Healthcare is a paradox in more ways than one. Life-changing breakthroughs come at a rapid pace while practical application of the same happens extremely slowly. The industry does not have the forces which have disrupted other industries like media, retail, and travel. Patients or customers of this industry know better than the most. Healthcare technology is now far from being user-friendly. Change, however, is swiftly coming to healthcare. This change will benefit not only patients and pharmaceutical companies but also insurers and medical device makers. Most of the benefits will go to those investors who figure out what exactly the changes will be and take the necessary preparations to tackle it.
The opportunity is so large that major companies from outside the healthcare industry are trying to profit from it. Three companies- Amazon, Berkshire Hathaway, and JPMorgan Chase- made headlines during January when they announced plans to create a company which will deliver healthcare to own employees in new and novel ways. Amazon is reputed to increase its newly set up medical supplies business. It has already acquired wholesale distribution licenses in a number of US states. Other non-traditional players in the healthcare industry include Samsung, Apple, and Tencent.
Investors can learn a lot from the disruptive potential of these players from the non-healthcare industry. Private equity has carefully tread in. The PE funds carefully assess the technological expertise and scale which such companies can import in when they challenge the already entrenched competition in diverse areas like insurance, retail clinics, and pharma distribution. All research is tempered with skepticism, remembering how time-consuming and challenging it is to disrupt a fragmented, complex, and well-regulated industry as healthcare. The PE funds sense opportunities to sell the healthcare assets to the non-healthcare companies as these firms want to develop a presence in the industry. Premium companies are those which are category leaders in the critical market segments.
The rationale for these PE fund activity is that these funds know category leaders can invest in and also benefit from their industry's digital technology adoption. Healthcare companies, as a partial response to outsider pressure, are now using tools like smart devices, advanced analytics, and machine learning. For investors, they can select between healthcare IT and MedTech companies which supply the systems and devices which make possible digitized care. Consolidation opportunities are also present. Small companies can be gobbled up by bigger ones.