- The digital health sector bucked the uncertain regulatory climate in Washington to wrap up the first half of 2017 with a record-breaking number of deals and unprecedented funding levels, according to a new Rock Health report.
- Fueled by a “record-shattering” second quarter, investors injected $3.5 billion into 188 deals involving digital health companies in the first six months of this year. At this rate, 2017 is on pace to beat last year’s total for deals and spending.
- The results echo StartUp Health’s recent roundup of its own digital health funding analysis. The two organizations track digital health a bit differently but StartUp Health also found 2017 is on pace for digital health funding to experience its best year yet. The organization counted 300 digital health deals totaling $6.5 billion — $3.8 billion of that in the second quarter.
While the number of deals was bullish, it was seven $100 million-plus deals that put the sector over the top at the year halfway mark. Consumer health information platform Outcome Health and connected fitness equipment developer Peloton landed the largest deals ever in the digital health space at $500 million and $325 million, respectively. Other companies snaring $100 million or more were Modernizing Medicine, PatientPoint, Alignment Healthcare, PatientsLikeMe and Sharecare.
“As the digital health market matures and companies begin to show real revenue potential, we’re seeing more growth-stage and private equity investor lead large, pre-IPO rounds,” the report says. Interestingly, it adds, none of the $100M+ deals are based in the San Francisco Bay Area — a sign the digital health industry is gaining ground across the country.
The top categories for funding were consumer health information, digital gym equipment, healthcare consumer engagement, EHR/clinical workflow, analytics and big data and digital therapies.
Digital health has been largely immune to the regulatory uncertainty around President Donald Trump’s administration and Republican-led efforts to repeal the Affordable Care Act. That’s due in part to the move to value-based care, which has seen strong bipartisan support, Rock Health notes. Regardless how ACA overhaul efforts play out, patients are likely to see higher deductibles, providing more incentive for innovative healthcare solutions that improve patient health while lowering costs.
“Any technology, digital technology, that enables employers or consumers to be activated and to change their behavior, take control of their health, particularly for chronic conditions, will benefit greatly from any administration,” Frank Moss, co-founder and chairman of Twine Health, told Healthcare Dive shortly after the November presidential election.
There are signs that digital health may soon get more support from Washington. Newly appointed FDA Commissioner Scott Gottlieb recently announced plans to issue a new Digital Health Innovation Plan, providing greater clarity on digital health regulation so that companies don’t have to seek out the agency’s position on a case-by-case basis.