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Moody's says healthcare industry's 2020 outlook stable amid demand cost tussle

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Moody's says healthcare industry's 2020 outlook stable amid demand cost tussle

Moody's said the global healthcare industry's outlook for 2020 is mainly stable as payers' efforts to reduce costs counterbalances a rising utilization of healthcare products and services.

The rating agency expects demand for healthcare products and services to remain strong in 2020 due to aging populations in mature markets and better access to healthcare in the emerging markets.

Moody's associate managing director Jessica Gladstone, however, noted that payers will seek to control healthcare spending and continue to focus on cost-effectiveness as regulatory and legislative changes could lower demand or prices.

The rating agency said the cancer market will be the largest contributor to the growth of the global pharmaceutical industry, which is expected to see an EBITDA growth of 2.5% to 3.5% over the next 12 to 18 months.

Moody's added that the increasing pressure to reduce drug prices was a rising social risk for the pharmaceutical industry and that generic-drug makers will face price erosion. The agency, however, said such pressures are somewhat easing up.

The rating agency noted that the stable outlook for the U.S. for-profit hospitals is backed by an expected same-facility EBITDA growth of 3% to 4% over the next year, wherein price increases by private insurers and government payers will help in revenue growth. Rising labor and other costs, though, are expected to put pressure on the sector's margins.

In addition, Moody's forecasts a positive outlook for the U.S. medical device industry, whose EBITDA growth is expected to be between 5% and 6% over the next 1.5 years. While new products and a rise in demand from emerging markets are expected to boost growth, rising trade tensions and slowing GDP growth may curb expansion.