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Healthcare Sector Continues to Triumph in Troubling Times

14th November 2022

The gross profit of pharmaceuticals in the UK petered out last year following a solid 13.6% rise in 2020, although it remains 13% higher than pre-pandemic numbers. Growth has been fuelled by the introduction of Covid 19 vaccinations and the need for related pharmaceuticals (such as fever-relieving drugs and critical care medications), which has led to higher profit margins for manufacturers and similar, but less poignant, increases for both distributors and pharmacies.

Although we have seen this shift in demand patterns, some firms still face Brexit-related border controls and regulatory constraints which have increased total costs and slowed down the supply of products. In order to maintain smooth market access in the European Union, some corporations relocated facilities to countries that remain members of the trade bloc.

Hospitalizations for medical and pre planned care unconnected to Covid 19 continue to have a sizable backlog, meaning the consumer need for pharmaceuticals is projected to be maintained. The UK administration and NHS said they will deal with this via a significant catch-up initiative which will last for three years.

The ageing UK population will be an additional growth factor in the medium and long run, especially in regard to specialty medications used to treat chronic illnesses.

But even taking into account the immediate increase in public healthcare expenditure, cost limitations will continue to be a problem in the long run, with public health regulators putting pharmaceutical companies under pressure to reduce medication sales prices. The tension between rising cost and expectation to keep consumer prices low may lead to an increase in imports of generic drugs at lower prices.

The typical payment time in the healthcare and pharmaceuticals sector is 60 days, however the NHS frequently levies lengthier payment terms. Since 2020, we have seen excellent payment behaviour, with both bankruptcy and payment postponements being rare in 2021.

These two factors may potentially rise marginally every year due to the termination of government assistance measures put in during Covid 19. But this is nothing to be concerned about considering it would just entail a return to the pre-pandemic figures, which were both low and steady.

In all healthcare divisions, credit risk remains small, and demand remains strong, with the majority of enterprises in a position of sturdy financial stability.

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