Demand in the health care industry is increasing
2Q 2015 Health Care Industry Spotlight
INSIGHT ARTICLE |
Health care spending accelerated in 2014, following five years of below-average growth. Recent gross domestic product (GDP) numbers point to a significant increase from Q1 2014 levels, to about $1.896 trillion from $1.798 trillion at the beginning of the year. Demand is increasing, thanks to several factors, especially demographic changes and more insured Americans, following implementation of the Affordable Care Act (ACA).
Today's growth is stemming from an aging population, more insured millennials and a rebound in job growth. There was a delayed function in health care spending once the recession began, but now that more people are finding jobs and gaining employer-based coverage, there has been an uptick in overall growth. Beyond those factors, many health care products have become much cheaper over the last two decades.
Mergers and acquisitions (M&A) activity in the U.S. health care industry has also been strong in recent quarters, but heavily influenced by large deals in the pharmaceuticals sector. Driven by demographic changes, expiring drug patents and partially by the ACA, pharma activity has boomed.
Private equity activity is on a downward trend since Q1 2014, though that may be due to timing issues, as opposed to waning investor interest. Just over $7 billion was invested in the health care industry in Q1 through 86 transactions, both significantly down year over year.