Healthcare, more than any other area of the economy, is antiquated. For an industry that represents 18% of the U.S. GDP, the pandemic investment boom in digital health was a welcome relief to those seeking to bring healthcare into the digital age, writes Sebastian Seiguer, CEO of emocha Health.
Before 2020, digital health companies had limited options to raise capital, but the pandemic changed that entirely, with many investor dollars chasing proportionally few targets. Private equity and growth capital have provided the funding for many new concepts and models of care. However, amid the rush to fund digital solutions, investors should be aware of the following market nuances. Without taking heed, they risk making precarious investments or missing out on the right opportunities.
Don’t confuse digital therapeutics with digital health
Digital health and digital therapeutics, while often conflated, are not the same.
“Digital therapeutics” refers to a narrow segment of app-based technologies that treat a human disease or condition to help a patient achieve an outcome–similar to a medication. While digital health technologies do offer wider help and resources to patients, digital therapeutics take a clinical approach with a desired outcome. As such, all digital therapeutics are FDA-regulated and are held to the same FDA standards of evidence and regulatory oversight as traditional medical treatments.
Digital health, on the other hand, is a broader category of digital and app-based technologies that either use technology to deliver accepted clinical interventions or offer supporting help and resources to patients and providers. While digital health technologies may provide a platform for delivering care, and while some market entrants offer a technology-enabled clinical care team on top, the technology itself is not considered clinical care in the same way as digital therapeutics. Not all health software is regulated by the FDA or other regulatory groups.
Both are hot markets for investors, but digital therapeutics are a very narrow class of technologies and it is not clear that there will be many use cases where a technology alone can achieve a major clinical effect anytime soon. Read more.
