Health IT, Startups

How do health IT investment trends in China and U.S. differ?

Health IT investment in the U.S. and China was hot in Q2, but what are some of the areas where these two markets differ?

Source: Mercom Capital Group

Aggregated data from Mercom Capital Group drew attention to the growing profile of Chinese digital health companies as they seek to address the needs of the country’s domestic market.

But they heavily target the consumer market, compared with digital health and health IT companies in the U.S.

Ping An, an insurance company, launched the mobile health business Good Doctor last year to help patients to schedule healthcare appointments and interact with physicians through text messaging, images and video.

Then there’s Chunyu Yisheng (aka Spring Rain Software). A couple of years ago, it raised $50 million — the largest single financing round for a Chinese digital health company at that time. Aggressive growth has pushed the company’s fundraising numbers sky high in only a couple of years. To date, it has raised $244 million from six investors, including $183 million in the second quarter of this year alone. The telemedicine business uses video and phone to connect patients with physicians and lets users look up symptoms, which seems like a variation on a theme for several digital health companies. The company is reported to be using its latest fundraise to lay the groundwork for an initial public offering.

HITTop5VC-Q22016

The mobile health app market has continued to grow and evolve, but it’s interesting to look at the contrast between the digital health fundraise trends for China and the U.S.  Technology companies offering up direct-to-consumer services are dominating the investment landscape in China and that of other non-U.S. countries because the story there is about using mobile health apps to improve access to physicians. In the U.S., the focus has been much more on companies helping physician practices get paid faster and gaining access to more patients through referrals. That’s also demonstrated through the consolidation of practice management startups.

In response to emailed questions, Mercom Capital Group CEO Raj Prabhu indicated he agreed with my observation of health IT investment trends in China to a point and for different reasons.

“Health IT investments in China are exclusively B2C as they do not have a healthcare system and policy mandates akin to the U.S. model. However, Chinese government agencies are active investors (China Venture Capital, China Development Bank, China International Capital Corporation) along with Chinese internet conglomerates like Tencent, Baidu, and Alibaba. Goldman Sachs is also an active investor in Chinese deals. Chinese Health IT deals also tend to be large compared to what we see in the U.S.

Prabhu takes a different perspective on trends driving the U.S. market.

“In the U.S., funding traditionally goes to B2C and B2B companies, but in the last couple of years the trend has completely shifted towards B2C funding as [electronic health records] and other B2B software, like practice management software, has already been widely adopted. But within B2B deals in the U.S., there is a larger diversity in deals whereas in China most funding deals are focused on text/chat, telehealth, booking & comparison, and wearables.”

It’s not just Chinese b2c health IT companies building their profile. Fitbit made a deal with Alibaba Group business Tmall earlier this year to help its fitness trackers get in front of more Chinese consumers.

Centauri Health Solutions, for example, provides technology analysis to support health plans and accountable care organizations. Proteus Digital Health is working with pharma companies and health systems to track and improve adherence through ingestible and wearable sensors. It expects to refile a new drug application with Otsuka Pharmaceuticals with the U.S. Food and Drug Administration in 2017, a spokesperson said in an email, since the initial joint application was met with a complete response letter earlier this year.

Photo: Getty Images/TEH ENG KOON