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HEALTHCARE CONSUMERIZATION

Examining how the delivery of healthcare products & services is


changing thanks to technology

#cbihealth
The technology market
intelligence platform.
CB Insights software lets you predict, discuss, and
communicate emerging technology trends using data
in ways that are beyond human cognition.

#cbihealth www.cbinsights.com 2
A FEW OF OUR HAPPY CUSTOMERS
The most publicly reference-able customers of anyone in the industry

Think of the fundamental value chain of venture


capital If we play the clock forward, the finding
and assessing of investments will be almost entirely
done by technology, not human beings. And the
company that is today positioned to be the market
leader in that evolution is CB Insights."
Pat Grady
Sequoia Capital, Partner

#cbihealth See what other customers have to say at http://www.cbinsights.com/customer-love www.cbinsights.com 3


ACCORDING TO CB INSIGHTS
From the NY Times to Bloomberg, CB Insights data is used by hundreds of
leading media outlets every week

CB INSIGHTS NEWS MENTIONS PER YEAR


1600

1200

490

211
62 16
9

2010 2011 2012 2013 2014 2015 2016(YTD)

#cbihealth www.cbinsights.com 4
ABOUT THE LEAD ANALYST
Nikhil Krishnan
Research Analyst, CB Insights

Focuses on Healthcare, Consumer Packaged Goods, Industrials,


and VC Trends
Published research and data analysis have been featured in The
New York Times, Wall Street Journal, Financial Times, Bloomberg,
and CNBC, among other major media outlets. @nikillinit

Graduate of Columbia University

nkrishnan@cbinsights.com

#cbihealth www.cbinsights.com 5
TABLE OF CONTENTS
7 What Is Healthcare Consumerization?
8 Macro Trends
22 Digital Therapeutics Private Market Activity
32 Changing Primary Care
61 Pharmaceutical Distribution
70 Looking Ahead: Artificial Intelligence

#cbihealth www.cbinsights.com 6
What are we analyzing in
Healthcare Consumerization?

How new solutions are changing the way


healthcare goods and services are being modeled
and delivered to the population

We will not be focusing on data digitization and


storage, but only as they relate to the
transformation of a process

Private market financing activity will focus on


digital therapeutics

#cbihealth www.cbinsights.com 7
Healthcare Consumerization:
MACRO TRENDS

#cbihealth www.cbinsights.com 8
HEALTHCARE REGULATORY CHANGES
FUTURE UNCLEAR FOR CMS' MANDATORY
VALUE-BASED INITIATIVES
March 25, 2017

#cbihealth www.cbinsights.com 9
HEALTHCARE COSTS
CONTINUE TO
INCREASE

The average cost to


cover a family has been
steadily going up, and
healthcare costs are now
approximately ~17% of
US GDP. Despite the shift
to value-based care,
growth in healthcare
costs have not yet
materially decreased as
a whole.

#cbihealth Milliman www.cbinsights.com 10


HEALTHCARE
OUTPACES INFLATION

Healthcare is outpacing
inflation along with some
other services industries
and more highly
regulated industries.
Compared to the
baseline 55% inflation
during this time period,
healthcare was close to
double at 105%.

#cbihealth American Enterprise Institute www.cbinsights.com 11


PRESCRIPTION DRUG
PRICES SPIKE

While some parts of


healthcare are starting to
see some slow down in
cost growth, prescription
drugs is one category
that still sees spikes.
Recent drug pricing
debacles (Daraprim,
Epipen, etc.) have kept
this issue at top of mind
for many.

#cbihealth Milliman www.cbinsights.com 12


BOTH EMPLOYERS AND
WORKERS ARE FEELING
COST INCREASES

In the last 10 years both


employers and
employees have seen
their contributions
increase. Employers'
costs have jumped about
51% while workers are
paying about 78% more.

#cbihealth Milliman www.cbinsights.com 13


MORE PEOPLE ARE IN
HIGH DEDUCTIBLE
HEALTH PLANS

Employers are passing


costs to employees as
high-deductible health
plans become more and
more common. More
than half of workers are
in plans with a deductible
above $1000.

#cbihealth CNN Money www.cbinsights.com 14


LACKING HEALTHCARE
ACCESS

Many states still lack


access to necessary
primary care + other
services necessary for
adequate health (e.g.,
mental health services).
Digital tools can help
extend the reach of care
to these areas.

#cbihealth MarketWatch www.cbinsights.com 15


HEALTHCARE IS ONE
OF THE LEAST
DIGITIZED SECTORS

Healthcare is towards
the bottom when it
comes to digitization.
Even though a lot of
money flows into Health
IT, the only areas that
have seen digitization are
typically in the parts
related to billing and
business processes.

#cbihealth McKinsey www.cbinsights.com 16


PEOPLE ARE UNCOMFORTABLE WITH THE
SYSTEM

#cbihealth Accolade Consumer Health Survey www.cbinsights.com 17


COORDINATION + UNDERSTANDING ARE THE
PAIN POINTS

#cbihealth Accolade Consumer Health Survey www.cbinsights.com 18


CHRONIC DISEASE
DRIVES EXPENDITURE

Chronic disease is a
major driver of health
expenditure, especially
amongst the Medicare
population. Most of the
high cost drivers (heart
disease, diabetes) can be
managed with lifestyle
changes, facilitated by
new technology and
tools.

#cbihealth PBS www.cbinsights.com 19


MOBILE IS ENABLING
ENTIRELY NEW
BUSINESS TYPES

The penetration of
mobile devices in society
has opened up
possibilities in
healthcare. Services can
become location
agnostic, more lower-
income households have
access to mobile
devices, and diagnostics
can be enabled at home.

#cbihealth CNN Money www.cbinsights.com 20


DIGITAL HEALTH IS STILL PICKING UP STEAM

#cbihealth CBI Trends Tool www.cbinsights.com 21


Digital Therapeutics Funding Trends:
DEALS, DOLLARS, ACTIVE INVESTORS

#cbihealth www.cbinsights.com 22
Global equity funding since 2013:

$3.7 BILLION
across

546 DEALS
#cbihealth www.cbinsights.com 23
DIGITAL
THERAPEUTICS
ANNUAL FUNDING

Activity into digital


therapeutics took off in
2014, with funding more
than doubling and deals
seeing a 78% jump
between 2013 and 2014.
Funding continues to
increase, with 2016
breaking $1B invested,
though deals have
stagnated in the last few
years.

#cbihealth CB Insights www.cbinsights.com 24


DIGITAL THERAPEUTICS QUARTERLY GLOBAL FINANCING 2017 HAS STARTED
HISTORY STRONG
Q1'13 - Q1'17

50
48 Funding activity in 2017
has already reached a
39 new peak in quarterly
38 38 38
35 deal activity, with 50
34
32 32 deals in the first quarter
29 30
27 of the year. Funding has
25
remained relatively
21
consistent between
17
$200M and $400M since
13
Q215, but the last two
quarters have seen a
funding slowdown.
$21

$289
$191

$121

$127

$338

$152

$159

$306

$227

$244

$383

$399

$263

$198

$194
$60

2013 2014 2015 2016 2017


Disclosed Funding ($M) Deals

#cbihealth CB Insights www.cbinsights.com 25


DIGITAL THERAPEUTICS GLOBAL DEAL SHARE DIGITAL
Q1'13 - Q1'17 THERAPEUTICS DEAL
SHARE

18% 16% 16%


21%
Digital therapeutics has
4%
30% seen a robust early stage
4% 7% 1%
1% 1%
1% deal share environment.
5% 4% 4%
1% 7%
8% 7%
12% 0%
4%
0%
While original most deals
14%
8% were in the seed/angel
22% 21% 14%
and Series A rounds,
29%
29%
2016 saw much more
activity in the Series A
and B range compared to
40% 42% 44% previous years. 2017 has
34%
29% so far seen a lot of seed
deals similar to the 2013-
2015 time span, but
2013 2014 2015 2016 2017
could change through
Seed/Angel Series A Series B Series C Series D Series E+ Other
the rest of year.
#cbihealth CB Insights www.cbinsights.com 26
GEOGRAPHIC
BREAKDOWN OF DEALS

Most deals are


concentrated in the
major markets, with CA,
NY, and MA taking 61%
of all digital therapeutics
deals since 2013. Some
other states had strong
showings, with Florida
and Illinois following the
major tech markets soon
after.

#cbihealth CB Insights www.cbinsights.com 27


DIGITAL THERAPEUTICS EXITS DIGITAL
2013 - Q1 2017 THERAPEUTICS SEES
FEW EXITS

Digital therapeutics
hasnt seen many exits
since the space is still
maturing and digital
health as a whole tends
to take longer due to
regulatory burden, trials,
etc. There have been
some sizeable ones,
including TelaDoc and
iRhythm technologies.
Interesting to note that
3 2 4 4 3
2017 has already seen 3
exits so far.
2013 2014 2015 2016 2017*
*2017 through Q117

#cbihealth CB Insights www.cbinsights.com 28


NUMBER OF UNIQUE
INVESTORS
STAGNATES

Investor interest surged


between 2013 and 2015
in digital therapeutics,
with more than 300
investors in the area in
2015. 2016 however has
seen that growth stall,
though there were still
more than 300 unique
investors in the space.

#cbihealth CB Insights www.cbinsights.com 29


YEARLY UNIQUE INVESTORS INTO DIGITAL CORPORATES AND VCS
THERAPEUTICS PICK UP STEAM
2013 - 2016
147
139
VCs have seen
137 opportunity in the space,
118
more than doubling
108 106
between 2013 and 2015
but interest is tempering.
Corporates are a small
but increasingly more
62
active part of the space
52
45 as well. Other types of
41
investors in this space
23 have cooled down
13 (Private Equity,
Incubators, etc.).
2013 2014 2015 2016
Corporation/Corporate VCs VCs Other

#cbihealth CB Insights www.cbinsights.com 30


MOST ACTIVE INVESTORS IN DIGITAL THERAPEUTICS MOST ACTIVE
Q113 Q117
INVESTORS
Rank Investor Number of Companies
1 Qualcomm Ventures 7 Varying investor types
1 Khosla Ventures 7
3 Social Capital 6 are active in digital
3 Rock Health 6 therapeutics. Qualcomm
3 Kleiner Perkins Caufield & Byers 6 tops the list, focusing
6 Y Combinator 5
6 Kaiser Permanente Ventures 5
specifically on
6 Merck Global Health Innovation Fund 5 therapeutics involved in
6 iSeed Ventures 5 hardware. Other
6 Kapor Capital 5
11 True Ventures 4
corporates like Merck
11 Techstars 4 and Kaiser Permanente
11 Zaffre Investments 4 were also active. There
11 Great Oaks Venture Capital 4
11 Norwest Venture Partners 4
are a few healthcare
11 Asset Management Ventures 4 specific VCs at the top of
11 BoxGroup 4 the list as well.
11 FundersClub 4

#cbihealth CB Insights www.cbinsights.com 31


Healthcare Consumerization:
CHANGING PRIMARY CARE

#cbihealth www.cbinsights.com 32
LACKING HEALTHCARE
ACCESS

Many states still lack


access to necessary
primary care + other
services necessary for
adequate health (e.g.,
mental health services).
Digital tools can help
extend the reach of care
to these areas.

#cbihealth MarketWatch www.cbinsights.com 33


PRIMARY CARE IS
IMPORTANT

Most studies point to a


reduction in
hospitalization and
generally improved
health outcomes if
people utilize primary
care resources regularly
and stay proactive about
their health.

#cbihealth PCPCC www.cbinsights.com 34


HOSPITALS AND
POPULATION HEALTH

While many hospitals


have been focused on
consolidation, several
have taken active
measures in population
health. Some have active
venture arms (Ascension
Ventures, NYP Ventures,
etc.) while others partner
or invest in startups to
pilot on their patient
populations.

#cbihealth CB Insights Business Social Graph www.cbinsights.com 35


UNBUNDLING PRIMARY
Urgent Care Concierge Medicine
CARES FUNCTIONS

Retail Clinics Thinking about how


Telemedicine
patients interface with
the healthcare system,
we can unbundle primary
care into separate
functions, based on
areas companies are
addressing and the new
Consumer Diagnostics Prescription Management
business models theyre
building on top of.

#cbihealth www.cbinsights.com 36
UNBUNDLING PRIMARY
Urgent Care Concierge Medicine
CARES FUNCTIONS

Retail Clinics Thinking about how


Telemedicine
patients interface with
the healthcare system,
we can unbundle primary
care into separate
functions, based on
areas companies are
addressing and the new
Consumer Diagnostics Prescription Management
business models theyre
building on top of.

#cbihealth www.cbinsights.com 37
CONSUMER
DIAGNOSTICS

Companies are
leveraging mobile to
enable diagnostic tests
to be done by consumers
or bringing the tests
directly to the consumer.
Helps avoid problems of
single-instance
measurement, allows
measurements to be
taken at different times
of day, and can catch
anomalies earlier.

#cbihealth CB Insights www.cbinsights.com 38


CONSUMER DIAGNOSTICS FACES REGULATORY
SCRUTINY TWO TALES

#cbihealth CB Insights Trends www.cbinsights.com 39


UNBUNDLING PRIMARY
Urgent Care Concierge Medicine
CARES FUNCTIONS

Retail Clinics Thinking about how


Telemedicine
patients interface with
the healthcare system,
we can unbundle primary
care into separate
functions, based on
areas companies are
addressing and the new
Consumer Diagnostics Prescription Management
business models theyre
building on top of.

#cbihealth www.cbinsights.com 40
CONSUMER
DIAGNOSTICS

Retail clinics are starting


to become more and
more popular amongst
grocery and pharmacy
chains, and now offer a
wide variety of services
and tests.

#cbihealth Wall Street Journal www.cbinsights.com 41


RETAIL CLINICS HAVE SHORTER WAIT TIMES
#cbihealth athenahealth www.cbinsights.com 42
RETAIL KIOSKS

Some companies are


bringing telemedicine
and diagnostics to retail
locations in the form of
kiosks. While weve seen
some failures in the
space (Healthspot),
some companies are
attacking the space
differently, like higi which
is taking a more holistic
and non-transactional
approach using other
wearables, gamification,
a social network, etc.

#cbihealth CB Insights www.cbinsights.com 43


UNBUNDLING PRIMARY
Urgent Care Concierge Medicine
CARES FUNCTIONS

Retail Clinics Thinking about how


Telemedicine
patients interface with
the healthcare system,
we can unbundle primary
care into separate
functions, based on
areas companies are
addressing and the new
Consumer Diagnostics Prescription Management
business models theyre
building on top of.

#cbihealth www.cbinsights.com 44
URGENT CARE
INCREASING IN
POPULARITY

Urgent care clinics are


becoming more popular,
increasing significantly in
the last few years and
projected to increase
further.

#cbihealth Wall Street Journal www.cbinsights.com 45


URGENT CARE VS.
EMERGENCY ROOM URGENT CARE THE ER

Allergies $345 $97 Urgent care provides a


cheaper alternative for
Acute Bronchitis $595 $127 low-severity cases in
between primary care
Earache $400 $110 (long wait) and the
emergency room (high
Sore Throat $525 $94
expense).
Pinkeye $370 $102

Sinusitis $617 $112

Strep Throat $531 $111

#cbihealth Debt.org www.cbinsights.com 46


URGENT CARE FINANCINGS
PRIVATE EQUITY LIKES
URGENT CARE

Private equity investors


were involved in more
than a quarter of all
urgent care transactions
since 2010. Recently,
Warburg Pincus
announced it would take
a majority stake in
CityMD, valuing the
company at $600M.

#cbihealth CB Insights www.cbinsights.com 47


UNBUNDLING PRIMARY
Urgent Care Concierge Medicine
CARES FUNCTIONS

Retail Clinics Thinking about how


Telemedicine
patients interface with
the healthcare system,
we can unbundle primary
care into separate
functions, based on
areas companies are
addressing and the new
Consumer Diagnostics Prescription Management
business models theyre
building on top of.

#cbihealth www.cbinsights.com 48
CONCIERGE MEDICINE COMPANIES
CONCIERGE MEDICINE
COMPANIES

Concierge
medicine/direct primary
care build their own
practices and charge a
retainer fee (billed
monthly or annually) for
access to a suite of
services. This creates a
more predictable stream
of revenue and creates a
lock-in for the network.

#cbihealth CB Insights www.cbinsights.com 49


NEW PRIMARY CARE
BUILDS ITS OWN
SYSTEM

Many of the retainer-


based primary care
clinics are bringing
services in-house (lab
testing, new EMR
systems, standalone
apps, etc.). Some of
these companies are
now pitching their
services to self-insured
employers as a perk.

#cbihealth One Medical www.cbinsights.com 50


UNBUNDLING PRIMARY
Urgent Care Concierge Medicine
CARES FUNCTIONS

Retail Clinics Thinking about how


Telemedicine
patients interface with
the healthcare system,
we can unbundle primary
care into separate
functions, based on
areas companies are
addressing and the new
Consumer Diagnostics Prescription Management
business models theyre
building on top of.

#cbihealth www.cbinsights.com 51
TELEMEDICINE
BENEFITS

Lower friction access to


people that might not
normally opt for care

Create a referenceable
conversation

Create mineable text


data

Scale down cost of


services using
asynchronous
communication

#cbihealth www.cbinsights.com 52
AND CAN INCREASE
THE REACH OF CARE

In areas with a high


patient:primary care
physician ratio,
telemedicine can help
distribute and extend the
reach of doctors to areas
that may have difficulty
with access.

#cbihealth CDC www.cbinsights.com 53


TELEHEALTH PLAYS AN
IMPORTANT ROLE FOR
CHRONIC CARE

Chronic conditions and


related comorbidities not
only drive up healthcare
expenditure, but they can
also be managed with
lifestyle adjustments.
Telemedicine can play an
important role in
mitigating cost and
helping with lifestyle
changes.

#cbihealth Seattle Times www.cbinsights.com 54


TELEMEDICINE TOOLS
ARE ENABLING DIGITAL
THERAPEUTICS

Using a suite of tools


(wearables, chat, online
portals, etc.) were
starting to see more
remote programs with
lower overhead costs
and more scalable
services targeting
conditions which are
rooted in lifestyle
choices.

#cbihealth Omada Health www.cbinsights.com 55


BUSINESS MODELS ARE
STILL BEING FIGURED
OUT

Teladoc, one of the


largest digital health
exits, has seen growth
stall. Many of the existing
telemedicine vendors
have examined different
business models with
mixed success. Low
utilization rates,
regulations, and issues
with reimbursement
remain major hangups.

#cbihealth CB Insights/Google Finance www.cbinsights.com 56


UNBUNDLING PRIMARY
Urgent Care Concierge Medicine
CARES FUNCTIONS

Retail Clinics Thinking about how


Telemedicine
patients interface with
the healthcare system,
we can unbundle primary
care into separate
functions, based on
areas companies are
addressing and the new
Consumer Diagnostics Prescription Management
business models theyre
building on top of.

#cbihealth www.cbinsights.com 57
MEDICATION
ADHERENCE IS A HUGE
PROBLEM

Failure to adhere to
medication schedules is
a huge contributor to
failure in treatment,
medical waste, and
undermining the value of
clinical trials.

#cbihealth www.cbinsights.com 58
MEDICATION ADHERENCE COMPANIES DIFFERENT
APPROACHES

Companies are taking


different approaches to
adherence, from smart
pillboxes and bottles, to
leveraging the
smartphone and
machine vision, to
creating ingestible
sensors that monitor
pills.

#cbihealth CB Insights www.cbinsights.com 59


BUT SMART GADGETS
ALONE MAY NOT BE
ENOUGH

Simply notifying users


that they need to take
their medication may not
be enough. Non-
adherence could be due
to other reasons (e.g.
cost) or might require a
more effective means of
intervention.

#cbihealth JAMA www.cbinsights.com 60


Healthcare Consumerization:
PHARMACEUTICAL DISTRIBUTION

#cbihealth www.cbinsights.com 61
DRUG DISTRIBUTION TODAY IS COMPLEX

#cbihealth Wall Street Journal www.cbinsights.com 62


COMPARISON SITES
HAVE PRODUCED
MIXED RESULTS

Some companies have


gone the route of
bringing price
transparency to
shoppers in an effort to
make patients better,
more price-sensitive
shoppers, but this has
been a difficult route for
many companies.

#cbihealth CB Insights www.cbinsights.com 63


COMPARISON SITES
HAVE PRODUCED
MIXED RESULTS

Despite many of these


programs targeting
employers, findings are
mixed on whether these
programs actually
provide substantial
savings to employees.
Another example where
utilization was low
(similar to telemedicine).

#cbihealth JAMA www.cbinsights.com 64


CONSUMER BRANDS IN
DRUG DISTRIBUTION

Several startups are


building consumer
brands dedicated to re-
inventing their
relationship with the
pharmacy. Many of these
startups are trying to
ease the process by
providing things like last-
mile logistics and
concierge services.

#cbihealth www.cbinsights.com 65
VIRTUALIZING THE
PHARMACY

Similar to other
industries like
commerce, technology is
virtualizing the retail
pharmacy. New tools
allow for businesses to
be built entirely online
and both reduce
overhead spend and
simplify complex
logistics (which in this
case also simplifies
medication regiments).

#cbihealth Pillpack www.cbinsights.com 66


AGGREGATING
CONSUMERS

By getting more
consumers to use
platforms, companies
are aiming to leverage
negotiating power and
bring the costs down of
drug + provide
transparency in the
process.

#cbihealth Blink Health www.cbinsights.com 67


RETAIL PHARMACY ACTIVITY RETAIL PHARMACIES
Q112 Q117
HAVE MADE SOME
MOVES

Pharmacies are looking


into other forms of care
too. While there are
several acquisitions into
different parts of the core
business, theyve also
invested in some
startups that extend the
reach of care (TytoCare)
and create social groups
(myHealthTeams)
among others. They also
have several
partnerships.

#cbihealth CB Insights Business Social Graph www.cbinsights.com 68


Because we serve more than 5 million customers every day,
we have a huge opportunity to use technology to improve the
health outcomes of our customer, by extending our services to
meet them anytime, anywhere.
For us, the benefits of technology arent just driving
people back to our platforms: its about uncovering the
most effective ways to help all people on their path to
better health. Our vision is to create a connected health
experience that makes it radically easier for people to
save time and moneyand stay healthy.

Brian Tilzer
Chief Digital Officer, CVS

#cbihealth Source: HIT Consultant www.cbinsights.com 69


Healthcare Consumerization:
LOOKING AHEAD: ARTIFICIAL INTELLIGENCE

#cbihealth www.cbinsights.com 70
HEALTHCARE HAS SEEN THE MOST AI DEALS

#cbihealth CB Insights: The State Of Artificial Intelligence www.cbinsights.com 71


#cbihealth CB Insights: The State Of Artificial Intelligence www.cbinsights.com 72
HEALTHCARE + AI
MARKET MAP

Artificial Intelligence
startups are attacking
different parts of AI, from
preventive care, to virtual
assistants. Many of
these startups are
patient facing, and can
reshape patients
interactions with the
healthcare system.

#cbihealth CB Insights Blog www.cbinsights.com 73


TOP TECH COMPANY INVESTMENTS IN PRIVATE MARKETS
2015-2016 TECH COMPANIES ARE
LOOKING INTO AI

Some of the top tech


companies are investing
in the artificial
intelligence or healthcare
data spaces to make a
better consumer
experience, leveraging
their expertise (machine
learning, analytics,
customer facing portals,
etc.) IBM Watson and
Google Deepmind have
been particularly active
here.

#cbihealth CB Insights Business Social Graph www.cbinsights.com 74


FILLING THE HEALTH SERVICES VOID
Robot-assisted home care

Mental health & Prescription


dementia regimen & vitals
Robotic companionship to Nursing, pharmaceutical
solve for late stage life regimen and health vitals
companionship and memory monitoring
lapse

#cbihealth www.cbinsights.com 75
HAS PATENTS IN WEARABLES AND
DIAGNOSTICS

#cbihealth CB Insights Patent Data www.cbinsights.com 76


FULLY AUTOMATED HEALTHCARE?

#cbihealth Sense.ly www.cbinsights.com 77


@nikillinit

QUESTIONS? nkrishnan@cbinsights.com

CB Insights Digital Health Newsletter

#cbihealth www.cbinsights.com 78
Where is all this data from?
The CB Insights platform has the details on all the
deals included in this report

CLICK HERE TO SIGN UP FOR FREE

#cbihealth www.cbinsights.com 79
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