Last week, we wrote about the digital retail revolution that is speeding up. Here’s another example: the digital healthcare revolution. In this market, it’s not so much about sales, but rather about investments. The market is in an earlier phase, back where retail was perhaps 15 or more years ago. But the pace of change is already fast.
The pandemic has been a stress test for all kinds of systems, not least healthcare ones. Healthcare is huge, with global spending estimated as 10.3% of global GDP this year, roughly $9 trillion (retail is over $20 trillion). With 11.3% in 2019, Germany spent even more of its GDP on healthcare. It is a complex industry with public and private sectors. For good reasons, the degree of regulation is high. But the degree of digital maturity, at least in Germany, is low. The crisis has highlighted this as a problem.
The German track and trace app came late to the party, wasn’t really useful in containing or mitigating the spread of the virus and has evolved quite slowly. Only in recent weeks, more than a year into the pandemic, was basic check-in functionality added. Too little, too late. Data exchange and reporting channels between health authorities are still slowed down by insufficient digital infrastructure. Many parts of the German healthcare system continue to operate on paper. The list goes on.
Consumers are the driving force
However, significant investments into digital healthcare are underway, at least globally. According to Startup Health, a whopping $21.6 billion was invested into digital health innovation last year. In Q1 of 2021 alone, investment rose to $8.5 billion, up 60% from one year ago. The sector has been growing with a compound annual growth rate (CAGR) of 35% over the past decade. For comparison, all venture capital investments in Europe amounted to €39.8 ($48.1) billion in 2019.
If we take a closer look, we find the same patterns that drive the digital revolution in other industries. Consumers, or patients, are the driving force. Their expectations have changed, their behaviour has changed, and thus business models need to change as well. Healthcare must become patient-centric, and we’re talking about a holistic human health experience. Sounds familiar? Once again, digital technology enables a shift that’s broader and deeper than just technological.
Consumers, or patients, or let’s simply call them people, are more active and engaged, better informed and keen to use virtual visits. They are using technology, like the Apple Watch, to monitor their health status, and yet value their relationship with a trusted practitioner. The focus is shifting from the end of the pipeline – treatment of the sick – to prevention, healthy lifestyle, and wellness. The pandemic has taught us that it’s better to prevent diseases in the first place. This is not a new insight, but it has gained significance.
The market has forever changed
Once again, the crisis has accelerated and amplified trends that have been in the making for years. The global population is ageing, and this adds stress to healthcare systems. Pressure towards more efficiency and efficacy is mounting. “The entire market has forever changed and isn’t going back,” asserts Unity Stoakes, co-founder of Startup Health:
“It’s as big as pre-Netscape and post-Netscape, or pre-iPhone and post-iPhone. The whole health innovation landscape changed one year ago, buttressed by the 10-year foundation that had been laid. The next decade is going to pay tremendous impact dividends because the world will start to experience what’s possible with meaningful outcomes at scale. In fact, we’ve already seen it with the Covid vaccine development. Many of the old boundaries of what’s possible in health are no longer the same.”
The two biggest segments of health innovation investments, as Startup Health sees them, are access to care and cost to zero. These are, of course, closely related. Globally, half of the population lacks access to healthcare, and costs are certainly an issue. If we spend 10.3% of GDP on healthcare, this roughly translates into an average amount of 10.3% of household income – too much for many people. The audacious goal of zero cost is opening up healthcare for them. This is particularly important in the US, which spends a world-record 17% of GDP on healthcare and nevertheless has 30 million people without health insurance.
Is Germany falling behind?
To get a glimpse of start-ups in the access-to-care segment, Startup Health has you covered. Another list, compiled by Plug and Play, features the top ten digital health start-ups. Besides the Valley, a lot is happening in China, India, and Israel as well. Is Germany falling behind in this revolution? While London, Paris, Porto and Barcelona are among the top ten health innovation hubs outside the US, there is no German city on the list.
But let’s not forget that Curevac (with a funding of $1.1 billion) and Biontech ($741.9M) are healthcare start-ups as well, and they are top of the list in Germany. While the Curevac coronavirus vaccine is pre-approval, Biontech already has a big impact with its vaccine. Tracxn’s database lists 1,770 health tech start-ups in Germany and provides a top ten list as well. Four out of this list are based in Berlin. So maybe the German health tech start-up scene is simply more distributed, as the whole country is.
Overall, the digital healthcare space radiates a beam of excitement that reminds me of the early days. This new breed of start-ups stands on the shoulders of giants which have paved the way. Unlike two decades ago, the consumers (patients, people) are now there, and they are ready for change. They even expect and demand change. Capital is available, and the digital healthcare ecosystem looks strong and promising.
Ready for takeoff.