After several years of government reimbursement pressure, headwinds are beginning to abate.  Given the aging population, the significant positive impact in vitro diagnostics have on the medical care and controlling costs, the diagnostics market is expect to grow.   This is especially the case in regard to molecular diagnostics and genetic testing, which enable more personalized and targeted therapeutic approaches.   See accompanying chart.

In June 2015, the Supreme Court of the United States affirmed the Affordable Care Act in King v. Burwell.  While the Republicans may continue to try to change some provisions, the Court clarified much of the uncertainty surrounding the fate of the ACA.  The ACA provides for a major expansion in the number individuals entitled to insurance coverage, and higher burdens on insurers to cover pre-existing conditions and other pathologies, among other requirements which make for more costly insurer requirements.

Composition
The U.S. clinical testing industry consists of two segments: (a) hospital inpatient and outpatient testing (40%) and (b) commercial clinical laboratories, physician-office laboratories and other locations, as well as hospital outreach testing (60%).Hospital-based and affiliated laboratories account for ~60% of the total industry; commercial clinical laboratories approximately 33%;and physician-office laboratories and other locations account for 7%.See adjacent chart.

Healthcare M&A in 2014 was characterized by seismic changes.  More than 40 deals were announced or closed with a value over $1 billion – 8 were over $10 billion. Here are the key factors that shaped the environment for healthcare mergers and acquisitions and healthcare investment banking.

In Q3 2014. big deals continued to dominate the healthcare M&A headlines, with transformative divestitures and restructurings also reshaping the landscape. Large scale M&A activity is how large companies are adapting to the new healthcare environment.  In the new environment, tight government and hospital budgets loom large and cost has become an enormous part of the equation. Lower reimbursements, more challenging and expensive regulatory pathways, and a tougher gauntlet to get products…

Key dynamics in the urology sector, helping to fuel healthcare M&A activity, include:
Urological Devices Market Expansion
Fueled by increases in sales of urinary catheters and urological endoscopes, the U.S. urological devices market is estimated to reach over $5.4b by 2016. Urinary continence products account for almost 40% of the market – the largest among all product categories. Among other factors, favorable reimbursement, improved diagnosis technology and rates for prostate cancer and benign prostatic hyperplasia (BPH) and the aging population have contributed market growth (Source: iData).

As a backdrop to healthcare M&A actvitiy, leading dynamics in the spine surgery sector include:

• Minimally invasive Spine Surgeries (MISS) – increasingly being used to implant lumbar fusion devices, interspinous fusion systems, spinal non-fusion devices and to perform more simple procedures, such as discectomies. Traditional surgery requires a large incision in the back or abdomen, requiring the expertise of specialized vascular surgeons and risking serious injury.  May involve surgical complications such as excessive blood loss and severe post-operative pain, and significant hospital stays and recovery periods.

As part of our Healthcare M&A and strategic consulting services, we offer the following overview of the Dental market as a context to understand mergers and acquisitions in the sector.

• Changing Demographics. The aging population and increased awareness drive the demand for aesthetic and functional dentistry. Approximately 10% of people over 65 have some form of periodontal disease.According to the U.S. Census Bureau, in 2012 there were > 5 million Americans aged 85 years or older.By 2050, that number is projected to more than triple to ~19 million.The population aged 65 to 84 years is projected to increase > 85% during the same period.

As part of our Healthcare M&A and strategic consulting services, we offer the following overview of the Diagnostic Imaging market as a context to understand mergers and acquisitions in the sector.

• Growth in Diagnostic Imaging Procedures Slowing Down.  Recent data shows that the number of physician visits by patients 65 or older resulting in an imaging exam is consistently trending downward, from 12.8%in 2003 to 10.6% in 2011. Similarly, Medicare spending per enrollee for imaging has declined from $418 in 2006 to $390 in 2011.Maturation of technological advances, over-saturation of imaging centers, radiation awareness, new guidelines from the American College of Radiology reducing duplicative studies and new healthcare reimbursement policies have all led to the slowdown.

Vascular Access Industry Trends

The Walden Group’s assessment of vascular access market dynamics:

Growing Market and Changing Demographics. In 2012, the U.S. market for vascular access devices was worth an estimated $4 billion –  a 6.1% increase over the previous year.  The market is expected to continue to grow at a high-single-digit rate and exceed $6 billion by 2019 in the U.S. alone*. The aging population and increased prevalence of diabetes and obesity has put more Americans at risk for renal disease, among other illnesses, contributing to the growing market.