S&P: 6 key healthcare trends to watch in 2019

Healthcare leaders should keep tabs on several key trends in 2019 — ranging from continued credit rating deterioration, more drug-pricing reform and muted M&A activity, according to a new report from S&P Global Ratings.

Here are six of the most important:

1. Rating deterioration will continue. In 2018, downgrades outpaced upgrades by a 3:2 ratio in the healthcare sector, a trend S&P expects will continue into 2019. The mix of downgrades will also shift toward pharmaceutical companies, as drug-pricing reform continues to place pressure on margins in the U.S.

2. Specialty and generic drugmakers will continue to struggle. The generic sector will remain under pressure in 2019, especially as many drugmakers work to deleverage their balance sheets.

"Pricing remains top-of-mind for the pharmaceutical industry, as payer and generic buying consortia continue to exert pricing pressure on big pharma/biotech and generic drugmaker" the report states. "Generic drug makers are experiencing greater-than-typical pricing deterioration."

3. M&A will take a breather. Despite expectations that the healthcare sector would see a flurry of mergers and acquisitions in 2018, the rate of M&A activity was relatively muted. S&P predicts this trend will continue in 2019.

4. Shift to value-based care will gain traction. S&P expects the shift to value-based care to gain traction in 2019, as cost pressures mount, payers continue to drive change and nontraditional players enter the healthcare arena.

"This increasing shift to a pricing model that is more dependent on quality and outcomes will be a major disruption to the health care industry, likely pressure sales growth and margins, and create new winners and losers."

5. Nontraditional players will make waves. Nontraditional players continue to push into the healthcare arena. In the last year, Amazon has moved in through its partnership with Berkshire Hathaway and JP Morgan Chase and its acquisition of specialty pharmacy PillPack. These moves are creating further uncertainty for the industry. S&P warns the entry of nontraditional players "could provide certain players with a major opportunity, while shutting out others."

6. Traditional players will also make waves. Several vertical healthcare mergers were approved by regulators late this year, including Cigna-Express Scripts and CVS Health-Aetna.  S&P says "The creation of these healthcare verticals, which wield increased negotiating leverage on healthcare products and services pricing, will have significant implications for the industry. Players that can, with the use of healthcare data, demonstrate superior value or outcomes, will benefit. The ones that are not will struggle."

Read the full report here.

Copyright © 2024 Becker's Healthcare. All Rights Reserved. Privacy Policy. Cookie Policy. Linking and Reprinting Policy.


Featured Whitepapers

Featured Webinars