The development of new cures for severe diseases and the aging of the population have blown up healthcare costs. Fortunately, new tools and technologies promise to enhance productivity and improve healthcare quality. Henk Grootveld, Portfolio Manager of Rolinco and Robeco Global Growth Trends Equities, and Steef Bergakker, Robeco’s Trend Analyst, discuss these exciting new developments and the arising investment opportunities.
Modern medicine has been very successful in treating once fatal diseases. Infant diseases have almost been erased thanks to pediatric vaccines. Once lethal diseases like tuberculosis, diphtheria and cholera have been tamed and even hard-to-crack HIV has been transformed from a fatal disease into a chronic one. There is also hope of further successes in the future. In cancer, for example, a new breakthrough therapy has been discovered that looks to be defeating at least some of the many different types of cancer.
Unfortunately, this success has had an unwelcome side-effect: an explosion of healthcare costs. The combination of more diseases that can be treated and more people that have access to healthcare has caused healthcare costs to outgrow GDP for decades. In many developed nations healthcare spending already exceeds 10% of GDP and is still climbing.
The demand for healthcare is virtually guaranteed to soar over the coming decades, simply because healthcare demand is positively correlated to age and the proportion of elderly people is inexorably growing in virtually every region of the world. If we cannot find ways to dramatically increase healthcare productivity, costs will run out of control sooner rather than later and healthcare will become unaffordable.
Fortunately, exciting new tools and technologies that promise huge productivity improvements in healthcare are now rapidly evolving and gaining critical mass. Examples are DNA testing, diagnostic imaging technology, artificial intelligence and personalized medicine. For investors, there are three trends from which we can benefit, i.e. fragmentation, customization and decentralization.
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