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Analysis: What does a Trump election mean for Asian healthcare?

Rhenu Bhuller, partner at Frost & Sullivan, examines the evolving implications of the Trump election on the healthcare industry in Asia.

Despite global political uncertainties and a sluggish economic outlook, 2017 will be an amped-up year for the global healthcare industry that promises partial realisation of major health policies and initiatives. Frost & Sullivan projects that the total healthcare industry (covering pharmaceuticals, medical devices and imaging, in vitro diagnostics, patient monitoring and HCIT) will grow from US$1,652 billion in 2016 to US$1,732 billion in 2017, a growth rate of 4.8%. Future drugs and medical devices will be more targeted to meet the unique needs of emerging markets in regions like Asia and Latin America which demonstrate high growth opportunities compared to the sluggish developed markets in Europe or the US.

Donald Trump’s ascendancy to president of the US promises to bring big change for business. Controversial campaign rhetoric targeting topics as diverse as trade, deregulation, the environment, and healthcare coupled with Trump’s long list of unconventional government appointees has created an environment of uncertainty. Citizens, businesses, and governments around the world are trying to separate the hyperbolic from the probable by asking what policies Trump will actually pursue over the course of his presidential term and what preparations can be made.

The US economy is expected to strengthen on account of Donald Trump’s presidency. Rapid growth of factors such as personal disposable income, retail sales, and overall consumer confidence, supported by fall in unemployment and advances in manufacturing, is expected to continue in 2017 owing to the president’s focus on manufacturing and domestic demand driven US growth. Overall, Trump’s economic policies are expected to prompt average annual GDP growth to rise from 1.6% in 2016 to 3.5% in 2017, supported by the strengthening of sectors such as energy, manufacturing including chemicals and pharmaceuticals.

It is expected that the healthcare industry will be one of the industries that will see the strongest effect of a Trump presidency, where Trump’s healthcare plan is likely to be focused on lowering costs and driving competition. While the effect of Trump administration’s legislative actions will be experienced primarily by the US healthcare industry, global market participants and markets need to consider the trickle-down effect.  Starting with mergers and acquisitions, this confluence of events is poised to make 2017 a banner year for vc investment in healthcare. The maturation of certain emerging technologies, combined with access to cash from a possible lowering of US corporate tax and repeal of the medical device excise, would lead to resurgence in funding for new healthcare technologies and drive mergers and acquisitions in the healthcare space as US companies seek to invest globally.

Under the Trump administration, there is a likelihood of possible restrictions on global trade and new tariffs or custom duties may be instated for healthcare manufacturers aiming to export their products to the US. This would drive up prices of imported products and negatively affecting supply chains for foreign drug manufacturers with operations in the US. Japanese pharmaceutical and medical device companies and Indian pharma companies for example could be faced with new challenges in the US, one of their largest markets and hence need to re-look at their US and global strategies to drive growth.

Trump also believes that the cost of care could be reduced to a great extent if Medicare negotiated with pharmaceutical companies. More power may be bestowed to Medicare to negotiate drug prices – leading to lower prices in the US. Public and political pressure to control surging drug prices in the US will compel health authorities to introduce transparency measures around drugs pricing, especially for some of the expensive diabetes and cholesterol medicines where more low-cost generic competition is gaining market acceptance. The lower prices combined with a possible decrease in the number of insured people in the US due to changes to the Affordable Care Act would increase the importance of other high growth markets such as those in Asia to pharmaceutical companies.

Last, but not least, would be the failure to pass the Trans Pacific Partnership in 2017 as presently constituted, putting on hold debates over its impact on health care and curtailing the incentive for authorities to reform their regulatory process. Representing approximately 40% of global GDP, the TPP would have linked the economies of the United States, Canada, Mexico, Peru, Chile, Brunei, Vietnam, Singapore, Malaysia, Japan, Australia, and New Zealand. Proponents argue that the United States will be left out of contributing to 21st-century global trade rules without this agreement. Because the TPP will not be implemented, implications can only be measured by lost benefits to select industries. The pharmaceutical industry would have benefitted from tighter IP laws and patent protection as it would have helped pharma to retain 12 year exclusivity and put a firewall against the back drop of extensive biologic patent expiries from 2017 to 2020. It is expected that the pricing environment in APAC will become more dynamic now as governments seek to introduce more measures to control spending while meeting the demand for specialty and high-value pharmaceuticals. This would ultimately drive the generics and biosimilar market in Asia Pacific as well.

Given the importance of healthcare, any corporate tax changes, regulatory and legislative activities, or incentives in the US will influence global markets. Trump’s presidency will likely have economic consequences for the US and global markets and shape this industry’s trajectory in next several months.

Posted on: 22/02/2017 UTC+08:00


News

First REIT, the SGX healthcare real estate investment trust owned by Indonesia’s Lippo Group, has reported a 0.9% rise in distribution per unit (DPU) of S$0.0214 for the third quarter of the year.
Metlifecare, New Zealand’s second-largest listed retirement village operator, plans to spend NZ$240 million (US$167.2 million) to develop a waterfront retirement village at Scott Point, in the Auckland suburb of Hobsonville.
Thonburi Healthcare Group, the country's third largest hospital operator, has inked an MoU with Korea’s Green Cross MS and Green Cross Laboratories.
At its annual general meeting at the end of last week, Gordon Ballantyne, new chief executive of Healthscope, Australia’s second largest private healthcare operator, said that he expected current private hospital market conditions to continue in the short term.
Hong Kong-listed healthcare company China Wah Yan Healthcare plans to consolidate its shares. The move has been pushed onto the company to comply with trading requirements.
Monash IVF Group, Australia’s second largest fertility treatment provider, has appointed David Morris as the CEO and managing director effective from 13 November. After eight years, James Thiedeman stepped down in May.
SGX-listed Singapore Medical Group, a multi-disciplinary specialist healthcare services provider has announced its latest acquisition.
Malaysia's Top Glove is on the acquisition trail. The world’s largest rubber glove manufacture has signed an MoU to buy all the ordinary shares of Eastern Press for M$47.25 million (US$11.18 million) in cash. Eastern Press is principally engaged as a printer and supplier of packaging material. It is also the major supplier of packaging material to Top Glove's subsidiaries in Malaysia.



Analysis

Is there a case to be made for a merger between Metlifecare and Summerset Group, New Zealand’s second and third-largest listed retirement village operators? First NZ Capital reckons so and analyst Arie Dekker makes an eloquent case for it in a new research note.
Stephenson Harwood’s Tom Platts, Ben Hickson and Su Wai Phyo report on key changes implemented by the Myanmar government to facilitate much-needed foreign investment in the country’s healthcare sector.
In the lead-up to the UN’s International Day of the Older Persons on 1 October, Jason Sadler, president, Cigna International Markets, looks at the impact of an aging population on the world’s healthcare system and the role that digital technology will play in meeting this new challenge.
By 2042 there will be more over-65s in Asia than the populations of the Eurozone and North America combined. We look at the business opportunities this creates.
Albert Wong argues that biomedical technology should not be ignored and explains how the Hong Kong Science and Technology Parks Corporation can support it.
Jacob Pope explains why medical tourism remains one of the region’s most significant industries.
APACMed’s Fredrik Nyberg looks at how local and multinational IVD companies are developing novel solutions for Asia’s unique needs.
It is perhaps a curious line in the sand to draw, but the new hospital in Dunedin, the second-largest city in the South Island of New Zealand, is gearing up to be a significant battle in the use of private-public partnership funding in the APAC region.


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