Taking stock of global healthcare

A “Renaissance age of medicine” is boosting the U.S. biotechnology and pharmaceutical sectors, says Jean Hynes, managing partner, senior managing director, and global industry analyst at Wellington Management Company in Boston, Mass.

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“The amount of new innovation that’s coming through is more robust than it’s been in my 25-year career,” said Hynes in an April 16 interview.

“We’re seeing very solid volume growth that is supporting life science tool companies, medical procedures that impact medical devices, and continued growth of the publicly traded managed-care companies, which are taking share in government programs such as Medicare and Medicaid.”

However, there are still some risks in the healthcare sector, she warned. Price pressure has impacted the generic drug industry, for example.

“The risk to the sector would be any dramatic change in the profitability of biopharmaceuticals,” said Hynes, who manages the Renaissance Global Health Care Fund.

“There are a number of measures underway that could impact how drugs are reimbursed in the U.S. We think, overall, these will be neutral to the biopharmaceutical companies themselves, but it’s really something we’re watching closely.”

Innovation remains the most important element in the investment process, Hynes said. American companies pay for innovation by being able to price their drugs “for the value they provide patients.”

Earlier this month, Democrats in the U.S. House of Representatives passed legislation aimed at lowering drug prices.

What’s happening globally?

While few healthcare services stocks trade outside the U.S., Hynes said there are opportunities in the biopharmaceutical and medical technology sectors in Europe, Japan and China.

Hynes said she’s watching dramatic changes in China, where the percentage of GDP spent on healthcare is low but growing. The Chinese government has made regulatory changes over the last few years that are contributing to a “robust” local medical technology and pharmaceutical market.

“We are seeing the early stages of the formation of a biotech industry in China that could, over time, rival parts of the U.S.,” she said. “That’s something we’re watching closely.”

There are big changes in Japan, too. As the country’s population ages, “the volume growth in the Japanese healthcare market is accelerating and the Japanese government is using lower prices to control that spending,” she said.

“But it seems like we’re in the early stages of structural changes in the Japanese market, in terms of how drugs are reimbursed, what procedures are reimbursed and how Japanese patients interact with the healthcare system.”

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