The world of healthcare has been revolutionized by digital technology, enabling healthcare providers to deliver targeted and effective interventions to patients across the globe. As we navigate through the COVID-19 crisis and shape the future of healthcare, it is essential for stakeholders in the industry to understand the landscape of digital health. The first half of 2020 has witnessed unprecedented growth in digital health, with record levels of venture funding, game-changing acquisitions, and accelerated virtual care delivery. In this article, we will provide an overview of the digital health market, explore its potential for growth, and delve into how investors, patients, and healthcare players are interacting within this ecosystem. We will also examine the impact of COVID-19 on digital health and offer strategic guidance for companies considering an entry into the healthcare sector.
Unveiling the Nine ‘Value Pools’ of Digital Health Technologies
Digital health encompasses a wide range of technologies that aim to improve healthcare and care delivery. Through our extensive experience in business building and healthcare, we have categorized digital health technologies into nine “value pools” across five main categories: Research & Development (R&D), Wellness and Disease Prevention, Screening and Diagnosis, Care Delivery, and Finance and Operations. Each value pool represents unique opportunities for companies interested in entering the digital health market. In this article, we will address five common questions asked by CXOs and executives looking to explore the digital health market:
- What are the largest and fastest-growing digital health markets?
- How do digital health companies typically demonstrate value?
- Which value pools are investors most excited about?
- Which value pools are patients most excited about?
- What impact has the COVID-19 pandemic had on digital health value pools?
The Thriving Digital Health Markets
Digital health represents a global market of approximately $350 billion as of 2019, with each value pool projected to grow by at least 8 percent per annum. The care delivery category stands out with a market size of $157 billion, comprising 45 percent of the overall digital health market. Companies in this category provide novel therapeutic solutions enabled by digital technologies or use technology to improve patient access to healthcare solutions. The R&D category, with a market size of $109 billion, offers significant opportunities for companies focusing on precision medicine, AI-enabled patient recruitment, and decentralized or virtual trials. Another promising area lies within the finance and operations category, where companies are optimizing the financial model and increasing operational efficiency. This category commands the highest compound annual growth rates (CAGRs) observed in digital health, making it an attractive prospect for nontraditional digital health entrants.
Demonstrating Value in Digital Health
Digital health technologies offer numerous value propositions, with healthcare cost reduction being one of the primary factors. Digital interventions have the potential to save the US healthcare system nearly $500 billion if fully adopted. Solutions in the care delivery category, such as remote care and digital therapies, provide lower-cost alternatives for delivering or managing care, resulting in significant cost savings. Likewise, technologies that increase operational efficiency can directly improve productivity for healthcare stakeholders, potentially reducing healthcare costs by about $180 billion. In contrast, value pools in wellness and disease prevention and screening and diagnosis may not demonstrate direct cost savings potential but rely on research publications and patents to establish credibility.
Investor Excitement in Digital Health
Investor interest in digital health has been steadily increasing over the past decade. Total funding and average deal sizes have consistently risen, with a predicted record-breaking $10.2 billion in digital health funding by the end of 2020. Care delivery value pools have been the focus of most funding, closely followed by solutions that enhance drug R&D processes, identify the right patient, and supply therapies to patients. Healthcare players seeking to develop capital-intensive products and services can find opportunities in the R&D and screening and diagnosis categories, which typically experience larger deal sizes. Significant shifts in funding trends highlight the growing importance of technologies directly impacting patient care.
Patients’ Excitement and Engagement
Patients have shown keen interest in certain value pools within digital health. Search trends indicate greater enthusiasm for screening and diagnostic tools, online prescriptions, and clinical trials. Companies in the screening and diagnosis and R&D categories can increase patient engagement through digital marketing campaigns. Patient searches often begin with flagship products or well-known brands, emphasizing the need for a clear go-to-market strategy that leverages digital engagement. The COVID-19 pandemic has significantly increased patient interest in remote patient support, driven by the surge in telemedicine solutions. Understanding patients’ preferences and timing digital campaigns accordingly can create a competitive advantage.
The COVID-19 Impact on Digital Health
The COVID-19 pandemic has had a profound impact on digital health value pools. Remote patient support solutions have experienced heightened investor and patient interest. However, healthcare stakeholders face diverse challenges and needs in response to the crisis. Telehealth may improve connectivity, but affordability remains a concern for patients. Providers seek to cut costs and improve workflows, creating opportunities for solutions that supply therapies more efficiently and increase operational efficiency. Pharmaceutical companies face disruptions and delays in clinical trials, prompting the need for tools that enhance drug R&D processes. Payers focus on optimizing the financial model and disease interception through screening to manage large patient populations effectively.
Harnessing the Potential of Digital Health
Digital health innovations have the potential to significantly improve patient outcomes while reducing healthcare costs. As we embrace the “next normal,” it is crucial for investors, healthcare players, and new entrants to continuously redefine value, pursue strategic partnerships and M&A opportunities, and take decisive action. With the ongoing evolution of the healthcare industry, a willingness to adapt and seize digital innovation opportunities will be vital for success.
Now is the time to unleash the potential of digital health and drive transformative change in healthcare. By identifying the right value pools, healthcare investors and companies can thrive in the fast-growing digital health space and contribute to improving healthcare for patients worldwide.
