With more than $30 billion flowing into digital health over the last three quarters of 2021, major digital health players and newer, more specialized health tech providers saw explosive growth. The broad acceptance and dire need of telemedicine during the pandemic offered an opportunity for new and incumbent digital health companies to reach swathes of new and non-traditional customers across the country. In the wake of all this growth and change, however, consolidation is becoming the dominant business trend.
Our experience in dealing with the country’s health systems tells us that consolidation plays a role in reducing competition and triggering price increases in legacy healthcare institutions. Digital health, with its many expansions and broadening services, risks going down the same path—ultimately diluting or wasting the potential of this critical medium for the healthcare industry.
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Andrew Le Andrew Le, MD is the cofounder and CEO of Buoy Health.
Some of the biggest names in digital health have announced significant acquisitions or mergers. The telemedicine behemoth Teladoc acquired the equally significant Livongo for $18.5 billion in cash and stock. Ro, the direct-to-consumer healthcare company, bought fertility planning startup Modern Fertility for more than $225 million. One Medical announced a $2.1 billion takeover of Iora Health, which primarily serves Medicare patients.
Unless we’re careful, digital health will go down the same path as our legacy health systems as the rush to compete prompts consolidation that misaligns incentives. Vertical integration tends to trap people within narrow networks that have reduced options and higher prices. Rather than focus on consolidation, the industry should be thinking of new technology-enabled and scalable tactics to get diversified options in front of all consumers via a long-tail marketplace model. There, with personalized needs and choice directing competition, we will see the real potential for digital health to grow, diversify, and meet patient needs while reducing costs.
Agnostic, long-tail marketplaces i.e., marketplaces that connect large volumes of individuals with hard-to-find or personalized goods and services, are marketplaces that enable a more centralized experience for patients that gives them visibility into all their options while making room for true competition—good companies will ascend based on patient outcomes. We have seen the impacts of competition in recent years with the Affordable Care Act health insurance marketplaces. More competition in that realm has gone in American’s favor with a wider variety of plans options offered at lower costs, factors that are essential for accessing affordable healthcare.
The right long-tail marketplace platform has the potential to bring all varied digital health companies, and even legacy healthcare institutions, to one place where individual patients can see all the options available to them––no matter how niche the service might be. After all, everyone’s health experiences are unique. Patients will benefit from the highest quality of care as the result of this fair competition platform that allows care quality-driven small players to shine, rather than hiding in the shadows of oversized competitors. Plus, the compounding forces of large patient populations using a marketplace inevitably drives down costs as individual patients make their needs and preferences known.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
In the end, individuals’ health questions, resources, and knowledge of the healthcare space vary widely, and a closed, vertical system that’s built on “swallowing up” limits patient options and ultimately falls short for everyone. Patients are looking for transparent care options that also enable them to make decisions about their health that are cost-effective. A marketplace in which real competition can thrive — rather than narrowly focused digital health monoliths — offers a genuine opportunity to turn that vision into reality.
Andrew Le, MD is the cofounder and CEO of Buoy Health.
