Henry Schein 2014 Annual Report Download - page 52

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38
The trend of consolidation extends to our customer base. Health care practitioners are increasingly seeking to
partner, affiliate or combine with larger entities such as hospitals, health systems, group practices or physician
hospital organizations. In many cases, purchasing decisions for consolidated groups are made at a centralized or
professional staff level; however, orders are delivered to the practitioners’ offices.
We believe that consolidation within the industry will continue to result in a number of distributors, particularly
those with limited financial, operating and marketing resources, seeking to combine with larger companies that can
provide growth opportunities. This consolidation also may continue to result in distributors seeking 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 and joint ventures has been to expand our role as a provider of products
and services to the health care industry. This trend has resulted in our 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. 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 merger and
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 Data Base, in 2014 there were more than six 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 18 million. The population
aged 65 to 84 years is projected to increase over 60% during the same time 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 Projections 2013-2023” indicating that total national health care
spending reached approximately $2.9 trillion in 2013, or 17.2% of the nation’ s gross domestic product, the
benchmark measure for annual production of goods and services in the United States. Health care spending is
projected to reach approximately $5.2 trillion in 2023, approximately 19.3% of the nation’ s gross domestic product.