Henry Schein 2009 Annual Report Download - page 43

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to acquire companies that can enhance their current product and service offerings or provide opportunities to
serve a broader customer base.
Our trend with regard to acquisitions has been to expand our role as a provider of products and services to
the healthcare industry. This trend has resulted in expansion into service areas that complement our existing
operations and provide opportunities for us to develop synergies with, and thus strengthen, the acquired
businesses.
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.
As the healthcare industry continues to change, we continually evaluate possible candidates for merger or
acquisition and intend to continue to seek opportunities to expand our role as a provider of products and
services to the healthcare 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 healthcare products distribution industry continues to experience growth due to the aging population,
increased healthcare awareness, the proliferation of medical technology and testing, new pharmacology
treatments and expanded third-party insurance coverage, partially offset by the affects of increased
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.
The January 2000 U.S. Bureau of the Census estimated that the elderly population in the United States
will more than double by the year 2040. In 2000, four million Americans were aged 85 or older, the segment
of the population most in need of long-term care and elder-care services. By the year 2040, that number is
projected to more than triple to more than 14 million. The population aged 65 to 84 years is projected to more
than double in the same time period.
As a result of these market dynamics, annual expenditures for healthcare services continue to increase in
the United States. Given current operating, economic and industry conditions, we believe that demand for our
products and services will grow at slower rates. The Centers for Medicare and Medicaid Services, or CMS,
published “National Health Expenditure Projections 2008 – 2018” indicating that total national healthcare
spending reached $2.4 trillion in 2008, or 16.6% of the nation’s gross domestic product, the benchmark
measure for annual production of goods and services in the United States. Healthcare spending is projected to
reach $4.4 trillion in 2018, approximately 20.3% of the nation’s gross domestic product.
Government Influences
The healthcare industry is subject to extensive government regulation, licensure and operating compliance
procedures. National healthcare reform has been the subject of a number of legislative initiatives by
Congress. Additionally, government and private insurance programs fund a large portion of the total cost of
medical care. The Balanced Budget Act passed by Congress in 1997 significantly reduced reimbursement
rates for nursing homes and home healthcare providers, affecting spending levels and the overall financial
viability of these institutions.
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 is the largest expansion
of the Medicare program since its inception, and provides participants with voluntary outpatient prescription
drug benefits. This Act also includes provisions relating to medication management programs, generic
substitution and provider reimbursement.