By Greg Licholai | Forbes.com | Jan 14, 2020, 09:44am
It has been an extraordinary time for digital medicine and the new year will bring continued growth. The key drivers are expanded patient engagement as well as institutional investment with the ultimate goal of reducing costs. Big pharma, payers and insurance companies have recognized the business benefits of patient empowerment. Digital applications are helping patients become better decision makers for their own health by providing personalized insights. As companies and legislators seek to reduce health costs, digital tools are ever more attractive options to drive efficiencies.
The year 2019 saw many exciting advances in digital health. Money poured into startups and billions of dollars of value were created with high-flying initial public offerings (IPOs). Novel products were approved such as Voluntis’ market authorization for a digital therapeutic in oncology. Leadership changes occurred at the FDA as outgoing Commissioner Scott Gottlieb brought in Flatiron’s Amy Abernathy to help speed up digital innovation. Industry groups expanded as Digital Medicine Society (DiMe) was formed to join existing Digital Therapeutics Alliance (DTA) while prestigious journals such as Nature Digital Medicine and Lancet Digital Health were launched.
Looking forward, continued growth will be fueled by large institutions seeking partnerships, product development and better tools for clinical trials, further changes at the FDA to help demystify digital therapeutics, and steady flow of investor money from both venture capital and public markets.
Financing shift from private to public markets. Investors reward revenue growth, and the global market for telehealth, apps, health analytics, mHealth, and digital health systems has been projected to reach over $500 billion. Money has began to shift from private sources such as venture capital (VC) to public financing. VC funding leveled off to about $7 billion in 2019 after topping at $8 billion the prior year with over 350 companies were funded. By mid-year, investors began to validate the digital health sector by financing a burst of public offerings. Six companies had IPOs resulting in a combined market value of $17 Billion. Notables included Livongo (NASDAQ: LVGO), which develops solutions for people with chronic conditions; Change Healthcare (NASDAQ: CHNG), which sells software and tech-enabled services; Phreesia (NYSE: PHR), a maker of patient check-in software; and Health Catalyst (NASDAQ: HCAT), which develops population health management solutions. Other public companies such as cloud-computing Veeva (NYSE: VEEV), and Teledoc (NYSE: TDOC) have seen their stock soar. In the new year, One Medical, a tech-enabled primary care provider backed by Google’s Alphabet and the Carlyle Group, has already filed for IPO. With a liquidity overhang of over $30 billion, investors will be eager to see more public offerings for digital health companies.
Corporate partnerships and acquisitions. As digital health companies mature there will be continued interest from corporate partners to both acquire and create alliances. Over one hundred digital health companies were acquired in 2019. Several notable deals included Amazon’s acquisition of Health Navigator’s online symptom checker and Google’s purchase of FitBit for its wealth of personal health data. Additionally Optum bought patient monitoring company Vivify Health and and Best Buy aggressively grew its at-home health business though Tyto and Critcal Signal Technologies acquisitions. Large companies continue to work on alliances with smaller innovators. Pharma giant Novartis announced a digital innovation lab called the Novartis Biome with the specific intention of empowering health tech companies and to foster partnerships. The first Novartis Biome opened in San Francisco with another in Paris and more planned. At the Digital Therapeutic East conference held on the Harvard Medical School campus, large companies set expectations for partnerships and at HLTH 2019 there was much discussion how strategic partnerships would allow big companies to take participate in the patient consumerism trend. For example Everlywell, an online diagnostic firm, announced its partnership with Target and Kroger while Pfizer pointed to its partnership with Aetion, a provider of real world analytics. Akili Interactive and Shinogi announced a Japan partnership for digital solutions for cognitive dysfunction.
Regulatory innovation acceleration. The Food and Drug Administration (FDA) has demonstrated dedication to promote innovation in order to accelerate product development with a focus on data and technology. Amy Abernethy, the Principal Deputy Commissioner, said at the recent Consumer Electronics Show that she came to the agency “very excited about the capabilities of digital medicine,” and the “FDA is focused on becoming as modern as possible in order to keep pace and focus on the innovation spectrum.” She announced a public meeting in March to discuss its data strategy. As she says this is an important signal that the agency has the intention be as progressive as possible to use, receive and analyze data. The strategy builds on the FDA Technology Modernization Action Plan which outlines how the agency will ensure data security, develop a series of living examples as well as learn how to communicate and collaborate with external technology innovators to build better products.
Virtual clinical trials. Interest in a new type of mobile, decentralized clinical trial has been mounting and will help enable digital health. These trials are called virtual because they are conducted using mobile technology with patients participating from home with few or no hospital visits. The clinical development process is extremely slow and expensive as total costs can be over a billion dollars for approval. Industry leaders have been searching for ways to drive efficiencies. The virtual approach was initially used for passively collecting patient information. The next step was to explore mobile diagnostic capabilities. The landmark Apple Heart Study recruited about 400,000 participants in record time and showed how wearable technology can help detect atrial fibrillation. Johnson & Johnson (JNJ) partnered with Apple for its Heartline Study for stroke prevention and plans to recruit over 150,000 participants. The field has now progressed to drug approval trials in a mobile format. JNJ recently announced a fully virtual trial called CHIEF-HF with the goal of evaluating diabetes drug Invokana in patients with heart failure. My company is collaborating on this trial. As virtual trials expand, they will be ideal for digital medicine and software as a therapeutic.
Artificial Intelligence applications. Artificial Intelligence (AI) in healthcare is a giant opportunity to help revolutionize patient outcomes and reduce costs. AI companies broke funding records last year with investment estimated to eventually reach over $6 billion and cost savings over $150 billion. In order to take advantage of such promises, health AI firms need to scale by creating meaningful use cases according to Jeff Elton, the CEO of Concerto HealthAI and Forbes technology council member. Elton recently said that AI health companies need appropriate applications that provide value to customers. Much health data is available but he compares it to “raw crude petroleum that will damage your car if poured directly into the engine.” AI is a powerful way to refine data and companies such as Concerto use an integrated approach to provide a profound understanding of cancer progression linked to genetics, environment and treatment.
The digital transformation of healthcare will gain momentum as drivers include better tools such as AI and virtual trials to empower patient outcomes, maturation of funding to public markets, regulatory innovation and technology adoption, and more alliances between entrepreneurs and large companies.