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August 03, 2015
mHealth remains a hot investment area at the intersection of healthcare & technology
By: Arda Ural

Discover the value of digital health in 2015 and the implications some converging trends have for pharma and biotech companies.

It has been six years since The Health Information Technology for Economic and Clinical Health (HITECH) Act was passed as part of the American Recovery and Reinvestment Act, to promote the adoption and meaningful use of health information technology. During those trying times, the private sector was trying to stay afloat with a massive backdrop of macroeconomic uncertainty, and the act was simply appended to the "Stimulus Package" to facilitate government spending in health IT and provide incentives to healthcare providers for the adoption of Electronic Medical Records.

In parallel, we also observed the digital revolution shaping up with the advancement of Big Data, open-source software frameworks (e.g., Hadoop), cloud capabilities, processing speed, mobile to allow data access on-demand, expanding storage, consumers' adoption of social media leading to exponential explosion of data, etc.

Fast forward to 2015, digital health venture funding has crossed the $2 billion mark in the first half of the year, (see below) keeping the momentum from a record-breaking 2014 (For more details see Rock Health report).

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The total transaction volume remained about the same, and the average deal size slightly improved to $15 million from $14.6 million.

These findings were verified by a similar Mercom Capital Group report indicating that VC funding in health IT rose to $1.2 billion with 138 transactions. It was reported that mHealth companies attracted the largest chunk of funding at $214 million, with personal health companies close behind at $209 million. The Rock Health report also reflects the trend of growing investment in mHealth, with investments to wearables and biosensors amounting to $387 million. Behind that is analytics and Big Data, which brought in $212 million in funding.

IPOs in digital health (see Teladoc, which raised $157 million) also had a big impact, both reports say. FierceHealth IT also ran a helpful summary of these reports.

Implications of these converging trends for pharma and biotech companies are significant. As an industry, we need to:

  1. Identify opportunities, build a business case, quickly test (and fail fast) or scale up new digital business models informed by the converging ecosystem of healthcare enabled by IT. This bodes well with "beyond the pill" strategies to augment pharma/ biotech products with service offerings targeting outcomes, system cost reductions and patient satisfaction to create a competitive differentiation.

  2. Embrace real-world evidence generation which now has a better chance to demonstrate system value powered by the proliferation of real-world data sources and analytics stack on top to inform and measure insights.

It is time for us to move out of our comfort zone of operating like it is 2000s.

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