Health care sector and markets

The health care sector is considered to be widely independent of economic cycles. The demand, especially for life-saving and life-sustaining products and services, is expected to increase irrespective of the COVID-19 pandemic and mortality among dialysis patients, given that they are medically needed and the population is aging. Moreover, medical advances and the large number of diseases that are still difficult to cure – or are incurable – are expected to remain growth drivers.

In the emerging countries, the availability of basic health care and the demand for high-quality medical treatment are increasing. As per-capita income increases, indi­viduals increasingly have to cope with the illnesses associated with lifestyle diseases.

On the other hand, experts estimate that further financial constraints in the public sector could result in more pricing pressure and a slowdown in revenue for companies in the health care industry. Some countries are experiencing significant financing problems in the health care sector due to the strained public finance situation. Especially in the industrialized countries, increased pressure to encourage saving can be expected as health care costs constitute a large portion of the budget.

It will be increasingly important for companies in the health care sector to increase patient benefit, to improve treatment quality, and to offer preventive therapies. In addition, especially those products and therapies that are not only medically but also economically advantageous will be of increasing importance.

The dialysis market

The global dialysis market is expected to grow in a range of 1% to 4% at constant exchange rates in 2021.

The number of dialysis patients worldwide is expected to rise, depending on further developments of the global COVID-19 pandemic, by approximately 3% in 2021, although significant regional differences will remain. For the United States, Japan, and the countries of Central and Western Europe, where prevalence is already relatively high, we forecast patient below-average growth in the region. In emerging markets, we expect growth rates to be even higher.

Excess mortality of dialysis patients due to the COVID-19 pandemic is continuing in 2021 and is expected to have a significant adverse effect on treatment volumes and additional COVID-19 related costs. The further development sig­nificantly depends on the adoption and speed of the roll out of vaccinations to our worldwide patient population.

Overall, factors such as aging populations and the growing number of people suffering from diabetes and hypertension, which are ailments often preceding terminal kidney failure, are contributing toward continued growth of the dialysis markets. The life expectancy of dialysis patients is also rising thanks to ongoing advances in treatment quality and the rising standard of living, especially in the emerging countries.

The market for generic IV drugs, biopharmaceuticals, clinical nutrition, Infusion therapy, and Medical devices/transfusion technology1

For 2021, we expect the growth of our markets will depend on the further development of the COVID-19 pandemic. Products that are used for the treatment of coronavirus patients could face an ongoing increased demand; at the same time, further postponements of elective surgeries could moderately dampen market growth.

In 2021, the market for generic IV drugs is expected to grow by 5 to 7% worldwide. The demand for generic drugs is likely to grow because of their significantly lower price in comparison to the originator drugs’ price. The growth dynamic will continue to be driven by originator drugs going off patent, as well as by original off-patent products that are offered at steady prices due to a unique selling proposition. A further growth driver in 2021 is expected to be the recovery after the COVID-19-induced market decline in 2020. A factor working in the opposite direction is the price erosion for original off-patent drugs and generic drugs that are already on the market.

We expect Fresenius Kabi’s relevant market for biopharmaceuticals to grow by 5% to 7% in terms of units sold, and by 0% to 2% in terms of sales value in 2021.

In 2021, we expect worldwide growth of 2% to 4% in the clinical nutrition market. Growth perspectives are supported by increasing awareness of the need for early nutritional intervention, which is reflected in the latest guidelines and the increased practice of mandatory malnutritional screening². We see additional potential in the still-underlying high percentage of people affected by malnutrition who do not yet have access to nutritional services. Continued high growth potential is projected in Asia-Pacific, Latin America, and Africa. We assume growth of up to 6% to 8% in individual regions.

We expect the market for infusion therapy in Europe to be at or slightly over the prior year’s level in 2021. While the blood volume substitutes market should remain stable, the standard-solutions business is expected to show a slight growth in 2021. Outside Europe, we estimate the market for infusion therapy to grow by approximately 0% to 2% in 2021, whereby Latin America is expected to show mid single-digit growth.

In 2021, the market for medical devices and the market for transfusion technology are expected to grow in the range of 1% to 3%.

1 Market data refers to Fresenius Kabi’s addressable markets. Those are subject to annual volatility due to currency fluctuations and patent expiries of original drugs in the IV drug market, among other things. Percentage increase based on market value (price × volume). Depending on the further development of the COVID-19 pandemic in 2021, the market growth of single product segments could change.
Source: Company research
2 Sources: New ESPEN guideline on clinical nutrition and hydration in geriatrics. Clin Nutr. 2019 by 38(1):10-47; Volkert D, Beck AM, Cederholm T, Cruz-Jentoft A, Goisser S, Hooper L, et al.; latest implemented e.g., in Portugal: “National Policy for effective screening implementation”; Directorate General of Health DGS

The hospital market3

The number of hospital admissions in Germany in 2018 remained roughly at the previous year’s level. We assume there will be a stagnation or decline in inpatient hospital admissions in the future in particular as a result of the increasing number of outpatient treatments.

What is known as the change in value figure is crucial for the increase in reimbursement for hospital treatments in Germany. For 2021, it was set at 2.53%. In addition, the hospital funding system provides for various increases and reductions for acute hospitals. For additional services agreed in advance with the health insurance companies, hospitals have to accept the so-called fixed-cost degression discount of up to 35%. The exact amount of the discount is negotiated between the hospitals and the health insurance companies.

In order to factor medical outcomes into the remuneration, the Federal Joint Committee defines quality indicators. The specific financial terms and details are being worked out in a consistent overall fashion. However, we do not expect any adverse effects from this since the Helios Group is well prepared for quality-based remuneration thanks to its clear focus on quality and transparency of medical outcomes.

The expectations with respect to their economic situation vary among the German hospitals: according to the Krankenhaus Barometer 2020 survey by the German Hospital Institute (DKI), only a quarter (24%) of the hospitals expect their economic situation to improve in 2021, whereas 40% expect it to worsen.

Due to the COVID-19 pandemic, hospitals’ results of operations could further worsen, as the support measures initiated in 2020 could largely cease again in 2021 and the fundamental challenges in the German hospital market remain unchanged. In addition to inadequate income from current business, the need for capital expenditure continues to grow, while government subsidies are decreasing. Hospitals can only close this gap to a limited extent on their own.

The Rheinisch-Westfälisches Institut für Wirtschafts­forschung (RWI) forecasts that more hospitals will respond to economic pressures by joining together into networks and bundling their services. The affiliated hospitals benefit from synergy effects, including the possibility of generating cost savings, for example in purchasing. RWI expects the COVID-19 pandemic to further accelerate the trend towards more collaboration.

The degree of digitalization will play an increasing role in ensuring the sustainability of hospitals. Networking and the use of digital solutions create new opportunities to make processes more efficient and safer, and thus to break new ground in patient care. To promote digitalization in the German health care system, the digital patient file (ePA) will be introduced on a mandatory basis in 2021. This also creates an obligation for hospitals to be connected to the telematics infrastructure (TI), which is intended to standardize and simplify the exchange of data among health care players. Hospitals must then store patient data digitally or make it available via the patient file.

As a result of the Act to Strengthen Nursing Staff (Pflegepersonalstärkungsgesetz) (PpSG) a certain amount of financial support will be provided from 2020 onwards for measures that relieve the burden on nursing staff. In addition, the regulations on the binding minimum level for nursing staff, which were suspended in parts in 2020 due to COVID-19, will apply again in 2021. These regulations apply to nursing staff in hospitals in the following areas: geriatrics, intensive care, cardiology, trauma surgery, cardiac surgery, neurology, neurology/stroke unit, and early neurological rehabilitation. Binding minimum levels for nursing staff could also be introduced in other areas of the hospital. However, there is currently no timetable for the implemen­tation of these further regulations.

In December 2020, the German Hospital Federation (DKG) and the National Association of Statutory Health Insurance Funds (GKV-SV) agreed to narrow the existing definition of nursing costs for 2021 (“Pflegepersonalabgrenzungsver­einbarung”). Since 2020, nursing costs have been deducted from the standardized base rates and the costs for direct nursing patient care are instead fully reimbursed by the health insurance companies via separate care budgets at costs. Helios Germany will consider measures to mitigate consequences for patients and employees and financial impacts. Overall, we expect this regulation to have a negative effect on our earnings.

We expect the private hospital market in Spain to continue to grow by 2% to 3% in 2021. The continuing increase in the number of privately insured patients should also open up opportunities for private operators in the future.

Relevant indicators, for example nationwide health care spending and bed density, indicate the further market development potential in the Spanish health care system compared with other EU countries. This also provides opportunities for the establishment of new hospitals. In addition, the highly fragmented private Spanish hospital market offers further consolidation potential.

In Spain, the COVID-19 pandemic has not changed the basic mechanisms in the private hospital market and the growth opportunities for private hospital operators. Likewise, the important role that the private hospital operators play in supporting and complementing the overall Spanish healthcare system has become more apparent.

Overall, it can be said that digitalization has become even more important as a result of the COVID-19 pandemic.

3 In each case, most recent market data available refers to the year 2018 as no more recent data has been published: German Federal Statistical Office, 2018 data
Sources: Company research; German Hospital Institute (DKI), Krankenhaus Barometer 2020, Roland Berger Krankenhausstudie 2020

The market for projects and services for hospital and other health care facilities

For 2021, we expect a slight increase in demand for projects and services for hospitals and other health care facilities worldwide, depending on the further course of the COVID-19 pandemic.

In the Central European markets with established health care systems, we expect solid growth and a continued rise in demand. This is due to demographic developments and an increasing need for investment and modernization in public health care facilities that has also become apparent as a result of the COVID-19 pandemic. Demand is particularly strong for services, i.e., the maintenance and repair of medical and hospital technology, facility management, technical or overall operational management, and the optimization of infrastructural processes – especially within the framework of public-private partnership models. Additional growth opportunities arise from the fact that public institutions are increasingly outsourcing non-medical services to private service providers due to increasing efficiency pressure. In addition, an expansion of the range of post-acute services in Europe is expected.

In the emerging markets, we anticipate an overall dynamic development. Growth in markets such as Africa, Latin America, and southeast Asia will initially be driven by the demand for efficient, needs-oriented medical care. In China and the Middle East, growth will be driven by the development of infrastructure and the creation of new care services, as well as research and training facilities.

Further opportunities arise from the progress of digi­tization. It is important to systematically exploit the opportunities it offers, for example in the establishment and operation of “virtual hospitals”. These can make a decisive contribution to making state-of-the-art technology and medical expertise available at adequate cost. This goes hand in hand with networking between health care systems at different levels of development in order to facilitate access to high-quality health care services for broad sections of the population.

Source: Company research

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