Demographics of medtech demand
October 21, 2024
Jacob Celermajer, Portfolio Manager
Key takeaways:
• The rapidly ageing population is creating an explosion of chronic disease.
• This is putting strain on healthcare budgets around the world, and it is largely governments footing the bill.
• Advancements in medical technology are playing a crucial dual role by both managing the patient disease state and ultimately lowering healthcare costs by reducing procedure and recovery times.
The global population is ageing rapidly, which is leading to a surge in healthcare spend. As the elderly population lives longer, they are more likely to develop chronic diseases such as heart disease, cancer, and arthritis, impacting their quality of life. These chronic conditions often require ongoing medical care and treatment, significantly burdening global healthcare budgets.
Advancements in medical technology are playing a crucial dual role by both managing the patient disease state and ultimately lowering healthcare costs by reducing procedure and recovery times.
There has been a significant improvement in life expectancy in the developed world over the past 200 years as the global healthcare system has improved. Expected lifetimes of ~40 years in 1824 have doubled to life expectancies in the low 80s in the most advanced economies today. The effect of this is that the global population is ageing at an unprecedented rate, and the proportion of the elderly population is increasing. The number of people aged 60 and over is projected to double by 2050, reaching 2.1 billion, and the over 80s population is expected to treble. As the proportion of elderly individuals grows, so does the demand for healthcare services, ultimately placing a significant strain on healthcare budgets.
As the population ages, chronic diseases – such as heart disease, cancer, and arthritis – are becoming increasingly prevalent across wider age ranges as people live longer.
The improvements in healthcare, largely through drug-based treatments, that have allowed the population to live longer have typically been focussed on acute conditions, which are characterized by sudden onset, often with severe symptoms, and typically resolve within a relatively short period. They require immediate medical attention but tend not to have long-lasting effects.
Chronic conditions on the other hand are persistent and long-lasting, often developing gradually over time. The most significant co-existing condition for these chronic conditions is age, and while there may not yet be a cure, they can be managed with appropriate treatment. The increasing prevalence of chronic diseases is a major challenge facing healthcare systems worldwide, as they can meaningfully impact quality of life and drive healthcare costs higher.
The ballooning healthcare costs of the ageing population is having an increasingly detrimental effect on government policy and planning. Appropriate medical treatment is a high priority driven by the expectations of the world’s growing – and ageing – middle class. According to US statistics in Figure 2, those over 65 consume three times the average healthcare of those under 65. Governments around the world are struggling to work out how to afford this new impost on expenditure.
That is not to say, of course, that governments will cease spending on essential procedures for its populations but there is the challenge of the need to reduce costs.
One of the potential keys to solving this problem is in the form of advancing medical technology.
Innovative medical devices have so far proven to be much better suited to treating chronic conditions, as opposed to the pharmaceutical treatments for acute care. These new therapies are enabling more efficient diagnosis, treatment, and management of diseases. For example, minimally invasive surgical procedures, advanced imaging technologies, and personalized medicine are reducing procedure times, improving patient outcomes, and ultimately lowering healthcare costs. By leveraging the power of technology, healthcare systems can better manage the demands of an ageing population and ensure sustainable healthcare delivery.
Medical technology is the ‘newest’ piece of equipment in the medical toolbox. As the ageing population continues to be burdened with more incidence of chronic disease, driving healthcare budgets rapidly higher, medical technology has a key role to play in the improvement of both patient outcomes and strained budgets. By leveraging the power of technology, healthcare systems can better manage the demands of an aging population and ensure sustainable healthcare delivery.
Disclaimer
This report was prepared by Cordis Asset Management Pty Ltd ABN 68 637 078 490 a corporate authorised representative (No. 1282680) of Avenir Capital Pty Ltd ACN 150 790 355, AFSL 405469 (“Cordis”)”, the investment manager for the Cordis Medical Technology Fund (“Fund”). Equity Trustees Limited (“Equity Trustees”) ABN 46 004 031 298 AFSL No. 240975, is a subsidiary of EQT Holdings Limited ABN 22 607 797 615, a publicly listed company on the Australian Securities Exchange (ASX:EQT), and is the Responsible Entity of the Fund. This document has been prepared for the purpose of providing general information only, without taking account of any individual person’s investment objectives, financial circumstances or needs. Whilst every care has been taken in the production of this document, no warranty is given as to its accuracy and persons relying on this information do so at their own risk. The information contained in this document is not intended to be relied upon as a forecast and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy, nor is it investment advice. Any forwarding-looking statements or forecasts are based on reasonable assumptions, but cannot be relied upon as guarantees or representation as to what future performance will actually occur. Unless otherwise specified, the information contained in this document is current as at the date of issue and all amounts are in Australian Dollars (AUD). You should consider the Product Disclosure Statement (“PDS”) in deciding whether to acquire, or continue to hold, the product. A PDS and application form is available at www.cordisam.com. Cordis and Equity Trustees do not guarantee the performance of the Fund or the repayment of the investor’s capital. To the extent permitted by law, neither Equity Trustees, Cordis, nor any of their related parties including its employees, directors, consultants, advisers, officers or authorised representatives, are liable for any loss or damage (including consequential loss or damage) arising directly or indirectly as a result of reliance placed on the contents of this report. Past performance is not indicative of future performance. The unit price performance calculation methodology follows the FSC Standard No.6: Investment Option Performance – Calculation of Returns (July 2018). Total returns are calculated based on changes in net asset values, at the exit price after the deduction of fees and expenses. Due to individual circumstances, your net returns may differ from the net returns quoted above.