Return on capital performance in life sciences and health care

How have organizations performed and where are best bets going forward?

With more change in store for the future, we look at where opportunities for consolidation and convergence lie for each health care sector, using return on capital employed as a measure of success or value delivered.

Organizations across the health care spectrum are looking for opportunities to generate returns, build capabilities, and attract customers. Consolidation is happening within each sector, as is convergence. The pace of convergence has accelerated over the last 12 months, and many new and surprising partnerships are emerging across sectors in their pursuit of new revenue streams, greater focus on outcomes, and more control over parts of this growing market.

In the report "An investment view of the health care market" explores the value that these activities brought to drug intermediaries and retailers, life sciences manufacturers, and health plans and providers by analyzing return on capital (ROC). ROC is a measure of financial performance that takes an investment perspective, and provides a fresh lens to understand the efficiency of allocating the capital under control to drive profitability.

Deloitte’s seven-year review of ROC found that:

  • Drug intermediaries and retailers, on average, have the highest return on capital across the health care sectors.
  • Return on capital declined across the seven sectors we studied between 2011 and 2017, with life science companies experiencing the largest drops.
  • Despite overall declining return on capital, companies with some specialty focus areas had higher returns than average, ranging from 10 to 30 percent, depending on the focus.
An investment view of the health care market
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