Moody’s says will be ‘many years’ before big AI impacts are seen in healthcare, pharma – Yahoo Finance

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A surge of optimism about the benefits AI will bring across industries has boosted the stock market this year.

But a new report from Moody’s cautions that it will be “many years” before the biggest impacts are seen across the healthcare and pharmaceutical industries currently grappling with cybersecurity risks.

“The adoption of AI is still in the early stages and we expect it will take many years before the full extent of its benefits are felt,” Moody’s said in its report.

“While having large amounts of data is an advantage for health-related companies in the AI race, it also brings risks related to data quality and an increased threat of cyberattacks,” the firm added.

“The quality of data is crucial because inaccurate or incomplete data can lead to flawed AI outputs and decision-making, which have a direct impact on the health of individuals. Cyber risk, which is already high in this sector, may increase if companies seek to acquire more sensitive patient data to drive the use and benefits of AI.”

The recent cyberattack on UnitedHealth Group (UNH) is likely to increase caution around faster adoption of new technologies in an already wary sector. UnitedHealth’s recent cyberattack carried out by a Russian-backed ransomware group prevented some patients from getting prescriptions filled. The company’s latest update indicated its Change Healthcare online portal won’t see all services fully restored until the week of March 18.

FILE PHOTO: A UnitedHealth Group health insurance card is seen in a wallet in this picture illustration October 14, 2019. REUTERS/Lucy Nicholson/Illustration/File PhotoFILE PHOTO: A UnitedHealth Group health insurance card is seen in a wallet in this picture illustration October 14, 2019. REUTERS/Lucy Nicholson/Illustration/File Photo

A UnitedHealth Group insurance card in a wallet, Oct. 14, 2019. (Lucy Nicholson/REUTERS/Illustration/File Photo) (REUTERS / Reuters)

As for how the industry will benefit from AI, Moody’s sees pharmaceutical and medical device companies as the earliest beneficiaries given the potential for this technology to develop new products and increase productivity.

“Pharmaceutical companies, pharmaceutical service providers and medical device manufacturers will gain greater credit advantages from AI than other sectors such as medical care providers and laboratories,” the report said.

Moody’s expects the full credit benefits — essentially how much AI advances will improve existing business models — to emerge for these industries by the end of this decade. For other health-related companies like care providers and labs, it could take up to 15 years for the impacts of AI adoption to really be seen.

As Alexa von Tobel, managing partner of Inspired Capital, previously told Yahoo Finance, “I think it’ll be a tale of two AIs. There are a lot of places where AI isn’t suitable yet.”

Moreover, larger companies are likely to see larger benefits, given the investment required to make the most of this technology.

“In addition to having the financial firepower to invest in AI, we expect industry leaders in pharmaceuticals, pharmaceutical services, and medical devices will use their large amounts of proprietary data to customize AI products and services. This will help them sustain a competitive advantage as AI technologies become more widely available and commoditized,” the report said.

Regulation will also add another speed bump to adopting AI, Moody’s argued, noting that the heavily regulated nature of the pharma and healthcare sectors already weighs on credit ratings in the industry and the federal government is marshaling efforts to rein in AI.

“New legislation could initially force companies to increase spending to ensure compliance,” the report said. “Over the longer term, this could have significant implications for credit quality if AI systems are subsequently restricted.”

How well-informed legislators are on the topic will be a key to determining benefit, the ratings agency added.

“The size of the impact of AI technologies will depend on government policies around its adoption in healthcare services and companies’ ability to adapt to regulations, which are uncertain at the moment.”

Anjalee Khemlani is the senior health reporter at Yahoo Finance, covering all things pharma, insurance, care services, digital health, PBMs, and health policy and politics. Follow Anjalee on all social media platforms @AnjKhem.

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