Smith & Nephew's financial performance is not the only way it contributes to the economy of the countries in which we operate. Our products are designed to deliver better outcomes for patients and improve functionality in use for medical practitioners. Importantly, we also aim to deliver overall cost savings through improvements in efficiency, such as reduced frequency of dressing changes, shorter operating theatre times, reduced length of time spent in hospital and faster patient recovery. Health economic benefits are a primary focus in our product development and marketing.

There is a detailed explanation of health economics within the area of wound management in this section. Because of the importance of efficiency and cost-effectiveness in our business, as treatment for chronic wounds can be required over many months, sometimes years, we have a dedicated health economist on our staff, Professor John Posnett, a recognised leader in this field.

Future trends are likely to have both positive and negative impact on the Smith & Nephew business:

• The increase in the numbers of elderly (averaging 40% in the next 20 years in developed economies) should lead to an increase in demand for healthcare, including medical devices.
• Continued growth in per capita GDP will lead to enhanced expectations and to strong pressures from consumers for higher real expenditure on healthcare. Evidence suggests that health expenditure increases more than in proportion to the increase in GDP, so that over time the proportion of GDP spent on healthcare increases.
• Developments in medical technology will create additional pressures for increasing healthcare expenditure by extending the range of treatments available.
• The increase in the number of persons of nonworking age relative to the working population will impose constraints on the ability of governments to raise the overall burden of taxation. This, in turn, will constrain the growth of healthcare funded from public expenditure.

The combination of increased demand, higher expectations and technological development, taken together with constraints on the capacity of governments to fund higher levels of expenditure, will be met by increasing emphasis on cost containment in the healthcare systems in all major economies.

The aim will be to reduce the cost per episode of care for existing treatments and to restrict the introduction of potentially expensive new technologies to those which can be shown to be cost-effective. Many countries already have in place procedures to evaluate the cost-effectiveness of new technologies as a pre-requisite for reimbursement.