How the healthcare industry is navigating the post-pandemic world

COVID-19 has changed the healthcare industry. The easing of the pandemic is reshaping it.

Vaccine manufacturers and drugstore chains are reporting a sharp drop in the number of people getting vaccinated against COVID, manufacturers of rapid home tests are going out of business, and companies that made personal protective equipment have closed.

When the coronavirus first appeared, companies in the healthcare sector were racing to reconfigure themselves. Pharmaceutical companies, which were mainly focused on cancer and rare diseases, jumped into the pursuit of vaccines and antivirals. Medical device manufacturers developed at-home testing kits and quickly ramped up production.

This transformation is now falling apart. Last week, Pfizer — one of the biggest gainers from the pandemic boom — offered one of the most dramatic signs of the turnaround, cutting $9 billion from its annual sales forecast because of declining demand for its COVID-19 vaccines and Paxlovid treatment.

“The weakening demand for the vaccine and Paxlovid shows that this is indeed the post-COVID transition,” said Max Nissen, an analyst at Bloomberg Intelligence. “People are going to have to understand what this looks like far beyond Pfizer.”

Many Americans have put the pandemic behind them and the US public health emergency ended in May, but the virus has not completely disappeared.

Not every healthcare business that faces sudden change due to COVID suffers. More people are returning to their doctors for routine checkups and procedures they put off when clinics were overwhelmed with virus patients. This is good news for doctors and hospitals.

Still, Pfizer’s decision to cap its financial guidance shows how the landscape has changed and will put pressure on other companies that have benefited from serving COVID patients to re-look at their expectations and make adjustments.

Also on Monday, Pfizer rival Moderna reaffirmed its guidance for 2023 sales of COVID-19 vaccines, but said it was too early to predict exactly where vaccination rates would go.

Moderna said it expects vaccine sales of $6 billion to $8 billion this year. In a note to investors on Monday, William Blair analyst Myles Minter said he sees the company reaching the lower end of that range. Moderna predicts the U.S. market this season will be at least 50 million doses, but Michael Yee, an analyst at Jefferies, expects it to be lower, between 35 million and 40 million.

Weight change

Not long ago, Wall Street was excited about the potential of mRNA, the technology behind Moderna and Pfizer’s COVID vaccines. Both companies are betting the breakthrough will have a number of applications, and rivals have been under pressure to make their own moves on mRNA.

The narrative has changed, however, with investors pouring money into weight-loss drugs that some analysts are already predicting will have broad economic ramifications.

Pfizer shares have fallen 35% this year, and Moderna shares have tumbled 49%. By contrast, shares of Novo Nordisk, the maker of weight-loss drugs Ozempic and Wegovy, rose 49%.

The erratic distribution of the vaccine for this season has made it harder to know how high the demand really is. Pharmacies have found themselves short of the new vaccines from both Moderna and Pfizer, forcing them to turn away people who sought the vaccines when they first became available this fall.

This also damages the drugstores. Walgreens delivered roughly 400,000 COVID-19 vaccinations in the fourth quarter, compared with 2.9 million vaccines a year earlier, executives said on a call with investors. The company also saw a sharp drop in demand for COVID tests.

CVS also faced headwinds. Its pharmaceuticals and consumer wellness businesses generated adjusted operating income of $1.4 billion in the second quarter, down 17% from a year earlier, mostly due to lower demand for products and services related to COVID.

Tested test manufacturers

Vaccine makers aren’t the only ones seeing a downturn in business related to the pandemic. In February, Lucira Health, a publicly traded maker of at-home COVID tests, filed for Chapter 11 bankruptcy protection. Test maker Ellume, which received the first U.S. approval for its at-home COVID test kit, collapsed into liquidation in June.

Abbott Laboratories saw a sharp decline in sales of its COVID tests in 2022, a decline that forced the company to lay off temporary workers this year. Abbott’s COVID tests are expected to generate sales of just $1.3 billion in 2023, according to analyst estimates, well below the $7.7 billion tests accumulated in 2021.

Unlike its smaller rivals, Abbott has other businesses that can offset this decline: Demand for medical devices such as its diabetes monitors has cushioned the blow from falling revenue related to COVID.

For health insurers, the waning impact of COVID-19 means more people are seeking medical care. Patients put off surgeries and other care during the pandemic, but insurers have seen a rebound this year in joint replacements and heart procedures.

In June, a UnitedHealth Group executive suggested that medical costs were higher than expected, sending the health insurer’s stock tumbling. Managed care companies are also facing declining Medicaid membership as millions who joined safety net health plans during the pandemic must now prove they are still eligible for the program. Yet the insurers’ actual performance has been better than investors’ expectations.

For hospitals, surgery centers and medical device manufacturers, patients returning for more care is good for business. Labor costs spiked during COVID as hospitals depended on traveling nurses and temporary medical staff, but those pressures have eased somewhat. Meanwhile, investor enthusiasm for virtual care has waned.

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