Healthcare has been a hot topic for US politicians for much of the past five years, and is likely to remain so for some time yet.
Notwithstanding the capriciousness of political views on the topic, the ongoing ageing of populations around the world continues to provide solid and well-understood foundations for the long-term growth in the sector. Beyond this, the shape and focus of healthcare continues to evolve, with the proportion of the global disease burden caused by chronic conditions growing from 46% in 2001 to nearly 60% in 2020.
As people live longer, but also with more chronic health conditions, so healthcare costs have mushroomed around the world. The US is of course the stand-out example of this where healthcare costs now constitute over 17% of GDP. However the same pattern is evident in virtually all countries, with most developed world economies spending >10% of GDP on healthcare, and developing economies spending 5-6% on healthcare.
Pressure to cut costs in healthcare while maintaining positive health outcomes has become a key preoccupation for government funded health schemes, as well as for insurance companies and other commercial payers. Technological developments as well as changes in the market are providing a myriad of opportunities for businesses that demonstrate real cost savings for end payers.
Within WHEB’s investment strategy, ‘Health’ is a key investment theme. We believe that companies that are cutting the cost of healthcare are playing a central role in enabling higher quality healthcare to be accessed by a growing proportion of the world’s population. The WHEB strategy is currently invested in six companies representing approximately 7% of the fund that are primarily focused on cutting costs in healthcare.
For example, in the US, the fund is invested in a number of businesses that use their scale to negotiate reduced costs on behalf of their clients. This includes both Premier Inc. and CVS Health Corporation who are major purchasers of healthcare equipment/consumables and of pharmaceuticals respectively. CVS Health, as an operator of a US pharmacy network, has also been aggressively promoting generic over branded pharmaceuticals as an additional strategy for cutting costs for their customers.
New technology is also playing a central role in cutting healthcare costs. The fund is invested in one UK-based business BTG plc, which is developing novel therapies focused on the minimally invasive diagnosis and treatment of cancer, varicose veins, blood clots and a variety of other conditions.
Better management and interrogation of big data in healthcare is also yielding significant potential for cost reductions. The fund is, for example, invested in Cerner, a major provider of healthcare information technology (IT) solutions that help manage healthcare records better, and identify better treatment options. HMS Holdings also uses healthcare IT to identify payment inaccuracies, helping save money for public healthcare schemes such as the US Government schemes Medicaid and Medicare.
The most recent investment in the fund is in a business called Centene which is a US health insurer. Centene provides healthcare insurance for low income and vulnerable groups in the US. Their whole focus is on providing low cost access to healthcare to these populations in the US utilising their scale and technology to drive down the cost of healthcare for these groups.
Views on government’s role in healthcare provision will likely remain hotly contested in the US and elsewhere for some time to come. Removing costs and improving efficiencies will, in our view however, remain a key part of the solution whichever political view holds s
 The World Health Organisation (WHO)
 Organisation for Economic Cooperation and Development (OECD)
 WHO and the World Bank