At the Threshold of a New Digital Health Landscape

5/15/14

After decades of development, digital health has arrived at a gateway that is reminiscent of the days when the brick-sized cell phone was ready to advance to the first flip phone, with a world of innovation beyond.

Industry leaders will be offering their thoughts on what that world could look like in presentations today and tomorrow during the ninth annual Wireless-Life Sciences Alliance Convergence Summit in downtown San Diego.

Breakthrough business models in digital health can be viewed in two ways. First, through the business lens of companies that provide investment returns by offering a health-related technology product or service. Another way of looking at digital health is through the lens of new healthcare companies that are using innovations in digital health to deliver improved health and wellness to consumers, and to help reverse the impact of disease and lower overall heathcare costs.

Funding for digital health startups has been on an upswing. Rock Health reported that digital health funding throughout the United States surpassed $1.9 billion in 2013, with 186 companies raising more than $2 million each. In its most-recent funding update, Rock Health reported that the first quarter of 2014 set an all-time record, with total funding of almost $700 million—an 87 percent year-over-year increase compared with the first quarter of 2013.

According to the 2013 Rock Health Digital Health Funding Report, the most-active VCs in the sector are Qualcomm Ventures, Social + Capital Partnership, Norwest Venture Partners, Cardinal Partners, Khosla Ventures, and Merck. Three of last year’s biggest deals, Practice Fusion, Proteus Digital Health, and Fitbit, each raised between $40 million and $70 million. For the sector to deliver typical venture returns, this emerging industry would need to create close to $15 billion worth of value by 2019.

The overarching imperative for innovation in this sector is here to stay. Digital medicine amplifies the strengths of artificial intelligence to disrupt health care, through the integration of mobile devices, sensors, and integrated big data.

The first generation of mobilizing personal health and wellness data began five to six years ago with the arrival of smart phones, high-resolution displays, abundant processing power, and mobile Internet access. Around the same time, many health and wellness apps started to enter the market. These first-generation companies included health-monitoring sensors, such as smart Band-Aids; devices like glucometers and asthma inhalers; accessories; wearables; and mobile apps, such as diet and exercise trackers. More importantly, consumers began to use these digital tools to develop healthier habits and live healthier lives.

Data generated from first-generation devices and apps might have ended up in isolated silos, but the industry saw the necessity for better “data organization.” So the second-generation of digital health tools provided ways to aggregate data in one place, using data warehousing, dashboards, charts, and graphics. The third-generation tools focused on predictive analytics and informatics. These types of companies were designed to accommodate the shift from risk-based payment models and to take advantage of analytics engines to comb through the data for both operational and/or clinical insights. Now the fourth generation of digital health innovation is focused on engaging consumers and using new tools to initiate behavior changes in patients and providers.

Still, for this emerging digital health ecosystem to be successful, it must integrate with the health care system at large. To many healthcare consumers these days, if your doctor does not prescribe or recommend a “treatment” and your insurance does not pay for it, it implies that it does not work and is likely not worth the price. For digital health to mature, it must be part of the system and work through payers and providers—not around them. Currently, the digital health care market does not have easy access to work within the system. Companies that are able to carve a niche within the system will likely have higher success rates at a very large scale, particularly those companies that address the needs of both physicians and insurers by providing access to multiple systems at once.

In the past, the health care industry would prescribe treatment regimens for consumers. But that game will change as more patients reach into their own pockets to pay for their healthcare. In an environment where consumers are paying, technology solutions have to be economical, friendly, and usable.

For digital health to achieve its promise, one of our biggest challenges is to slay the two-headed dragon—-standards and lack of interoperability—that has plagued EMRs. This means that access to the health care system has to work as easily for digitally enabled consumers as buying a new mobile phone. With the purchase of a new smartphone, consumers can go into any cell phone carrier store, understand the selection of devices and accessories, and have personal data uploaded in 15 minutes. The digital health sector needs to operate at the same level of interoperability and with the same ease of use for consumers.

The intersection of technology, innovation, and consumerism will drive the future of health care, with patients playing a role as key stakeholders, alongside physicians and providers.

Wainwright Fishburn, Jr. is a founding partner of the Cooley law firm’s San Diego office, a prominent venture capital attorney, and chair of the firm’s digital health group. He is a frequent speaker on life sciences and digital health issues, including most recently a keynote talk at the CES 2014 Digital Health Summit. Follow @

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