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As industry consolidation continues, we believe that we are positioned
to capitalize on this trend, as we believe we
have the ability to support increased sales through our existing infrastructure,
although
although there can be no assurances
that we will be able to successfully accomplish this.
We also have invested in expanding our sales/marketing
infrastructure to include a focus on building relationships with decision
makers who do not reside in the office-
based practitioner setting.
As the health care industry continues to change, we continually evaluate
possible candidates for joint venture or
acquisition and intend to continue to seek opportunities to expand our
role as a provider of products and services to
the health care industry.
There can be no assurance that we will be able to successfully pursue
any such
opportunity or consummate any such transaction, if pursued.
If additional transactions are entered into or
consummated, we would incur merger and/or acquisition-related costs, and
there can be no assurance that the
integration efforts associated with any such transaction would be successful.
Aging Population and Other Market Influences
The health care products distribution industry continues to experience growth
due to the aging population,
increased health care awareness, the proliferation of medical technology
and testing, new pharmacology treatments,
and expanded third-party insurance coverage, partially offset by the effects of unemployment on insurance
coverage.
In addition, the physician market continues to benefit from
the shift of procedures and diagnostic testing
from acute care settings to alternate-care sites, particularly physicians’
offices.
According to the U.S. Census Bureau’s International Database, in 2022 there are approximately seven million
Americans aged 85 years or older, the segment of the population most in need of long-term care
and elder-care
services.
By the year 2050, that number is projected to nearly triple to approximately
19 million.
The population
aged 65 to 84 years is projected to increase by approximately 27% during
the same period.
As a result of these market dynamics, annual expenditures for health
care services continue to increase in the
United States.
We believe that demand for our products and services will grow while continuing to be impacted by
current and future operating, economic, and industry conditions.
The Centers for Medicare and Medicaid Services,
or CMS, published “National Health Expenditure Data” indicating
that total national health care spending reached
approximately $4.1 trillion in 2020, or 19.7% of the nation’s gross domestic product, the benchmark
measure
measure for
annual production of goods and services in the United
States.
Health care spending is projected to reach
approximately $6.2 trillion in 2028, approximately 19.7% of the
nation’s projected gross domestic product.
The
latest projections begin after the latest historical year (2020) and go through
2030.
Government
Certain of our businesses involve the distribution, manufacturing,
importation, exportation, marketing and sale of,
and/or third party payment for, pharmaceuticals and/or medical devices, and in this regard, we
are subject to
extensive local, state, federal and foreign governmental laws and regulations,
including as applicable to our
wholesale distribution of pharmaceuticals and medical devices, manufacturing
activities, and as part of our
specialty home medical supply business that distributes and sells
medical equipment
and supplies directly to
patients.
The federal government and state governments have also increased
enforcement activity in the health care
sector, particularly in areas of fraud and abuse, anti-bribery and corruption, controlled substances handling,
medical
device regulations and data privacy and security standards.
In addition, certain of our businesses must operate in compliance with
a variety of burdensome and complex billing
and record-keeping requirements in order to substantiate claims for payment under
federal, state and commercial
healthcare reimbursement programs.
One of these businesses was
recently suspended
in October 2021 by CMS
from
receivingfromreceiving payments from Medicare, although it
iswas permitted to continue
to perform
and bill for Medicare services.
The On September 30, 2022, CMS terminated the suspension of Medicare payments.As a result of the termination of the suspension, we recognized $13 million of previously deferred revenueduring the quarter ended September 24, 2022.