The first trend is demographic: The U.S. population is continuing to age. In 1960 the median age for men and women in the U.S. was 29.5; it is now 37.9, and in the next 12 years will exceed 40. Per capita annual health care costs are roughly $4,500 for people age 19 to 44; they double for people age 45 to 64; and they double once again for those 65 and older. Thus, as the population ages, health care services will naturally expand, as will the pressure to find efficient ways to deliver those services.
Second, technology has become a pervasive element across the health care system, with a major impact on diagnosis, treatment, and communications. In 2004 one in 5 practicing physicians used an electronic health record (EHR) in the U.S. Today nearly nine in 10 physicians regularly employ EHRs. There's a tremendous amount of information and structured data now available to guide treatment, assess outcomes, and measure quality of care. Beyond EHRs, digital health tools — apps, wearable devices, and other hardware and software that measures and monitors health — are becoming common in consumers' lives. From 2015 to 2016, investors poured more than $8 billion into funding these tools. More than 3,000 apps are now available to help manage diabetes alone. Clearly, most of these tools won't survive. But technology has become rooted firmly in U.S. health care and, as elsewhere, consumers will choose many of the winners.
Third, irrespective of revisions to the ACA, discoveries in the life sciences that enhance the quality and extend the length of life will continue to flow from research laboratories. These are being driven by two major trends: the availability of personal health data, and the plummeting cost of integrating massive health data sets in the cloud. Based on these two foundations, we’ll begin to see the emergence of personalized medicine.
The pipeline for new drugs is bursting, and new devices and tools in the rapidly emerging digital health space will come to market more quickly. According to QuintilesIMS, there are more than 2,000 drugs in the late-stage approval process, and they will yield an estimated 45 new active substances annually over the next five years. This therapeutic deluge will make decision making more complex for clinicians, who must understand efficacy and risk, and for payers, who must choose which treatments to favor through preferred pricing. Indeed, the profusion of new treatments may present a serious challenge to the current payer strategy of negotiating favorable pricing with drug and device companies.
Taken together, these three trends will drive dramatic changes in health care, regardless of government policies. We see several areas where patients and care providers, as well as entrepreneurs and investors, will likely benefit.
First, businesses that help patients understand, access, and use the health care system will be rewarded. Patient engagement has been a mantra for those seeking to reform health care, as it’s widely accepted that patients who are engaged in their own health care have better outcomes. Technology plays a crucial role in promoting engagement, in part by customizing medical information for each patient, and digital platforms — whether websites, apps, or EHRs — that promote health and help patients understand their medical conditions and their options for treatment and prevention will grow in importance.
Investors are already keenly focused on this area, with many startups competing for a slice of the market. In 2011 81 digital health startups received venture funding; with consistent year-over-year increases, 296 startups were venture backed in 2016. The venture industry is betting big on digital health, with $4–$5 billion invested annually. But traditional business models focused on and serving third-party reimbursement continue to struggle with how to monetize digital health tools. We believe models will emerge that capture value from the growing consumer demand for effective digital health-promotion support. Solutions that drive patient engagement and improve outcomes will succeed in the marketplace.
Second, we expect to see growth in businesses that make it easier for consumers to access affordable health care while living where they want to live, in a setting that they can afford. In the U.S., the two key drivers of this trend are the aging of the population and the need for cost control. Telemedicine is increasingly becoming an adjunct to care that addresses these trends. Today’s technology enables practitioners to scale their services, seeing more patients in less time, and it embeds analytics that can help focus clinicians’ time on the cases where they can have the greatest effect. From the patients’ perspective, telemedicine is appealing because it allows them to engage more frequently with doctors than they could through in-person visits — a particular aid for older patients with chronic conditions, who benefit from the frequent contact and care coordination that telemedicine can provide.
We’re convinced that these trends will ultimately drive mainstream adoption for proven digital health solutions. Where clinical trials demonstrate efficacy, and the solutions allow for improved cost management, we’ll begin to see multiple models emerge: insurance reimbursement, employer subsidies, and even consumer purchases. As adoption increases, companies that today provide therapeutics — principally pharmaceutical and medical device manufacturers — will begin to add digital health solutions to their portfolios.
Uncertainty surrounding the health care bill shouldn’t have a material effect on the success of various solutions. Indeed, with the current government gridlock, the rapid development of and growing demand for new health care technologies may help policy makers chart the course forward.
