016 2017 Brazil Mexico Colombia 16. THE SIZE OF THE OPPORTUNITY While hospital spending in LaQn America lags behind that of the U.S. and Europe, the size of the opportunity warrants a closer look – La/n America is home to 16,000+ hospitals TRAGETTED INVESTMENT Analyzing hospital demographics can uncover a wealth of opportuni/es, including: • 50% of hospitals in Brazil are located in six states • 20% of hospitals in Brazil have over 100 beds • 25% of hospitals in Mexico are located in three states • 10% of hospital physicians in Mexico are pediatricians • Amongst other 8. The potential of Latin America’s 16,000+ hospitals 15 Probability High Impact Brazil, Mexico, Colombia, ArgenQna, Peru, Chile Speed Slow-‐Medium Number of hospitals by country 5,700 6,700 3,900 2,400 1,650 1,000 420 US Brazil Mexico Colombia Argentina Peru Chile 17. IMPORTED DEVICES TRUMP LOCAL PRODUCTION Most countries in the region have liple-‐to-‐no local manufacturing of medical devices or medical technology. As a result, most countries rely on imports, especially for high-‐end, complex devices. Mexico, Brazil, Argen/na and Colombia together account for more than 75% of imported devices. TOP MARKETS • Brazil is the region’s largest and most mature market for medical devices – it accounts for 50% of the U.S. exports to the region and has a strong domesQc manufacturing industry of its own. • Mexico is the region’s largest importer. Its proximity to the U.S., developed road systems, integraQon into the NAFTA, and robust export manufacturing industry make it a natural expansion when looking outside the US. • Beyond the top four markets — Brazil, Mexico, ArgenQna and Colombia — a second Qer stands out, including Chile, Peru and Costa Rica, which each benefit from the right condiQons to make them apracQve to medical device suppliers and manufacturers. 9. Imported medical devices account for over $10 billion in Latin America 16 Probability High Impact Regional Speed Medium Medical device imports by country Mexico, $2.9 Brazil, $2.2 Colombia, $. 7 ArgenQna, $1.9 Others, $2.7 $. $1. $2. $3. $4. 2009 2010 2011 2012 2013 2014 US$, billions 18. www.globalhealthintelligence.com To learn more about Global Health Intelligence, our services, consulQng engagements and speaking opportuniQes, please contact: Guillaume Corpart, Managing Director +1 (305) 441-‐9300 gc@globalhealthintelligence