The Economic Impact of Covid-19 – GHA Episode 24
From the heart-wrenching photos of the plight of daily wage workers to the news of billionaires such as Elon Musk, Jeff Bezos, and Mukesh Ambani multiplying their net worth, the COVID-19 pandemic has shown us the entire spectrum of economic extremes. The year gone by perfectly embodies words coined by the poet, Percy Bysshe Shelley, “The rich get richer and the poor get poorer.” So, in the same spirit, this week we bring to you the economic impact of COVID-19 on the healthcare industry.
As we all know, the economy which was already crippled before the pandemic, took a nosedive when COVID-19 reached pandemic proportions.The global economy shrank by 4.3% in 2020, over 2 ½ times more than during the global financial crisis of 2008. By April 2020, we had over a third of the world’s population under lockdown, clearly steering the global economy towards a prolonged winter. And by September 2020, most of the advanced and emerging countries were deep in recession. Hospitality, retail, and tourism were some of the early victims and will understandably be the last to recover.
At the peak of last year, the US GDP contracted by 9%, UK by 21%, and India stood at 23%. The UN’s prediction of an overall loss of 195 million jobs globally was highly underestimated as 140 million jobs were lost in India alone. At the height of the pandemic, more than four out of five people (81%) in the global workforce of 3.3 billion were affected by full or partial workplace closures. Now, although the economy is yet to recover, employment is on the rise again. For example, air travel has started hiring again despite taking a major hit with the collapse of tourism and hospitality under the weight of the pandemic.
How COVID-19 has Impacted our Economy?
However, a major concern that still remains is the risk of hysteresis, which is when an unemployment shock lowers growth potential and leads to sustained high unemployment despite recovery of the economy. To address these problems, large-scale, integrated, policy measures are needed, focusing on certain key aspects, namely, supporting enterprises, employment and incomes; stimulating the economy and jobs; protecting workers in the workplace; and using social dialogue between governments, workers, and employers to find solutions.
Towards the second half of 2020, as governments around the world focused on nurturing the economy, the healthcare industry focused on slowing the pandemic. The unprecedented speed with which multiple vaccine candidates were developed and rapidly made available to every country around the world sowed the seeds for a slow but steady recovery. The projected recovery rate of 4.7%-7% for 2021 does offer a glimmer of hope.
Speaking of projections, the month began with India’s Union Budget presented by the Hon’ble Finance Minister, Ms. Nirmala Sitaraman. This is India’s first budget for the decade and the first paperless budget ever. Additionally, it was the first budget to start with focus on health and wellness. Amplifying this focus was the budget outlay of 223,000 crore for building better public health infrastructure, which is an increase of 137% over previous year. She also committed an additional expenditure of 35,000 crore rupees for Covid vaccination. Collectively this amounts to almost 13% of India’s GDP! Halfway across the world, Joe Biden’s government is committing to a $1.9 trillion “American Rescue Plan” to confront the virus and to provide temporary support for the economy. The UK government, on the other hand, has provided fiscal support through extended job retention schemes to safeguard companies, households and vulnerable populations. The government has already spent about £280 billion in order to combat the catastrophe brought about by the virus.
The Pandemic Impact on Healthcare 2021
So, let’s hunker down and explore the absolute economic impact of the pandemic on the healthcare and pharmaceutical industries. The race to create a vaccine; the impressive and inspiring speed with which pharma companies rose to the challenge brought to light both possibilities and shortcomings in the pharmaceutical manufacturing process. The supply chain gaps that the pandemic exposed resulted in landed cost no longer being the key metric and instead risk mitigation becoming a point of focus. As reinforced by the pandemic, the supply chain of active materials and ingredients, mainly from China, the import and export of pharmaceuticals, as well as the production location are all vulnerable to disruption. Thus, shifting production locations closer to end markets or in lower-risk countries has now started gaining importance.
That’s as far as the vaccine is concerned. What about the growing penetration of technology in healthcare and the subsequent change in the economic landscape? Understandably, the Internet of Things has resulted in an unprecedented growth in healthcare. The global market size of IoT in healthcare is predicted to grow from USD 70 billion in 2020 to USD 190 billion by 2025, at a whopping Compound Annual Growth Rate (CAGR) of around 22%. A bulk of this would be in digital healthcare tools such as telemedicine, remote patient and in-patient monitoring, interactive medicine, clinical operations and workflow management, imaging, medication management, and others such as fall detection, sportsmen care, and public safety.
Naturally, this growth is sowing the seeds for increased development in technology and healthcare. Although blue chip companies such as Apple Inc., Google, and GE Healthcare are emerging as key players in this revolution, it’s inspiring to see that healthcare startups are not far behind. So much so that companies such as LifeBridge and CareFirst have announced mentorship programs and investments of upto $100,000 in health-focused startups in a novel incubator program. In fact, in 2020, global investments in healthcare startups set a new record reaching nearly 5,500 deals and $80.6 billion in equity funding in North America, Asia, and Europe. Additionally, “mega-rounds” (which are over $100 million) of venture funding rose to a record 187 deals last year. Notably, companies such as the medical device company Butterfly Network and telemedicine company Hims & Hers went public via special-purpose acquisition companies as opposed to the traditional route.
November witnessed the biggest single round deal by a group of investors, including Google, for a $800 million boost to Resilience, a company that develops manufacturing technology products for biopharmaceuticals. This was closely trailed by a $700 million funding round in December for Alphabet Inc’s life sciences subsidiary, Verily.
How Digital Health has evolved!
Along with digital health, what used t#o be considered niche sectors such as mental health and women’s health also recorded notable deals. Mental health, brought into the limelight by the lockdown imposed due to the pandemic, saw a record high of $2 billion in equity funding last year. Similarly, companies addressing women’s health needs saw a record number of 239 deals last year. About 62% of those were early-stage companies, suggesting that the fledgling industry is poised for further growth even after the pandemic comes under control.
Putting the entirety of 2020 into perspective we realize just how deeply interconnected every aspect of modern civilization is. Despite the fact that this is one of the largest pandemics in the modern age, creating deep disruption, it’s become quickly evident that it’s also sparking all new opportunities for all of us. We are at the early stages of a “V” shaped economic recovery and we are going to experience tremendous growth across all sectors over the next few years. While the last 20 years can be considered the information age, we are now looking at the dawn of the healthcare era.