Could COVID-19 be the catalyst to a new healthcare paradigm in Asia Pacific?
COVID-19 has globally catapulted the healthcare sector to the front and center of public consciousness and policy makers’ attention alike. Its impact on the healthcare industry is undeniable, but what is also noteworthy is the spotlight it has shone on affordability and accessibility of care to its end consumers, namely the patient. In this article, MUFG’s APAC healthcare team looks at how the healthcare industry adapted swiftly to the pandemic, the further changes we anticipate and whether they, on balance, will create a ‘new normal’ for the sector. We believe that the healthcare sector will maintain its investment attractiveness, continue to draw capital and despite this pandemic, will see investment in innovation and solutions that go towards delivering patient-centric care.
At the time of writing, COVID-19 has infected over 23 million people worldwide and thrown the global economy into disarray. The United Nations Secretary-General calls it an ‘unparalleled economic shock(1) ’. Although the negative impact of the coronavirus extends to all sectors and trade flows, COVID-19 is first and foremost a ‘global healthcare crisis’ which has laid bare the shortcomings and challenges facing healthcare systems across the globe.
The current situation, however, is also a clarion call to all stakeholders in the healthcare delivery ecosystem to address long standing pressure points for the industry and for patients. These include the perpetual shortage of medical personnel (access), weak primary healthcare (access), high cost structures of hospitals (affordability) and capital expenditure-intensive business models (availability). Similarly, the pharmaceuticals sector, though less impacted by COVID-19 compared to healthcare services and medtech sectors, will also have to think through its own pressure points brought forth by the pandemic, notably, single-source supply chains and logistical dependencies, offline-only sales strategies, product mix as well as an increasingly insular world calling out for local manufacturing.
The potential changes in the healthcare system will be driven by a mix of factors, ranging from regulation, increasing public focus on healthcare access and infrastructure, to providers adjusting to new realities of the post-COVID-19 era.
REVIEWING THE PRIVATE HEALTHCARE DELIVERY MODEL
Private hospitals generate value primarily by increasing the number of their operational beds, occupying them with a higher profit case-mix and spreading the costs of doctors across more beds. This is a highly capital intensive business strategy, but one which is under-pinned by the essential nature of the service in a world that is rapidly aging and increasingly prone to chronic diseases. In fact, this pandemic has reminded governments of the value the private healthcare sector brings to the overall well-being of the population.
Post COVID-19, we expect private hospitals to rationalise their cost structures, as they accommodate additional costs imposed by revised infection protocols and safe distancing norms. Hospitals will also have to rethink their own supply chain strategies, having experienced bottlenecks during the initial phases of lockdowns. The financial impact from deferment of electives as well as macro-recessionary headwinds may act as a catalyst to mergers and acquisitions in this space.
As service providers wait for a ramp-up of elective treatments, private care facilities, in particular those dependent on healthcare tourism, will remain vulnerable to any resurgence in COVID outbreaks. They should remain agile and be open to solutions not considered hitherto, such as repurposing facilities or adding alternative healthcare delivery models, for example, day care or ambulatory care.
DIGITISATION IN HEALTHCARE
Digital health solutions will also take center stage for established hospital chains. During the first half of this year we saw a tremendous increase in the usage of digital health tools such as remote triaging, teleconsultations, e-prescription and home delivery of prescription drugs, and we expect this trend to continue. We expect hospital chains to continue integrating their legacy offline-only delivery models with online delivery systems. To do so, service providers will have to look at different strategies and weigh the risks and rewards for each, namely, building proprietary digital solutions (requires organisational focus, resources and agility), partnering (need to ensure data security and service quality) or to simply acquire (costly, and integration is key).
Indeed, going forward, digital interfaces may very well be the preferred first touch-point between care providers and patients. The deferment of electives during the pandemic has further illustrated the importance of remote disease monitoring and management. Nonetheless, whilst teleconsultations may support volumes during COVID-19 lockdowns and as economies re-open, this is just the first step in the process of digitising delivery. Private healthcare service providers need to continue to incorporate more aspects of digital technology, such as big data, IoT and AI, in their end-to-end delivery continuum so as to effectively navigate a new societal paradigm that embraces virtual care delivery.
COVID-19 has brought a renewed focus on universal healthcare (UHC). Countries in APAC with robust UHC frameworks were able to tackle the spread of the pandemic more effectively. Going forward, we expect to see an increase in governmental focus and spend (including capital expenditure) on public healthcare infrastructure, which in emerging Asian economies should lead to rapid strides in UHC.
The healthcare sector suffers from a perennial shortage of medical professionals which, at the current rate of growth, may take decades to address. Regulators could look at putting existing resources to better use by empowering experienced non-doctor medical staff, especially in primary care settings, while non-specialists could also selectively manage chronic patients and provide relevant repeat prescriptions. For example, Singapore and Australia allow a select category of nurses to write prescriptions.
During COVID-19, we have already seen how regulatory easing and clarity accelerated the adoption of digital health services. As patients and providers evolve in their digital journey, regulations will have to remain nimble to address any concerns on standard of care and data privacy and protection. Similarly, regulations will have to keep pace with expected standards for home healthcare, which will continue making rapid strides.
THE PROMISE OF A VACCINE AND A REVIEW OF GLOBAL SUPPLY CHAINS
The development of COVID-19 treatments and vaccines will remain the top priority of pharmaceutical companies and governments for the immediate future, as evidenced by more than 160 COVID-19 vaccine projects under development. Aided by an unprecedented push to accelerate approvals and a few promising results in early-stage trials, a vaccine is more likely to be available globally in the first half of 2021.
Going by the massive investments in research and the global manufacturing and distribution footprint currently being developed, a swift and worldwide availability of multiple vaccine solutions is expected. However, there are still some variables to consider, such as the level and duration of protection offered (lifelong / seasonal), number of doses required (one shot or regular boosters), how will supplies be prioritised, evolution of supply chains and pricing. Considering the globally pervasive nature of this pandemic, it is crucial that countries work closely in a globally coordinated manner to ensure widespread availability of safe and effective vaccines.
There is some uncertainty over supply chain continuity for pharmaceuticals, mainly due to evolving geopolitics, trade wars and vulnerabilities brought forth by lockdowns. These have renewed calls by some countries to relocate essential drug production closer to their own shores. We expect the pandemic to have a lasting effect on how pharmaceutical companies and governments think of drug supply chains, for raw material as well as finished products. Due to the essential nature of the pharma and biotech industries, this pandemic will not immediately spell the end of globalisation for these sectors, but will lead to a gradual and steadfast diversification of supply sources as well as a calibrated increase in near-shoring capabilities for certain drug categories. There will be a cost impact of such moves, unless support is provided by governments, and this remains a key variable to determine the success and extent of such changes.
The COVID-19 pandemic has shown that existing healthcare systems still have some distance to cover in terms of affordability, access and availability. Not addressing these issues can result in significant loss of human lives, which, of course, is not acceptable. Given the learnings from COVID-19 and also the tacit acceptance that the current pandemic will not be the last public health crisis that nations will face, we see renewed appreciation that investments in healthcare systems, innovation and drug research and development are essential.
The future of healthcare is in moving closer to the patient. Patients, when empowered, are active participants in their own treatment, thereby increasing compliance and improving medical outcomes. Systemic changes spearheaded by enlightened stakeholders can act as a catalyst and accelerate the transformation of care delivery, ushering in a post-COVID-19 future whereby digitally-enabled solutions can still bring healthcare ‘closer’ to the patient while maintaining a safe distance.
ABOUT MUFG’S HEALTHCARE BANKING PLATFORM
At MUFG, we offer clients across the entire healthcare spectrum — pharma, biotech, medtech, healthcare services — the best-in-class financial services and ready access to capital markets. Working with a global perspective, we provide an extensive network of financial professionals with deep industry knowledge in healthcare, providing flexible solutions and expertise wherever needed.
As one of the world’s top ranked healthcare banks, MUFG provides flexible, high quality solutions through our global platform with US, European and Asian coverage out of New York, London and Singapore respectively.
In Asia Pacific, MUFG is ranked top ten in healthcare loan league tables for 2019. MUFG’s APAC Healthcare team comprises experienced healthcare coverage professionals who are supported by experts from credit, research and products in corporate and investment banking.
APAC Healthcare Team
Sector Coverage and Acquisition Finance, APAC, Healthcare
Strategic Research Division, Healthcare
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- UN News, “COVID-19: ‘Unparalleled economic shock’ threatens development hopes and gains”, 10 June 2020