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Sector spotlight: Healthcare and life sciences

Dr Jan Egberts has over 30 years’ experience in the pharmaceutical and medical devices sector, with executive, non-executive and investment roles across a number of companies.  He currently serves on the Supervisory Board of eight private and publicly traded companies and organisations and is Managing Director of Veritas Investments, a private investment company focused on equity investments in European and U.S. healthcare companies.

Jan is also a founding member of Inflexion’s Healthcare Advisory Board – a small group of top executives from the healthcare and life sciences sector who work with Inflexion to navigate the industry. 

We were lucky enough to have Jan as was the guest speaker at the Healthcare Dinner we hosted in Amsterdam to discuss developments in and expectations for the industry.

What have been the biggest changes in life sciences and healthcare since you started in the industry?

One of the biggest changes has been the huge growth in the industry. Healthcare has grown from 11% of US GDP in 1990 to 18% now, and doubled over that period from 7% to 14% in the Netherlands. The increase in expenditure has politicized the sector, and the growth may not be sustainable. Demand has increased faster than the ability to pay for it.  As such healthcare systems have had to find ways to become more efficient – care in the community rather than hospitals, and increased outpatient surgery for example.  The number of acute care hospitals in the Netherlands has halved over the last 30 years to around 120 locations due to measures like this. 

Cost vs outcomes remains the critical question. New technologies have expedited both basic and applied research, for example mapping the human genome has allowed new therapies that impact at the DNA / human genome level, such as gene therapy. We’ve also seen phenomenal clinical improvements in many chronic diseases and ailments, like cardiovascular issues and high cholesterol, whereas progress in neurological diseases such as dementia, ALS and MS are only emerging. 

However they are very expensive, so the hurdle level for approvals is high, and it means more focus is being placed on outcomes, ensuring the efficacy warrants the costs.  It is not clear to what extent healthcare systems can afford to pay for these advanced therapies.

What do you think the biggest changes will be in the next 10 years?

I think it will be more of the same.

We will continue to see more (expensive) scientific breakthroughs, particularly around the human genome, gene therapy and neurological diseases. In recent years we’ve started to see progress driven by m-RNA, AI, cell therapy, CAR-T cell therapy and checkpoint inhibitors, and the successes mean we are likely to see more in these areas.

All of this will be accompanied by increasing cost pressure, with a the ‘cost versus efficacy’ balance being considered – as it is today.

What are some factors catalysing change?

There is no escaping the fact that the world population is getting older and we have more chronic diseases. At the same time we have fewer healthcare staff. In fact around half your life time expenses may be incurred in the final six months of your life. We are seeing a continued shift away from healthcare facilities, such as hospitals, and into less expensive (and often more comfortable) alternative locations, such as private homes and nursing homes. These outpatient settings can benefit from telemedicine as well as personal wearable devices – both of which have grown tremendously in the last couple of years. 1/3 of healthcare costs are now admin and the bulk of the rest is staff as the system has become more efficient. 

Are developments such as these wearables and telemedicine helping shift people to a more proactive approach to healthcare?

An encouraging development is the active role patients are taking in their own healthcare decisions. This is down to increased awareness of the importance of prevention as well as technology enabling monitoring, such as wearable devices. People engaging with a proactive approach to their health tend to be highly educated. This brings up another matter – the need to address the breakdown in society where we see significantly better health outcomes for higher educated / wealthier patients. This is a much overlooked factor in trying to achieve better health outcomes for the whole population. 

Healthcare working with private equity

 

“Private equity can take a longer-term focus than public markets, looking ahead five years rather than the next quarter. This can mean a company with private equity backing can make bold changes that take more time to materialise in strategy, team, board more easily than if listed.

 

“We now see specialisation at all levels of PE and VC, with many having deep experience in medical devices, pharma and services. This expertise, combined with the capital and private nature, can help grow a business, which is unencumbered by spending an extraordinary amount of time on external communications and governance, as can be the case with a listed business.

 

“They can bring a sharp focus on high quality and cost-effective outcomes, often through cost containment through next-generation business models or by achieving economies of scale or bringing in IT.

 

“Private equity can be particularly effective with roll ups, where multiple smaller and often highly specialised businesses in highly fragmented industries come together under a joint platform. We are seeing this a lot with dental clinics, oncology practices, diagnostic centers, fertility clinics and nursing homes.”

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