In the United States, healthcare is entirely private. As a result, there are lucrative opportunities for healthcare entrepreneurs. The Affordable Care Act (ACA) has expanded healthcare coverage to 32 million uninsured Americans. There is now a greater demand more than ever to manage health and provide prophylactic therapy.
As a result, digital health start-ups being funded at record pace. According to Rock Health’s Digital Health Funding report, one billion dollars were invested in 2013, which is more than double the funding in the digital health sector since 2011.
In addition to such, as life expectancy across the world continues to increase, in addition to the swelling middle class of emerging markets, more people are able to afford medical devices, resulting in a greater drive and growth of the healthcare industry.
Apple partners with IBM
Large companies have also realised the potential in the sector and have begun investing and innovating, in the hope to capitalise on the growing market.
IBM is working in partnership with Apple and makers of medical devices, to provide health data from Apple watches to doctors and health insurers. This will enable efficient health monitoring and provide personalised treatment for diabetics and hip-replacement patients. The IBM app will enable individuals to upload their stats from the Apple’s HealthKit platform regarding their heart rate, cholesterol levels and blood pressure, to a database, which can be accessed by their physicians, enabling them to produce tailored treatment plans
Warren Buffet invests in healthcare
Warren Buffet’s portfolio manager Ted Weschler is somewhat confident of the sector, predicting their investment in DaVita HealthCare Partners will be very “valuable” within the next 5 years. DaVita and Fresenius are the two major providers of dialysis care in the US. According to the centres for Disease Control and Prevention, 20 million people suffer from chronic kidney disease in America.
Weschler explains DaVita’s dialysis treatment is an “important life extending therapy”, and has significantly improved the quality of health care. As a result of DaVita’s interventions, investors receive a high and predictable stream of cash flow. Moreover, DaVita’s merger with HealthCare Partners in 2012 has enabled a rapid expansion of its centre throughout the country.
Healthcare investment in the UK
The investment opportunities in the UK, at present remain modest and not as competitive as USA; however fund managers including Neil Woodford recently launched a UK-focused life science investment trust. Woodford is a passionate supporter of the biotechnology industry and hopes to increase opportunities available in the UK to avoid the brain drain to the USA. The new fund is planned to be a close-ended investment fund capped at £200 million. His current investment trust is a £3.6 billion open-ended fund, which invests in popular companies such as BT and AstraZeneca.
Whilst the healthcare and biotechnology sector is flourishing along with the funds invested in such stocks, it is advised to consider the fund managers’ record in comparison with the rest of the markets.
With recent outbreaks of Ebola, and increase in cancer incidence, the industry is witnessing more innovation and disruption than ever before. Not only will this provide medical and technological breakthroughs, there may also be considerable investment potential in those who are at the epicentre of the disruption.
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