Did you know that clinical care is estimated to affect only 20% of our health well-being?
Hi, I am Raphael Oesch from Kieger.
Many factors influence our health and well-being. There are parts that we cannot influence, such as our genetics. However, the factors we can influence fall into one of 4 categories and have different estimated effects on our length and quality of lives. It is a simplified view because in reality most of the factors are also interconnected.
~10% of our health is influenced by the physical environment. This includes air and water quality and Housing. ~30% is influenced by Health behaviours, like tobacco use, balanced diet and Exercise. ~40% are influenced by social and economic factors such as education, employment, family and social support. And only ~20% by clinical care, which includes access to care and quality of care, meaning how well receive treatment from the healthcare system.
There are increasingly initiatives outside the health system that promote health and health equity through policy and practices.
Within the health system, however, the focus is dominantly only on access and treatment, which accounts for an estimated 90% of US health spending.
And that is because of a misalignment of incentives in most healthcare systems. We still live predominantly in a so-called “fee-for-service” environment, where healthcare providers are compensated based on the services they provide. But, we are at the beginning of a major system shift toward value-based payment, where the health outcome is rewarded rather than the service that led to that outcome.
In its purest form, this is done through global capitation programs, where a provider takes full financial responsibility for a person’s health. Suddenly preventive activities, home visits, closing gaps of care, and addressing social determinants of health become important components of such programs.
These measures attempt to address the 80% of factors that traditionally are not considered with the aim to avoid expensive health care costs down the line.
For us as investors, the good news is that companies participating in such programs have not only proven to do the right thing from a health system and health policy perspective, but they have also showed that it make commercially sense to consider all factors affecting our health.
Did you know that R&D expenses of the 15 biggest pharma companies have increased by almost 50% since 2016 to USD 133 bn in 2021? And expenses will continue to increase. Roche alone for example will spend close to CHF 15 bn on R&D in 2022, 1 bn more than in 2021.
We attended the ESMO (European Society for Medical Oncology) annual oncology congress in Paris from Sept. 9-13. We came away very positive from the meeting, though two souls remain in our chest. On one side we see the amazing potential and the opportunities for new oncology therapies. On the other side complexity seems to potentially increase and so does competition in the space. But what to do as an investor? Find some proposals in our ESMO Thoughts from the Street.
September is traditionally one of the most important conference months, as second quarter reporting is largely complete and third quarter reporting has not yet started. We attended the 19th annual Goldman Sachs European Medtech and HC Services Conference 2022, held in London on September 7-8, again in a physical setting. While we remain mindful of all the sector headwinds, we left the conference more convinced that there are selectively attractive investment opportunities at current levels.