Towards lower-cost, tailor-made healthcare

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Major changes are currently taking place in the healthcare sector, one of the most important being the development of personalised healthcare. This allows diseases such as cancer to be treated much more quickly and efficiently, since it will be possible to select the right medication immediately, based on the patient’s genetic profile. It is a development that is destined to produce both winners – patients/manufacturers of medical testing equipment – and losers – major pharmaceutical companies.

At present, cancer patients are often given medications that prove ineffective. Furthermore, there is more than one type of cancer and reactions to medications vary from one person to the next. As a result, patients take longer to recover and the costs of treatment are much higher than they need be.

Individualised treatment

Thanks to new technology, it is now possible to draw up a full DNA profile using a blood sample. This means that decisions concerning prevention, treatment and monitoring can be geared to the patient’s individual genetic profile. Previously, the main bottleneck was the cost of such an analysis. In addition, interpreting the data took a long time – a single scan contains hundreds of thousands of DNA variations – and the costs of the test were usually not reimbursed.

Supercomputers, which can quickly process vast quantities of data, and artificial intelligence have led to a sharp fall in costs and made the process of data analysis much faster. As a consequence, in a few years’ time, it will be possible to draw up a detailed genetic profile for EUR 100. This means genetic profiling will be accessible to a large number of patients. Doctors will be able to find the right medicine more quickly and avoid having to try different treatments and this will ultimately lead to substantial savings.

Explosive growth

At the moment, equipment that is suited to personalised care is mostly used at university hospitals. Given the sharp drop in costs and the fact that in the US, the costs of initial tests will be reimbursed, this is expected to deliver explosive growth for the providers of such equipment. That surge will be fuelled by the large-scale collection of genetic profiles in numerous countries for research. The aim is to move away from describing forms of illness on the basis of symptoms (subsequent observation) and instead use genetic information as the basis (information obtained in advance).

Personalised healthcare will likely have a major impact on pharmaceutical companies. General-use medications will make way for ever more specific drugs. Pharmaceutical companies will start developing much more targeted medications for patients with specific characteristics to offer personalised solutions.

Higher prices or lower sales

The pharmaceutical industry expects that the personal approach and faster cures associated with personalised healthcare will justify higher prices, but this still remains to be seen given the current climate in which high drugs prices are a great concern. At the same time, they stand to lose sales because the right treatment can be used from the outset, as a result of which the peak sales of a drug will in future generally be lower.

As a long-term investor, the OBAM team views these developments in healthcare with interest. We believe that the best investment opportunities are currently to be found among the manufacturers of the requisite equipment that makes personalised care possible. In this context, it is important to realise that new developments in healthcare often have a longer start-up period owing to the fact that the sector is so strictly regulated.

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Siegfried Kok

Senior Portfolio Manager

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