Digitization puts pressure on traditional pharmaceutical companies

FrankfortThe advent of digital technologies will structurally change the health sector in the coming years. Because the expenses will change massively.

As diagnoses, prevention and digital health become more and more important in health care, the areas of medicine and medical care are shrinking relatively. That's what the "Future of Health" study from Strategy &, PwC's strategy consulting firm shows. As part of the study, 120 pharmaceutical company directors were asked about their expectations for the future.

According to respondents, the global health care market will continue to grow from $ 10.6 trillion in 2018 to $ 11.6 trillion in 2030. However, more and more people will need access to health care. drugs and health care spending will decrease. On this basis, the net operating margins of the pharmaceutical industry could be under pressure.

"In our survey, health officials are waiting at uncertain times for their current business model.Traditional pharmaceutical companies must either become much more efficient at maintaining their margins, or invest specifically in growth areas such as diagnosis, prevention and digital health solutions, "said Thomas Solbach, health market expert and Strategy & Partner.

Pharmaceutical executives surveyed expect a significant increase in spending over the coming years from 2018, particularly in the areas of diagnostics, prevention and digital health. The proportion of these three areas will increase from 7% to 23% by 2030, more than three times, to reach $ 2.7 trillion in absolute terms.

On the other hand, the share of medical care (clinics, doctors) will increase from the current 70% in 2018 to 54%. According to pharmaceutical analysts, drug spending will remain stable at 17%, which translates into modest growth of $ 1.8 trillion to $ 1.9 trillion.

In total, leaders in the pharmaceutical industry expect a moderate increase in health spending by 2030, with a 10% increase. According to the authors of the study, this is partly due to price pressure and the discussion of excessive drug prices in the United States.

Technology companies enter the market

Several other market experts, including experts from the Washington Institute for Health Metrics and Evaluation, are expected to post significantly higher growth rates for the healthcare market. By the year 2030, they expect health spending to increase by 42% to $ 15 trillion. In this scenario, the expected developments in pharmacy magazines for diagnostics, prevention and digital health would be even larger in absolute terms, more than quadruple to $ 3.5 trillion.

According to the Strategy & Strategy study, healthcare spending will grow very strongly in the coming years, particularly in India and China. In China, for example, the budget is expected to more than double to just under $ 3.4 trillion. In the large countries of Europe and the United States, growth is much lower, from 12 to 20%.

Health spending in Germany is expected to rise from $ 492 billion to $ 575 billion (up 16%). Here too, the areas of prevention and digital health services are expected to grow the fastest, while spending on drugs will decline slightly and the budget for medical care will decline significantly.

According to Strategy & Partner Solbach, pharmaceutical companies are questioning the sustainability of their business model. There are two main trends for him: "Highly innovative drugs are still needed for serious and not yet treatable diseases, and in terms of sustainability, the prevention and management of widespread diseases and their treatment with low-cost generic drugs. cost is becoming more and more important, "he said. The biggest pressure will come from pharmaceutical companies, which are positioned in the market environment with little differentiated drugs, continues Solbach.

Technology companies, which are growing in the market, are drivers of change in the healthcare market. According to Analysis & Strategy, the number of partnerships and acquisitions of major players, such as Alphabet in Tencent, has increased over the past five years.

"To develop highly specialized drugs, technology companies will probably leave that to pharmaceutical companies," says Strategy & Partner Solbach. But technology companies have positioned themselves in the field of health and medicine and rely on their strategy to make themselves irreplaceable in terms of customer experience and data sovereignty.

"If they can create platforms and provide patients with the right application, pharmaceutical companies will have trouble keeping up," he said.

In his opinion, Pharma's core competency will continue to be sought in the future. "Pharma has a great deal of medical know-how, knows how to act in markets and has access to decision makers, and pharmaceutical companies will continue to be part of the drug business in the future," said M Solbach.

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