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HEALTHCARE INDUSTRY Health care costs continue to rise rapidly in the U.S. and throughout the developed world. Total U.S. health care expenditures are projected to increase from $2.39 trillion in 2008 to $2.72 trillion in 2010, with annual increases averaging about 7%. The health care market in the U.S. in 2008 was made up of U.S. Healthcare Expenses in $ Hospital Care 747.1 Physician & clinical services 501.7 Prescription drug 247.0 Nursing home & home health 198.5 Dental care 102.4 Other items 597.6 Registered hospitals totaled 5,747 properties in 2007, containing 947,417 beds serving 37 million admitted patients. Federal spending on Medicaid and Medicare accounted for about 21.9% of all federal government expenditures as of 2007. Medicare, the U.S. federal government's health care program for Americans 65 years or older, provided coverage to 44.8 million seniors in 2008 (up from 43.3 million the previous year), an increase of 3.46 % compare to last year. By 2030, the number of people covered will balloon to about 78.0 million due to the massive number of Baby Boomers entering retirement age. Federal Medicare expenditures, excluding patients' premiums, totaled $378.6 billion in 2006 and $432.6 billion in 2007. For 2008, that amount was projected to grow to $457.5 billion, an increase of 5.7 % Medicaid is the U.S. federal government's health care program for certain groups of seniors in nursing homes as well as low-income and disabled persons. The federal government incurred Medicaid expenditures totaling $180.6 billion in 2006 and $190.6 billion in 2007. That amount was projected to grow to $203.8 billion in 2008. State governments incur large expenses for Medicaid benefits as well. According to the Kaiser Family Foundation, total state and federal spending on Medicaid during 2006 was $304.2 billion. The cost in California alone was $34.2 billion. Health spending in the U.S., at about 16.5% of Gross Domestic Product (GDP) in 2008, will grow to about 19.6% by 2016 unless drastic reforms take place. Health care spending in America accounts for a larger share of GDP than in any other major industrialized country. Despite the incredible investment America continues to make in health care, 14.5% of Americans (43.3 million people) lacked health care coverage for the entire year of 2007. A significant number of the uninsured, about 9 million, were in households with annual incomes above $75,000. The US government has passed the Healthcare Reform Bill for the purpose of lowering the cost of healthcare. The bill proposes to cut patent protection to innovator companies from 20 years to 12 years result in higher priority given to generic formulations. The bill also came through to extend medical insurance to every American and create a government plan to compete with private insurers. It prevents insurers from denying coverage to people with preexisting conditions and would result in 36 mn Americans being covered under medical insurance Highlights Bill proposes to spend 1 trillion over 10 years on healthcare Translates into spending of $ 100 bn per year over next 10 years Out of $ 100 bn spent on healthcare, drug related spending estimated at 15 % or $ 15 bn With focus on cost effective healthcare generic pharma players to benefit

The Indian healthcare industry, which is expected to reach at US$ 75 billion in 2012 from the current US$ 35 billion, is attracting investment opportunities from private equity (PE) and

venture capital (VC) firms, according to private equity experts. “There is a huge demand supply gap in healthcare delivery business in India as there are few organised hospital chains. Pharma, retail, medical equipment, diagnostics services are businesses where efficiency can be brought in,” said Sahad PV of VC Circle, an website which tracks deals. AK Purwar, chairman of India Venture Advisors, and former chairman, SBI, told FE, “Healthcare, one of the fastest growing sectors, gives immense opportunities to investors. There is huge potential in services as well as medical tourism sectors in India as far as investments are concerned.” India Venture is in the stage of finalising three-four deals in healthcare delivery and support spaces with deal size ranging from Rs 30-50 crore. Similarly, Sanjay Arte, Partner, India Value Fund, a PE fund focusing on mid-size firms, also believes that there is a significant untapped potential for PE and VC firms in sector. The Ajay Piramal Group-owned private equity (PE) firm, India Venture Advisors, is to launch its second $150-million (around Rs 730 crore) healthcare fund next year. The firm’s first Rs 400-crore healthcare fund is being raised from domestic sources. The second fund, however, will be completely raised from foreign limited partners. The company, which has made only a single investment in Kavery Medical Centre from its fund, is expected to close the first fund by end of this year. Also in the offing is a Rs 500-1,000-crore infrastructure fund. India Venture Advisors, launched in 2007, has its major focus on healthcare and life sciences investments in areas such as healthcare delivery (hospitals), support (IT-BPO) and other services, including clinical research. According to a Grant Thornton India study, out of the six deals that took place in healthcare and pharmaceuticals space in the first half of 2009, hospitals and diagnostics sectors witnessed two deals each, worth $20 million and $60.50 million, respectively. Healthcare services and pharmaceuticals witnessed one deal each, worth $33 million and $5.5 million, respectively. Investments by Global Technology Investment Group in Nova Medical Centres ($60 million), International Finance Corporation in Max India ($33 million) and India Venture Advisors in Kavery Medical Centre ($20 million) are the major PE deals that took place in domestic market during the first half of 2009. In the last five years, PE and venture capital investors have invested over $2 billion in healthcare and life sciences companies and, as per analysts, are keen to tap sectors like diagnostic services, medical devices, equipment, hospital chains and wellness products and services.

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