Health Care

An industry analysis with a focus on concentration and competition intensity

Emilia Leszczyńska

Coursera - Peer-graded Assignment

January 2024

The Health Care Industry Analysis

• Analysis details:

  • Industry: Health Care

    • Sub-level 1: Health Care & Equipment Services
    • Sub-level 2: Pharmaceuticals, Biotechnology & Life Sciences
      
      

• Region: The USA

• Time period: 2022

Typical firm performance by region: profit distribution

• The bar chart shows a profit distribution in the health care industry in general (including both sub-levels)

• Profits are not distributed evenly:

  • health care businesses in some regions are very profitable: Oregon, Nebraska, Alabama, Indiana, Louisiana, Kentucky, and D.C. have a profitability index of 0.67 to 1.* 
  • in other regions, the industry is not doing so well: Maryland, Massachusetts, Colorado, Virginia, Washington, Nevada, and Connecticut have a profitability index of 0.13 to 0.06.
  • there are a lot of in-between regions – in those, health care-related companies earn a moderate share of profit

* Puerto Rico as well, but it seems that its presence among US states is a database mistake.

Industrial Comparison: Profitability

• The two sub-levels in the health care industry differ considerably in profitability

• Health Care Equipment & Services has a much higher total revenue and median revenue than Pharmaceuticals, Biotechnology & Life Sciences

• The proportion of profitable enterprises is also higher in the Health Care Equipment & Services branch (though the difference is not as significant here) 

• The values of Median Operating Margin and Median Net Margin are negative for both branches, but considerably more so for Pharmaceuticals, Biotechnology & Life Sciences

• The only KPI in which Pharmaceuticals, Biotechnology & Life Sciences does better than Health Care Equipment & Services is the Total Operating Income.

Industrial Comparison: Profitability

• Conclusion: the Pharmaceuticals, Biotechnology & Life Sciences branch seems to be performing worse than Health Care Equipment & Services. However, in the end it has a higher operating income (which is a company's profit, with costs and expenses already deducted).
• This suggests that the condition of the Health Care Equipment & Services branch is not as good as it really seems – since those companies lose their final profit along the way.
  • This is probably caused by the fact that operating costs in the industry are high, due to its high level of innovativeness.

Concentration and Competition Intensity Analysis

• Both sub-branches are highly divided and competitive
  • The Pharmaceuticals, Biotechnology & Life Sciences branch more so than the Health Care Equipment & Services branch

• With time, fragmentation and division are growing: there are more and more companies on the market

• At the same time, the largest players are overtaking more and more of the total revenue, so that less and less is left for the other companies

Conclusions

• The Health Care industry is a high revenue one, but total operating income is not high in either of its sub-branches
• Both sub-branches are highly divided and competitive

• It is not a good time to open a health-care related business. The market is dominated by a few biggest players, and there are very many small companies competing for the remaining share