Obesity drugs are among health breakthroughs forecast to boost GDP
A wave of healthcare innovation may significantly boost the potential of the US economy, according to Goldman Sachs Research.
The emergence of weight-loss medications, AI-powered drug discovery, genomic and regenerative medicine techniques such as gene and cell therapy, and advances in diagnostics for the detection of diseases such as Alzheimer’s amount to a “remarkable pace of healthcare innovation that could significantly improve health outcomes,” Goldman Sachs Research economists Joseph Briggs and Devesh Kodnani write in the team’s report. These developments could enable people to live better and longer lives.
While a healthier population is far and away the most important outcome of healthcare innovation, breakthroughs can also add up to big gains for the economy. On their own, new anti-obesity drugs could raise US GDP levels by 0.4% or more in the coming years, according to the report. More broadly speaking, the latest healthcare breakthroughs could lift GDP by 1.3%, equivalent to about $360 billion per year in today’s dollars.
Poor health subtracts more than 10% from the level of US GDP due to lost work from sickness and disability, early deaths, and informal caregiving, our researchers estimate. People who report “fair” or “poor” health are significantly less likely to seek employment, which has subtracted 2 to 3 percentage points from the overall labor force participation rate over the last 30 years. Health-related reasons reduce the number of days worked in the US by about 2% each year. Short-term illnesses account for most of the lost time, but chronic health conditions also account for a substantial share, according to the report.
Early deaths also subtract from growth in the working population. Goldman Sachs Research estimates that early deaths due to health conditions subtract roughly 0.2 percentage points from annual labor supply growth.
While poor health will likely never be fully eliminated, our economists see scope for medical innovations to improve livelihoods and increase the economy’s performance over the next five to 10 years.
The economic implications of new weight-loss drugs
The latest crop of weight-loss drugs, called glucagon-like peptide 1 (GLP-1), could markedly improve health. Academic studies suggest obesity-related disease and illness shave about 3% from per capita output — via both missed work days and lost productivity — or more than 1% from total output when the more-than-40% share of the US population that suffers from obesity is factored in. GLP-1 medications were originally developed to treat Type 2 diabetes and rose to prominence last year for obesity treatment. Clinical studies have shown GLP-1 drugs can lead to a 15-20% decline in weight among treated individuals, a benefit that can be sustained for at least four years with continued treatment.
These drugs are quite expensive and insurance coverage for them is still limited. But many obese people have other life-threatening chronic conditions that could become eligible for treatment and reimbursement if upcoming clinical trials and regulatory approvals are successful, Briggs and Kodnani write.
While this uncertainty generates a wide range of potential outcomes for treatment, our analysts’ median scenario predicts the number of Americans treated with GLP-1 therapies will triple to 30 million by 2028, with upside to as many as 70 million.
That could mean a 0.4% boost to US GDP in the team’s baseline scenario, or more than 1% if the drugs’ uptake comes in at the high end.
“If GLP-1 usage ultimately increases by this amount and results in lower obesity rates, we see scope for significant spillovers to the broader economy,” the authors write.
AI may provide a major lift to healthcare
Advances in computational biology, the arrival of big data in healthcare, and a greater understanding of human genomics may also provide a major lift to the US economy, according to Goldman Sachs Research.
One example the team cites is the use of AI in drug discovery, which has been shown to shorten the development of successful pre-clinical drug candidates from as much as five years down to as little as 18 months. That could translate into a meaningful improvement in combatting chronic diseases such as cancer, fibrosis, and aging-related diseases, among others.
Gene editing is also a promising area. It involves cutting out or repairing a disease-causing genomic segment, or even inserting “corrected” genes to target diseases. Roughly 30 million Americans have a rare disease, most of which are genetic. New developments such as multiplexing — editing several genes simultaneously — may expand the pool of genetic disorders treatable through this approach.
The US may stand to gain significantly from these advances. Since 1990, all major economies have made notable progress in reducing the burden of disease, with disability-adjusted life years lost declining by nearly 10% per decade. But Americans stand out among their peers in losing more life to disease and disability. The new data-driven therapies could go a long way to helping the US “catch down” to its developed-market counterparts in the level of disease burden. Our researchers estimate that such an acceleration could boost US GDP by 0.5 to 2.5%.
Investment in healthcare innovation is growing
Interest in healthcare innovation has soared in recent years. Venture capital fundraising in US healthcare concerns has more than doubled since 2019. That level of interest has been matched by corporate leaders in the healthcare industry, as evidenced by the 60% surge in innovation-related keywords on company calls during the most recent earnings season. Our equity analysts project that investment across the entire healthcare sector could increase by 34% in 2024 to nearly $900 billion.
Goldman Sachs Research points out that “potential” is just that. Among other assumptions, their analysis is predicated on individuals who experience health improvements working as much as their healthier peers. Health improvements are expected to reduce caregiving demands, but they could also delay those demands and actually increase caregiving if new therapies extend longevity more than health status. Our economists also note that nominal spending on health treatments could either increase or decrease as new innovations are introduced.
“While there is significant uncertainty around the magnitude and timing of any macroeconomic boost, our estimates suggest that healthcare innovation could be a significant macro (in addition to human and micro) story in coming years,” Briggs and Kodnani write.
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