Healthcare in Transition: Retail Opportunities Abound

Healthcare costs are approaching 20 percent of GDP, outstripping inflation and economic growth with significantly more services provided to the aging baby boom generation. While health care is an important contributor to the economy, many feel 20 percent of GDP is not sustainable.

Healthcare spending in the United States was $2.6 trillion in 2010. By 2021, healthcare expenditures will reach $4.8 trillion or about one-fifth of the economy.1 For American families in 2012, healthcare costs exceeded $20,000 for the first time.2 For many families, this easily exceeds the cost of a mortgage premium and property taxes. For those employees whose healthcare premiums are paid by their employers, more costs are being passed on to employees making them consumers.

The Patient Protection and Affordable Care Act implemented in 2010, has created more consumers by embedding in law the concept of high deductible health plans. Although new federal tax subsidies will help reduce health insurance rates for many consumers, many individuals and families do not qualify. For those individuals and families that do qualify, others make up this subsidy in the form of higher taxes or some other cost transfer. These first-dollar-no-coverage policies make these people into consumers.

This creates an expanding market opportunity. With more patients in control to manage their own health care dollars it is in a consumer’s best interest to shop around, compare prices and providers to select the medical services that are best fit their needs. Therefore, providers are encouraged to repackage and re-price their services, competing for patients based on price and quality.

The healthcare market is ripe for market encroachment by other industries eager to tap this large GDP healthcare segment. For example, Walmart, Costco, Target, CVS and others have expanded into the prescription drug business by offering low cost generic drugs and significant marketing influence. Other sectors of the healthcare sector will follow.

A case in point is Walgreen. Walgreen is the largest drugstore chain with fiscal 2013 sales of $72 billion and provides six million customers cost-effective pharmacy, health and wellness services and advice each day. The company operates 8,209 drugstores in 50 states, the District of Columbia, Puerto Rico 

 

Written by Steve Fehlinger