A wave of consumer-oriented companies are moving fast to capitalize on opportunities in the new, consumer-driven healthcare market. And if legacy companies and providers can’t keep up, they risk losing up to $64 billion in revenue to these new entrants, according to a new PricewaterhouseCoopers report.
“Traditional health players should consider strategic partnerships with new entrants, which also may possess broad distribution networks,” PwC analysts wrote in the new report Healthcare’s New Entrants: Who will be the industry’s Amazon.com?
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By PwC’s count, two dozen of last year’s Fortune 50 companies have recently expanded or are planning to enter into the healthcare market – primarily technology and telecommunications companies and retailers. Many of these companies are already trusted consumer brands with the benefit of global reach, consumer insights and a commitment to price transparency. Those things could give them a leg up as consumers gain more control in the marketplace and grow hungrier for price transparency and lower-cost solutions.
But it’s not just the big guys who pose a threat to legacy healthcare companies. Funding for startups in the digital health space reached an all-time high in Q1 of this year, and consolidation has started (Basis to Intel, Massive Health and BodyMedia to Jawbone).
Consumers are ready for the innovation, according to PwC. The firm recently surveyed 1,000 adults and found that many of them are willing to choose new options (that are either in development or on the market) to make common medical procedures cheaper or more convenient. More than half said they’d be likely to purchase an at-home strep throat test if it cost less than going to the doctor, or check their vital signs with a device that attaches to a smartphone, like Kinsa’s smart thermometer (see graphic below).
Meanwhile, the $267 billion fitness and wellness industry is also a prime target for consumer-facing companies like Apple and Samsung, as it’s cash-based and less regulated than other parts of healthcare.
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As existing healthcare players consider whether to compete with these emerging players or to collaborate with them, PwC reminds them that consolidation will inevitably ensue. If they choose to compete, they may need to develop new revenue models as lower-price options emerge.
Or, they could choose to collaborate. “Aligning with new entrants may transform a potential competitor into a future collaborator,” the analysts wrote. “New players can also benefit from smart alliances. As partners, traditional healthcare companies can serve as guides to the regulatory and payment maze.”
Read the full report here.
[Graphic from PwC; featured image from BigStock Photos]
