Sam Dickie: Fisher Funds expert on the growing pressure for the US to cut wasteful healthcare spending

America's healthcare sector is at a crossroads.

The US spends almost 20 percent of GDP on healthcare - nearly double the OECD average - but there's pressure to cut down on wastage.

Sam Dickie from Fisher Funds explains further.

LISTEN ABOVE

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:00):
Now America's healthcare sector is it a bit of a crossroads.
The US spends almost twenty percent of its GDP on healthcare.
It's nearly double the OECD average. But there is pressure
to cut wastage, and this of course has implications for
the big healthcare players who've all been reporting over the
last little while. Sam Dickey from Fisher Funds is with
US evening.

Speaker 2 (00:17):
Sam, good evening. Hey, can you give us a little bit.

Speaker 1 (00:19):
Of detail on the big picture here and what the
government is trying to do about it?

Speaker 2 (00:23):
Yes, this ties into what you and I were talking
about in June. So remember US government debt to GDPs
one hundred and twenty five percent versus say New Zealand
at fifty and healthcare spinning is an obvious target. Like
you say, almost twice the OECD average as a percentage
of GDPs spent on healthcare, which is five trillion dollars,
and at least a trillion dollars of that experts says wasted.

(00:46):
So how's that wasted? Administrative bloat is massive? So the
US has an incredibly convoluted patchwork of public and private
insurers with thousands of different insurance plans and big hospitals
for exams, dedicate entire departments with hundreds of employees just
to hand all the insurance claims, the denials, the resubmittances.

(01:08):
Then there's the middlemen that distributors everyone with their handout
clapping the ticket and to feed all those mouths. US
drug prices are extremely inflated versus the rest of the world.
So take the EpiPen or ozepic for example, that the
popular weight loss drug. They sell it ten times the
price in the US versus say the UK or Ossie.
So that's the problem, but it's really really hard to fix.

(01:29):
So in twenty eighteen, Warren Buffett, Jeff Bezos, and Jamie
Diamond set up a joint venture to tackle this bloat.
So think about those three guys. You probably couldn't get
three more capable people on Earth together in a room
to solve a problem. And they failed. So the joint
venture quietly dissolved, defeated by the sheer amount of greed,

(01:49):
vested interests and massive political clout of the healthcare players.

Speaker 1 (01:53):
So, as I said earlier, we've had some of these
big healthcare players reporting over the last little while. What
if the result told us about.

Speaker 2 (02:00):
This that's right. So companies like Boston Scientific, Danaher and
Chield of Surgical, and Icon of all reported results. So
in Chield of Surgical that we've spoken about this one before,
the leading soft tissue robotic surgery company, they sell their
robots to hospitals and they said on the result that
hospitals not just in the US but around the world
are tightening the purse strings. Danaher, who manufactures the tools

(02:26):
that big farmer companies used to develop a mass produce drugs,
said it's big farmer customers like Pfizer continue cutting costs
as government pressure mounts to reduce drug prices. And Icon,
who are a outsourced clinical trial company that tests drugs
for farmer companies, has been under immense pressure.

Speaker 1 (02:47):
What does this all mean for investors, Well, the good.

Speaker 2 (02:51):
News is both Democrats and Republicans support cutting waste. So
you've had the Inflation Reduction Act in twenty twenty two,
which reduced prices the government pays for drugs, and Trump's
Most Favored Nation policy aims to tie US drugs to
the lowest prices paid by the developed countries. But as
an investor, it's critical to determine whether the healthcare company
you own is contributing to the problem or helping solve it.

(03:13):
So big farmer companies charging excessive US drug prices are
right in the cross. Heirs as are distributed as a middlemen.
But Boston Intuitive and Icon, for example, they're part of
the solution. So Icon's clinical research expertise can complete drug
trials twelve months faster and up to twenty percent cheaper
than than their farmer customers. Boston reported forty percent higher

(03:34):
patient throughput at its cardiac or heart centers, they reduced
unnecessary patient stays by twenty five percent and cut procedure
times by fifteen percent over the last few years, and
Tudors robotic systems massively speed up surgical backlog. So make
sure you're part of the solution as an investor heator,
But tread carefully generally, because if the bloated supertanker that

(03:57):
is the US healthcare system is finally turning, you do
not want to be in its path.

Speaker 1 (04:00):
A very good advice, Sam, Thank you so much. As always,
Sam Dickie Fisher Funds will talk to you again sooner.

Speaker 2 (04:05):
For more from Heather Duplessy Allen Drive Listen live to
news Talks. It'd be from four pm weekdays, or follow
the podcast on iHeartRadio