Over the last few years, investment in digital health has rapidly risen from just over $1B in 2011 to a projected $8.4B in 2019. However, the challenges and pitfalls have been well documented, and the space is littered with struggling and failed startups. Whether related to the pitfalls of pure tech investors jumping in without having a full understanding of clinical, regulatory and health economics considerations, or the early dearth of solid business models, over 80% of the $36.3B invested in digital health since 2011 is still waiting on liquidity.
Some key players in the space are finally getting it “right”, by focusing on the basics: building true, actionable solutions, with value propositions that uniquely address unmet needs and which generate sustainable revenue streams. One of the most promising areas in the digital health space is chronic care management. A 2017 RAND report concluded that 60% of the US population suffers from at least one chronic condition, and 42% have multiple chronic conditions, resulting in over 90% of the nation’s $3.3 trillion in annual health care expenditures. The confluence of rapid innovations in sensors, wearables, mobile apps, and AI creates opportunities to provide solutions for prevention, early diagnosis, behavioral health, treatment, ongoing monitoring and timely interventions, saving significant costs and improving outcomes. Importantly, these solutions can provide patients with more control over their own health, something that today’s highly informed and connected patients want.
For example, diabetes contributes a staggering annual cost of over $300B to treat over 30M patients in the US. Successfully managing patients requires active, continuous monitoring and treatment required for optimal outcomes, as well as intense patient engagement. Livongo's highly successful IPO demonstrated that providing a complete solution that incorporates biological measures and digital engagement tools and that generates revenue primarily from contracts with employers, health plans, and others is a win-win model for all. Multiple other players have entered, focusing on prevention in at-risk populations, as does Omada Health, or in aggressive interventions to manage and even reverse the disease, such as Virta Health and Welldoc. And many have begun or are planning to expand into related areas such as obesity and hypertension.
Another important area is respiratory diseases. Asthma costs the US economy over $80B a year, while chronic obstructive pulmonary disease, or COPD, is responsible for estimated annual costs of around $50B. Propeller Health commercializes sensors and software that connect to respiratory medication inhalers to track compliance and develop personalized coaching and treatment plans. The company was acquired in December of last year for $225M by ResMed, a global manufacturer of medical equipment for sleep apnea and other respiratory conditions with a goal of providing broader solutions for respiratory diseases. HGE Health, a spinoff of Temple University, developed a platform to engage COPD patients and physicians with apps, telemedicine and clinically proven interventions to reduce symptoms and costly exacerbations. ProterixBio, a company I chair, is developing multi-protein biomarker blood tests with proprietary algorithms that provide measures of patients’ risk of future COPD exacerbations. Similar to the role A1C plays in diabetes management, combining such biological measures with traditional information such as clinical symptoms and history as well as newer digital inputs such as patient diaries or wearable readouts can provide greatly improved critical and timely measures of disease activity in a highly complex chronic condition. These companies are partnering with payers, providers, employers, and pharma companies, to provide fuller solutions to study and/or manage their patient populations.
Cardiology is another active area of focus. Mobile and wearable ECG offerings have been developed by companies such as iRhythm, AliveCor, Apple and many others to measure atrial fibrillation, or AFib, a common arrhythmia associated with high stroke and mortality risk that contributes over $26B in annual costs. Physicians and patients may feel empowered by the information captured with these devices and can make more informed treatment plans based on the data collected. However, there are currently no approved treatments available that patients can self-administer anywhere to resolve an acute episode of AFib within minutes without the need to go to the ER or clinic. My company, InCarda Therapeutics, is working on an inhaled therapy that would do just that and the therapy, combined with the use of digital ECG monitoring, will provide a “closed-loop” that will empower patients, reduce ER and clinic visits, and improve outcomes by reducing the total amount of time a patient is in arrhythmia over the years.
In order to take advantage of these trends, Big Pharma companies have begun making major investments in the space and have created their own internal digital health departments. Given that spending on retail prescription drugs constitutes only ~ 10% of annual healthcare expenditure in the US, and that patent expirations and pricing pressure will continue to increase, the industry is naturally focusing on ways to preserve and expand their revenue streams, by improving compliance, adding services, and partnering with payers and providers to share in the bigger pie of chronic care spend. Digital health is the “glue” that can facilitate this vision.
We are reaching the next stage of the digital health revolution, where winning players and sustainable business models are emerging. There are unprecedented opportunities to integrate digital and biological technologies to advance chronic care management, improve outcomes and save significant costs in the system. And at last, as it should be, patients will be at the center.