Opportunities and Challenges in Digital Health (Part II)
Photo by Ani Kolleshi on Unsplash
Previously in Digital Health
Digital Health in all its forms is one of the most exciting areas of technology. As health is our most important asset and the world market is 8 billion people, then it’s a hugely attractive market opportunity offering both the possibilities of better healthcare for patients and making inroads into the cost of modern health and social care.
Part I covered the broad opportunities in Digital Health and Part II this week will cover some of the considerable challenges to growth for companies in this space.
Cure Trumps Prevention
Although we say prevention is better than cure, when it comes to healthcare it’s only partially true. At a fundamental level, modern health services are ill-health services.
No one in the National Health Service ever rings you up to ask if you’re well and see how they can keep you healthy. The history of medicine is predominantly one of treatment. Doctors are primarily there to heal the sick with very little time and training dedicated to keeping people well.
Cure is also part of the culture in which health exists. The concept of triage employed on battlefields and used in accident and emergency emphasises the treatment of the sickest people and we defer to the sickest as an accepted part of our culture. TV dramas and factual programs concentrate on life threatening illness and injury and those specialisms tend to be the most prestigious career wise.
Health, by nature of its size and importance, is also embedded in our politics. A new hospital or a proton beam therapy centre represents a tangible lasting asset to the community. There are less votes in courses on smoking cessation, exercise, and diet. We’ll come back to this.
Economics of Prevention
When someone is treated, we are more certain about the cost/benefit of that treatment. Through the regulation process, we are first able to determine that the benefits of a drug outweigh the risks to the patient (at a statistical level). We can then quantify the benefit to the patient in terms of rudimentary measures like QUALY(quality-adjusted life year).
Prevention is however an investment now in the hope of benefit sometime distant in the future. Getting to a cost/benefit analysis gets more difficult the further we get from treatment, and with ‘wellness’, we have multiple options of things we can do to prevent illness e.g. diet, exercise, vitamins, clean air, good housing and the benefits may be felt decades later. So not only is the cost/benefit analysis more uncertain, the benefit of that investment is unlikely to go directly to the people who are making the decisions (the politicians) and those doing the intervention work (clinicians).
Let’s take an example of sugary foods and obesity which then starts to weave in not just economic uncertainty but politics, delayed gratification and freedom of choice.
We know sugary foods lead to obesity which leads to cancer, T2 diabetes etc at a population level. If we ban sugary foods then we reduce preventable illness, people live longer healthier lives and that benefits the individual and the nation in 25 years time.. Right?
Maybe but some people enjoy eating s*** because the short term benefits are pleasurable. They’re not prepared to delay gratification for some potential future benefit. Sugary foods are also often cheap so people don’t have as full a range of choice as they should. So the individuals don’t think they’re winning even if the country does, eventually.
Does the politician win? No, we can see it’s likely to be a net vote loser and, even worse, those benefits of prevention accrue to someone else in the future. Legislation therefore seems easy in theory when it comes to prevention, but more difficult to implement in practice.
So, if we don’t ban sugary food, then we need to work with individuals to help them make better food choices. However, from an economic point of view, it’s a terrible investment of time if they’re not being compensated to do so. They may well be retired before that benefit manifests itself. A typical GP appointment in the UK is around 10 minutes and they’re bombed with sick people. So while they may offer general health advice, they’re not going to work out a personal plan.
We can see from all this that ‘an ounce of prevention’ may be ‘worth a pound of cure’ but getting all the stakeholders involved to make that work is extremely. To make it even more complicated, those stakeholders may not even be in the sphere of healthcare. A lifetime of breathing toxic air has been calculated for Birmingham, UK as shortening life by seven months and the annual health costs associated with poor air quality estimated between £190m to £470m per year. However, we can see that initiatives like Ultra Low Emission Zones are unpopular with citizens.
The Complexity of Healthcare Systems
Although there are 8 billion people on the planet. It’s our access to healthcare that is the important factor. There are different models of provision by country, but it’s important to understand the complexity of the health ecosystem in which businesses have to operate.
As an example, the UK National Health Service (NHS) is one of the largest organisations in the world with about 1.5m staff and serving 66m people. That appears to be a very attractive customer, but you’re not selling to a supersized Amazon. The NHS is highly federated.
There’s NHS England and then the other devolved nations. Then within NHS England, there’s Health Education England, NHS Digital and 42 Integrated care systems (ICSs) covering regions and cities that plan and deliver joined up health and care services. Within those ICS, some of those services may be provided by 3rd parties or local authorities etc and the way they buy those services differs etc. Then you can add government agencies like NICE, MHRA, NHSA and so on and so on.
The US market is generally seen as more open to innovation because insurers are looking for ways to reduce the overall costs of provision and healthcare services in the US have more of a business mindset.
However the general principle applies that companies selling into these markets need to understand the customer, the user, the specifier, the buyer and the relationships between them. Having done that, they then need to be convinced that it works.
Clinical Evidence
‘Does it work?’ is pretty much the first question that people ask about any product or service but in healthcare, it has extra resonance.
Firstly, if it needs to prove that it does no harm, that the benefits far exceed the risks (particularly important in treatment). The processes for pharmaceutical regulation are extremely well developed as a result of past mistakes e.g. Thalidomide. Of all the many ways research can be conducted, the gold standard level of proof where treatments and therapies are concerned is the Randomised Controlled Trial (RCT). Drugs undergo three phases of clinical trials. Unlike COVID, which was authorised within a year, most trials take many years to complete.
Once through that stage, it’s now about demonstrating cost/benefit to the user as you would in a normal business. As you might imagine from the above, clinicians tend to be professionally sceptical.
What you need to do is very dependent on the type of product or service you’re selling and who you’re selling to but, as a rule of thumb, the nearer a product/service gets to the clinical side, the higher the burden of proof required. A wellness app for individuals will be completely different to using AI to detect cancer in a hospital setting.
Coopertition
Just as in many other walks of life, there are many demands on healthcare budgets. However, traditional healthcare tends to be categorised by speciality e.g. oncology (cancer), haematology (blood) etc so while hospitals operate as a unit, there’s also internal competition for funding both within hospitals and at a national level.
This complex stakeholder network means that the buying process differs greatly between healthcare providers and that a ‘one size fits all’ approach to selling is unlikely to be successful. Buyers may like the product/service but just not have the budget to buy it.
Consequences For Digital Health Companies
There are a number of points arising from all this for anyone who wants to play in this market.
It’s absolutely critical to define the product / service and its users, specifiers, buyers and other key stakeholders very early on.
A good idea that benefits patients can only survive if it can negotiate the wider health ecosystem including politics and health economics. Solutions must satisfy the needs and interests of all stakeholders within the ecosystem.
Clinical evidence is essential and it may take a very long time. Finding busy clinicians / practitioners to participate in trials is difficult.
MPVs (Minimum VIable Products) need to be carefully considered. Lots of companies are developing products which only solve part of a problem or fail to recognise the practical difficulties in use e.g. a monitoring system may have clear clinical benefits, but if nurses and patients can’t work with them, then it may get binned for the wrong reason.
The selling process can be tough, slow and people intensive. Companies need to be flexible in meeting the different needs both clinical and financial
Fund Raising
Given the nuances of healthcare that we’ve been talking about, fundraising is critical. Companies need to be prepared for a long haul and revenue generation is likely to be back loaded i.e. you can go a long time without making any money.
During the pandemic, there was huge interest in health tech, both because of media interest and demand from clinicians responding to the urgent need for social distancing and huge demand. A lot was done very quickly. As the crisis has eased, there is a gradual reversion to the mean in terms of interest and, with economic clouds, funding has dropped off considerably.
From a high of $15.55B in Q4 2021, funding in Digital Health steadily declined throughout 2022 and dropped to $4.8B in Q1 2023, according to a latest report by Galen Growth. The share of growth stage Digital Health ventures that have raised funding in the previous 18 months have dropped by quarter from 69% to 54% in North America, 64% to 46% in Europe and from 50% to 36% in Asia Pacific. We can expect to see many of these companies begin to struggle in the later half of 2023 as they run out of cash.
To succeed, companies need to be credible, creditable and clinical.
Credible - focused on the right things with the right people solving real needs that acknowledge the complexities of human health and the ecosystem in which health care operates
Creditable - having a sufficient financial runway to be able to execute their plans and progress to the next funding stage
Clinical - be able to evidence how their product /service creates benefit for all stakeholder
Conclusions
If, in these two articles, I’ve painted a picture of a market of both incredible opportunity and significant challenges, then I'll consider my job done.
In 2002, the Wanless Health Review warned that unless the UK took prevention seriously, it would be faced with a sharply rising burden of avoidable illness. That warning was not heeded and we can see the results today. This has been replicated to varying extents across the world.
Hopefully, you might now see from this article why prevention is ‘celebrated in principle and resisted in practice’. From the first article, you can see that Digital Health is now coming to a state of development such that we may be able to finally start to see some of the above challenges overcome and see prevention implemented rather than resisted.
Until Next Time
Pete