The healthcare sector is one of the most vital and fastest growing industries in the world today. It includes a wide range of experts, organizations, and services devoted to enhancing and preserving people’s health and well being, both individually and collectively.
The healthcare sector is made up of a large network of people and organizations that work together to provide high quality care and make sure that patients get the best possible care and help. These participants range from hospitals and clinics to pharmaceutical corporations and insurance companies.
The healthcare sector is continuing to develop and grow, providing exciting new potential for innovation and growth, thanks to technological advancements and a growing emphasis on prevention.
In a Nutshell
- By 2020, the U.S. economy’s largest and most complicated sector—the healthcare sector—will contribute 18% of GDP.
- Research, manufacturing, and facility management are just a few of the many industries that make up the healthcare sector.
- Although the U.S. ranks among the highest quality nations in the world for healthcare, it falls short of other wealthy, developed nations in some areas.
- Due to the unpredictability of the tug of war between government and industrial interests, healthcare investors are subject to a significant amount of political risk.
Understanding the Healthcare Sector
The healthcare sector is one of the biggest and most complicated parts of the U.S. economy. By 2020, it will make up 18% of the GDP. The U.S. healthcare sector benefits from a strong medical research and development system, in cooperation with the higher education system and the technology industry. The healthcare industry is seeing strong growth due to the aging population and the aging of the baby boom generation.
The health of a society is ultimately determined by the health of its citizens.
Margaret Chan
From an economic point of view, healthcare markets are characterized by a number of different factors. Public intervention in healthcare markets and activities is widespread, in part because of some of these economic factors. Demand for healthcare services is highly price inelastic. Consumers and producers face inherent uncertainties about service needs, outcomes and costs. Patients, providers and other industry players have highly asymmetric information and principal agent problems are pervasive.
There are significant barriers to entry in the form of professional licensing, regulation, intellectual property protection, expertise, research and development costs and natural economies of scale. The consumption (or non consumption) and production of medical services can involve significant externalities, particularly with respect to infectious diseases. Transaction costs are high in both the provision and coordination of care.
Healthcare Industries
The healthcare sector encompasses a diverse range of industries, with activities ranging from research to manufacturing to facility management.
Drugs
Drug manufacturers are further divided into biotechnology companies, large pharmaceutical companies, and generic drug manufacturers. The biotechnology industry consists of companies that engage in research and development to create new drugs, devices, and treatment methods.
Many of these companies are small and lack reliable sources of revenue. Their market value may depend entirely on the expectation that a drug or treatment will gain regulatory approval, and FDA decisions or rulings in patent cases can cause sharp double digit swings in stock prices. Examples of (larger) biotech companies include Novo Nordisk (NVO), Regeneron ( REGN), Alexion ( ALXN), Vertex ( VRTX), Gilead Sciences Inc (GILD) and Celgene Corp (CELG).
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Large pharmaceutical companies also engage in research and development, but tend to focus more on manufacturing and marketing an existing portfolio of drugs than the typical biotech company. These companies tend to have more reliable revenue streams and a more diversified “pipeline” of drugs in R&D, making them less dependent on pivotal drug trials and their stock less volatile. Examples of large pharmaceutical companies include Johnson and Johnson, Roche, Pfizer, Eli Lilly, Novartis AG. GlaxoSmithKline and Astrazeneca.
Some pharmaceutical companies specialize in generic drugs, which are identical to brand name drugs but no longer enjoy patent protection. As a result, there is often competition to manufacture identical drugs, resulting in lower prices and narrower profit margins. Teva Pharmaceutical Industries Ltd. is an example of a generic drug company.
Medical Equipment
Medical equipment manufacturers range from companies that make standard, well known products, scalpels, forceps, bandages, and gloves to those that conduct cutting edge research and produce expensive, high tech equipment such as MRI machines and surgical robots. Philips is an example of a medical equipment manufacturer.
Managed Healthcare
Managed care companies offer health insurance policies. The “big five” companies that dominate the managed care industry are UnitedHealth Group Inc, Anthem Inc, Aetna Inc, Molina and Centene.
Health Centers
Healthcare companies operate hospitals, clinics, laboratories, psychiatric facilities and nursing homes. Examples include Laboratory Corp. of America Holdings, which operates facilities that perform blood and other tests, and HCA Healthcare Inc. which operates hospitals and other healthcare facilities in the US and the UK.
Healthcare Sector in the U.S. and the OECD
According to the OECD, the U.S. is one of the countries in the world with the highest quality of care, but in some aspects of health it lags behind other rich, developed countries. According to the OECD, life expectancy is 78.9 years, below the OECD average of 80 years (the 38 OECD members are mostly rich, industrialized countries in Europe and North America).
Despite these poor results, the United States spends far more than any other country on healthcare, measured per capita: $10,948. This situation has led to a number of national reforms, such as the Affordable Care Act. Investors in healthcare face considerable political risk as a result of the uncertainties surrounding the tug of war between politics and industry interests.
Wrap Up
In conclusion, the healthcare sector is a dynamic and complicated part of the American economy. Numerous economic features, such as governmental interference, pricing inelasticity, asymmetric information, and high transaction costs, define it. The industry includes a wide range of businesses, including those that produce drugs, medical equipment, managed care organizations, and healthcare facilities.
Although the American healthcare system is among the greatest in the world, there are still several areas where it falls short of other nations’ systems. Finally, because of the uncertainty surrounding the struggle between political and industrial interests, healthcare investors are exposed to a significant amount of political risk.
FAQs
A wide word, “healthcare sector,” refers to all businesses and organizations that offer medical products, services, and care. Hospitals, medical offices, pharmacies, producers of medical equipment, health insurance providers, etc. are all included.
Hospitals, clinics, pharmacies, producers of medical devices, health insurance providers, and other related businesses make up the majority of the healthcare sector.
Working in the healthcare sector can have numerous benefits, including job security, competitive pay, and the chance to improve the lives of others.
Depending on the position, different qualifications are needed to work in the healthcare sector. A bachelor’s degree in a pertinent subject, such medical, nursing, or healthcare management, is typically necessary.
Due to the demanding nature of the work, the long hours, and the requirement to stay current with medical advancements, working in healthcare can be difficult. Additionally, the business is heavily regulated, thus it is crucial to be aware of all applicable laws and regulations.
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- Statista – U.S. national health expenditure as percent of GDP from 1960 to 2020
- Georgetown Health Policy Institute – Medicaid Managed Care: 2020 Results for the “Big Five”
- OECD – Health
