Whether its homecare, pharmaceuticals or conventional healthcare, the medical gases business has been one of the stronger pillars for industrial gas growth in recent years, against a backdrop of economic and industrial headwinds.
Since the price of oil began to plunge in earnest in summer 2014, related markets the world over have been plunged into similar turbulence. Though periods of relative stability have been experienced, high uncertainty in the crude oil price outlook – and investment uncertainty across various projects – has prevailed.
At the same time, the global steel business has been the source of much consternation itself, with a flooded marketplace, cheapened product, and high-profile plant closures.
Meanwhile several advanced economies have struggled to recapture the growth rates of yesteryear and China, for so long the fast rising star of the global economic stage, has seen its rapid growth tempered over the last 12 months.
In this context, the recovering electronics business and burgeoning healthcare sectors have provided bright spots for the gases industry. The fast-rising healthcare at home (homecare) movement in particular has been a strong growth driver for the gases business, with several major players keen to shore up their presence in this market.
So is this still the case – where does the healthcare business stand in 2016/17?
In a nutshell, the same dynamics remain. The major societal megatrends are unchanged; ageing populations, the rise of chronic diseases, downward pressures on healthcare systems, and a gradually increasing willingness of patients to be treated at home are fundamentals that are unlikely to change anytime soon.
All of which is driving the need for cost-effective treatments and solutions.
The US market in particular continues to be in healthy shape where growth is concerned, and appears set for strong expansion through to 2020. An investment analyst I spoke to recently agreed, explaining, “We think so, as US national healthcare expenditures are forecasted to total $4.1 trillion in 2019, representing 5.8% annual growth. Growth in healthcare demand is attributed to the continued ageing of the population as well as growing enrolment in private plans and Medicaid due to the Affordable Care Act.”
Providers are expected to benefit from growth in consumer incomes and a projected rise in the number of acute and chronic conditions, driven by above-average growth in the 55-years-and-older ‘cohort’ of the population, I understand. The number of persons 65 years of age and older is projected to rise 3.3% per year through to 2019 – four times as fast as the total population.
“The US insured population is projected to total 300.5 million persons in 2019, representing gains of 1.7% annually,” he summarised.
Key factors contributing to the rise in insurance are the expansion of Medicaid and subsidies to purchase private insurance available through the Health Insurance Marketplace, with the uninsured rate in 2019 forecast to fall to 8.1%.
Whether this wave of growth can be sustained long into the future may depend on the incoming President, I’m told.
Less precarious is homecare. Spending in homecare is projected to exhibit the most rapid growth among all segments, with expected annual increases of 7.2% through to 2019. What’s fuelling this expectation? The lower costs associated with home healthcare services, relative to nursing homes, and the desire of many persons to remain in their home is expected to drive spending while in addition, the growing elderly population is projected to boost demand.
But there are also a number of other advantages in favour of the homecare business that apply on a global level. For starters there are the cost savings from an absence of the large overhead costs associated with running nursing homes, clinics or healthcare facilities. Secondly, demand is supported by technological innovations to match that expand the scope of services that can be provided in home settings. And thirdly, home healthcare reduces or eliminates the risk of hospital-acquired infection. Clearly it’s win-win model.
For the global gases industry, there’s no contest either – the healthcare sector is not just a non-cyclical mainstay, but an end-user market in high-growth mode the world over. Right now, medical gases growth is in healthy shape.