Financial Impact of Covid-19 On the Medical Industry
First and foremost, Covid-19 can accurately be described as a growing human tragedy that has affected thousands of people. As the pandemic continues to create havoc on the health of individuals, so are its impacts on the global economy. More than 175 countries have reported on cases of covid-19, which is a virus that mutated enough to cross over from animals to humans zoonotically, most likely in an animal meat market in Wuhan, China.
As more territories continue to feel the effects of the pandemic, more and more infections and, consequently, deaths are being reported daily. Some regions have a handful of cases, while others report hundreds of cases. Currently, most alarming death tolls are recorded in Italy and Spain, while the USA leads in the number of infections. As the world grapples with handling the overwhelming situation, covid-19 has dealt a significant blow on many sectors, primarily the medical industry.
The pharmaceutical industry; supply of pharmaceutical products
According to Europeanpharmaceuticalreview, 95% of healthcare industry professionals expressed their concerns about the impacts of covid-19 on medical company performance. Going by the report from the survey, Asian pacific market healthcare industry professionals showed the highest level of concern. 23% of the professionals expressed their fear regarding the demand and supply gaps accompanied by the pandemic. In a report, Senior Director of Market Research at GlobalData, Urte Jakimaviciute, submitted that although drug manufacturing and discovery is a global effort, china and India have, over time, established themselves as the leading players in the sector, with many countries depending on china for pharmaceutical supply. He goes on to add that the current surge of coronavirus infection rates in Wuhan, China can reiterate the global pharmaceutical supply dependency on India and mainly china.
Although China successfully mitigated its first wave of infections and reopened many of its pharmaceutical companies and resumed production, the pharma industry’s concerns are still on countries like India and the UK who have restricted export of pharmaceutical supplies to other countries. According to BBC, the restrictions are an effort by the countries to protect their supplies of active pharmaceutical ingredients (APIs) and the medicines in the current outbreak of Covid-19. Jakimaviciute predicts that with the downgrading of the global growth forecast by the Organization for Economic Cooperation and Development (OECD), the world will continue suffering severe economic impacts from the Covid-19 pandemic.
The demand for pharmaceutical products
Due to the domestic inflation caused by the covid-19 outbreak, drug spending will be directly decreased as the cost of consumer goods increases. Themedicinemaker, which is a reputable source of medical statistical information, puts China as the second-largest drug market with a 2018 expenditure of $137 billion. This spending was majorly on Chinese pharma products whose sales and demand are on the spike due to the increase in specialty medicine like oncology. Another aspect reducing the effect of the outbreak is due to the reduction of sales activity on pharmaceutical products and services. With reduced sales activities and advertisements due to the indoor policy to curb the spread of the virus, many products end up on the shelves of pharmaceutical stores.
Effects on the non-profit healthcare sector
Moody’s investor services have indicated that the financial outlook for the non-profit healthcare sector is poised to change from stable and deteriorate to negative as the effects of the covid-19 continue to surge. Due to the unpredictable and rapid nature of the outbreak, it is difficult to describe the impact of the virus outbreak precisely. However, it is generally expected that the sector will face a low cash flow compared to 2019. As cases continue to increase, hospitals put more priority on coronavirus cases and cancel more profitable services such as elective surgeries and procedures. The expenditure will rise due to the purchase of personal protective equipment and a higher staffing cost.
According to a post by healthcare finance news, the final financial impact will depend on the medical reimbursements and special funding related to coronavirus. It is still unclear if hospital reimbursement under insurance covers will cover the total cost of treatment. Commercial insurance providers have, however, fortunately, indicated that they would pay the testing cost for coronavirus and waive copayments done by insured victims. Moody reports that non-profit healthcare providers should expect short-term debt due to expense constraints as a consequence of the unprecedented pandemic.