Years will pass before the global economy’s healthcare sector sufficiently leverages AI to build major financial muscle off of it. And when that day gets here, pharma companies and medical device makers are likely to see gains well ahead of hospitals, clinical labs and other provider organizations.

The predictions come from Moody’s Ratings, which largely looks through the lens of corporate credit quality—an org’s wherewithal to pay its debts—to project the org’s future business performance. Credit quality is assessed and scored by one or more credit ratings agencies, of which Moody’s is one of the “Big Three” (along with S&P Global Ratings and Fitch Ratings).

In a sector report released March 11, Moody’s supports its forecast with four key points, which the firm summarizes as follows:

1. Pharmaceutical and healthcare companies are rolling out the first applications from advances in AI technology.

All adopters can expect to wring considerable advantages out of AI, not least in boosts to productivity and efficiency, Moody’s notes. However, pharma firms and medical device manufacturers “will gain greater credit advantages” than healthcare providers and laboratories. Why? Because the industry players can further use AI to accelerate product innovation, Moody’s points out. In any case:  

The adoption of AI is still in the early stages [for everyone], and we expect it will take many years before the full extent of its benefits are felt.

2. Larger health-related companies are better equipped to harness AI, but companies of all sizes will need to invest.

The bigger they are, the greater their capacity to cash in. “Larger companies have more resources, both financial and personnel, to dedicate to embedding AI within their organizations,” Moody’s points out. Then too:

Market leaders typically have more proprietary data that they can use to customize AI products and so gain competitive advantage.

3. Data management and cyber risk are key credit challenges.

Massive datasets will advantage healthcare organizations of all types vis a vis organizations in other sectors, Moody’s suggests. At the same time, though, big data “also brings risks related to data quality and an increased threat of cyberattacks,” Moody’s writes. “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.” More:  

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.

4. Regulation will play a fundamental role in the ultimate credit impact of AI.

Heavy regulation weighs on credit quality, Moody’s emphasizes, and healthcare is nothing if not heavily regulated. “Regulations for AI technologies are still in their early stages and differ by region,” the firm states. “New legislation could initially force companies to increase spending to ensure compliance.”

Over the longer term, this could have significant implications for credit quality if AI systems are subsequently restricted.

On regulation, Moody’s adds: “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. However, deep regulatory knowledge and strong relationships with regulators among pharmaceutical and healthcare companies could help sustain credit quality.”

• The report, which fleshes out each of the above points in considerable detail, is available to Moody’s subscribers here.
• Yahoo! Finance has additional news coverage of the report here.