Crisis' bitter pill for healthcare - Views on News from Equitymaster

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Crisis' bitter pill for healthcare

Oct 6, 2008

Bailout brings no cheer
Asian stocks are trading deep in the red today. Stocks in Hong Kong, Japan, Korea and China are facing the severest pressure today. Benchmark indices there are down anywhere between 2% and 4%. Deepening of credit crisis in Europe and weak employment data from the US are said to be reasons for today's decline in Asian stocks. As reported by Bloomberg, 159,000 jobs were lost in the US in September, the most in five years.

Around 1.1 m jobs were created last year in the US. 760,000 have been lost in the first nine months of this year. The biggest decline has been recorded in the financial services space, which has seen the demise of behemoths like Bear Stearns and Lehman Brothers.

In the meanwhile, the financial bailout plan in its new avatar was cleared by the US House of Representatives (the lower house of US Parliament, like India's Lok Sabha) last Friday. This clearance came after a couple of weeks of contentious debate on the impact of the plan on taxpayers. CNN's financial website mentions that 'the law, which allows the Treasury Secretary to purchase as much as US$ 700 bn in troubled assets in a bid to kick-start lending, ushers in one of the most far-reaching interventions in the economy since the Great Depression."

Crisis' bitter pill for healthcare
The impact of financial crisis in the US and Europe is now being felt in sectors far and wide. Healthcare is the latest example. Bloomberg and a leading business daily reports that India's leading pharmaceutical company Dr. Reddy's is facing delays in the much-awaited launch of its diabetes drug called Balaglitazone. This is because Rheoscience A/S, the Danish firm conducting clinical trials on it has run into financial problems.

However no all hopes are lost for Dr. Reddy's as Rheoscience's parent company Nordic Bioscience is likely to take over the trials if the former ends up being liquidated. Importantly, Balaglitazone is a drug considered the closest to being launched by any Indian pharmaceutical company. The drug is intended to be used in treatment of type-2 diabetes, a rising ailment among urban Indians.

As mentioned on the website of the International Diabetes Federation, lifestyle diseases like diabetes (type-1 and type-2) and heart diseases are expected to put a heavy burden on the economies worldwide. The cost on India alone is estimated at US$ 333 bn over the next 10 years.

But there's something deadlier than diabetes
Violence, it is. As per a study published by the Pan American Journal of Public Health, violence causes US$ 150 bn in annual economic losses worldwide, more than the losses on account of diseases like diabetes and malaria. According to a study, violence is a major drag on developing economies. Suicides and murders (homicides) account for 54% and 35% respectively of the 1.6 m victims of violence. The remaining 11% deaths are on account of violence inflicted by larger groups such as organised political groups and terrorist organisations.

India contributes to 21% of worldwide suicides and 10% of homicides, making the country among the worst sufferers of violence.

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