Want to see something funny?
It’s actually more embarrassing than “funny.”
Still, I can’t help but laugh when I see this sort of thing…
The graph above was taken from the OECD economic database. It represents the amount of money spent on health care (per person) versus the average life expectancy of about 40 developed counties.
You’ll notice that, for the most part, the more a country spends… the longer its citizens live. Just about every country follows this trend, with very few deviating from the established curve.
But when we look at the figure, we notice the United States floating by its lonesome self.
Despite having the largest health care budget per capita in the world, our average life expectancy is embarrassingly low. In fact, the average American will live a shorter life than those living in nations with as little as 25% of our budget.
In other words, we’re spending as much as four times the money for the same level of health.
It’s no secret that the health care system in the U.S. is riddled with government waste and overspending. The above image really puts things into perspective.
Not only is this data embarrassing; it’s also completely unacceptable.
Increasing Efficiency
Let’s be clear: There’s absolutely nothing wrong with high levels of health spending.
In fact, we should take pride in our ability to do so.
The real problem doesn’t lie in how much we spend, but rather in where that spending takes us.
It’s an unfortunate truth that our health care system is incredibly inefficient. We can point to plenty of reasons for this — from slimy insurance companies to disorganized billing practices to excessive malpractice suits. We could even get into a discussion about the merits and flaws of ObamaCare, but that’s admittedly not my area of expertise.
Personally, I’m more concerned with how we can use new developments in medicine and technology to build a more efficient health care system. Specifically, I’m focused on advancements that support faster, cheaper, and more effective treatment.
Most of all, I’m concerned with how we can get in on these developments as investors…
Just last month, the U.S. Food and Drug Administration (FDA) approved a new line of medical devices that will change health care as we know it. These kinds of devices won’t just touch a single disease or focus on a specific area of the human body; they will soon facilitate the treatment of virtually any condition of nearly every patient who walks into the doctor’s office.
When I tell you this decision is monumental, please know I’m not exaggerating in the slightest.
These recently approved devices — and the similar ones that will follow — are set to completely disrupt the conventional model of medicine.
No Size Fits All
Imagine shopping for a pair of shoes and being told to buy the same size as the customer before you, simply because it worked for him. Better yet, imagine that store carrying just one size…
If this really happened, you’d probably decide to shop at a different store.
But what if they were all like that?
This “one size fits all” approach is not a far cry from our current medical model. If you and I were to visit the same doctor with the same symptoms, we would very likely receive the same diagnosis and treatment.
On the surface, this seems like the most logical way of doing things. But the reality is we, as patients, are not always being fitted correctly…
Each of us has our own unique genetic code. Our bodies react differently to diseases and treatments based on this code. That is why, in many cases, knowing this code can optimize care.
While this level of personalization is ideal, the problem with using genetic sequencing to inform health care has recently been an issue of efficiency. The process of mapping out a genome was both costly and slow, so there was little incentive to do so as a result.
However, the FDA’s recent approval of next generation sequencing (NGS) devices finally makes sequencing practical.
Cutting Costs and Making Sales
In 2001, it took $100 million to sequence a genome. By 2011, that number dropped to $10,000. Today, NGS can map our entire genome for close to $1,000.
This decrease in cost is sure to continue — and it will drive the adoption of NGS throughout the medical community.
In terms of time, conventional genetic sequencing can takes weeks to process, while NGS takes a matter of hours, regardless of genomic size.
As with a decrease in cost, this too will help drive adoption of genomic sequencing in medical practice.
Companies benefiting from this recent approval will be those providing the devices, as well as those analyzing the data collected.
As for the devices themselves, Illumina (NASDAQ: ILMN) is the most obvious play, with four devices just approved by the FDA. Shares are up nearly 100% over the last year, and our chart shows a relatively consistent uptrend.
The recent spike is the direct result of the FDA’s medical device approval.
ILMN is a solid play with very respectable financials, consistent sales growth, and an exciting story.
I’ll be holding on to my current lot of shares, but I’m not counting on such high returns with this market cap in the future…
Larger rewards are sitting in younger companies managing the data.
Turning progress to profits,
Jason Stutman
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