As the COVID-19 pandemic continues to unfold, responses and outcomes have varied widely—across nations and over time. Take Italy, for example.
On March 27, the nation was at the forefront of the pandemic, with 969 reported deaths in just 24 hours. The first weeks in August, however, presented a different picture. Reported deaths were less than a dozen on most days, and the restaurants and palazzos of daily life had reopened, albeit with mandatory masks and social distancing. Unfortunately, by August 27, the total number of daily infections had risen to the same level as in May.
While the final COVID-19 story for Italy—and indeed the entire world—is still being written, scenarios like these matter to internationally focused companies, both today and for the future. In the words of University of Hong Kong epidemiologist Ben Cowling, “Coronavirus is not going away.” And COVID-19 will not be our planet’s final pandemic or natural disaster.
If your company is expanding, revamping, or divesting global operations, this means there are new questions to add to your market evaluation checklist.
What is the region’s capacity for healthcare? System capacity contributes to regional resilience. Canada’s well-funded public health system and testing availability, for example, contributed to the nation’s ability to catch the virus early and blunt its impact. As of August 31, Canada’s death toll has essentially flattened, and Canada’s daily positivity rate (the percentage of those tested who are positive for COVID-19) averaged just 0.7 percent in the past week.
Particularly over such a prolonged crisis, a health system that is stretched to capacity can’t provide care to all the people that need it, and this impacts all aspects of operations: the workers who produce goods and services, the customers who purchase them, and everyone involved in the supply chain in between.
Furthermore, when people don’t feel safe leaving their homes or secure economically due to COVID-19, they spend less—much less. According to a report by Deloitte, real personal consumption expenditure (PCE) in the United States, which accounts for a little less than 70% of GDP, fell by 10.1% in Q2 2020 compared to Q1 2020,1 the sharpest quarterly contraction on record. Deloitte’s study of 18 countries across Asia, Europe, and the Americas revealed steep falls in recreation, food, accommodation, and transportation spending and spending on consumer services like salons, doctors, and dentists, as well as delays on larger purchases.
Going back to our earlier example, what does the post-pandemic outlook look like for Canada? Investment Executive gave a mixed prognosis:
“With the economy starting to re-open, Canada’s recovery has begun. However, any optimism about the end of the historic shutdown was tempered by practical considerations in an outlook report released on Wednesday by BMO Capital Markets. ‘[W]ith some restrictions still in place, borders still closed and many Canadians understandably reluctant to venture out, a complete recovery will likely take an extended period of time.’ the report said.”
How have lawmakers and leaders responded to the crisis? From the timing, duration and nature of shut-down orders to the strictness of enforcement, COVID-19 rules impact the spread and severity of the virus, and your business’ ability to operate in a region for health, public safety, and economic reasons.
Aggressive interventions have been shown to lead to stronger economic recoveries, as demonstrated by analysis of the 1918 flu pandemic in the United States. “There is a limited window for governments to drive adequate public-health responses and meet demand drawdowns with proportionate economic interventions,” states McKinsey. “Without this, the possibility of a deeper effect on lives and livelihoods is more likely.”
Strong policy can make up for gaps in health system capacity. For example, Vietnam has only 8 doctors for every 100,000 people, far less than the 41 per 100,000 in Italy and Spain. Strict quarantines, reporting, and travel restrictions helped this nation of 11 million keep COVID-19 cases to only 1,040 cases and 32 deaths, as of August 30 reports.
Strong leadership matters as well. While New Zealand benefits from a small population and relative isolation as an island nation, the country’s prime minister, Jacinda Arden, has been praised for her ability to “combine public empathy with political skills and technocratic know-how,” in the words of Fortune magazine.
Finally, what’s the in-region capacity for medical manufacturing and innovation?
As nations develop vaccines and therapeutics for COVID-19, who around the world will benefit from their first? While plans are taking shape for equitable worldwide distribution of vaccines and treatments, JAMA Network notes that “absent broad agreement and buy-in on those plans, governments may prioritize their own populations, resulting in inequitable distribution of medical products both within and among countries.”
For this reason, it may be prudent to examine local drug development in any market where a company has significant investment or long-term plans. Germany, for example, is Europe’s biggest healthcare market and home to more than 400 biotechIndia, home to more than 1,000 biotech startups, is also very active in biotechnology, clinical trials, contract research and manufacturing.
How can you factor health system capacity and resilience into your market evaluations and operations? Specialized consultants and advisors can help. For more information, contact us