A surge in digital health companies 3 min read
ANDHealth recently launched its detailed report on the state of the Australian digital health sector, The Awakening Giant: The Rise of Australia's Evidence-Based Digital Health Sector.
In this Insight we summarise some of the key takeaways from the report, including key trends and challenges for the Australian market.
Background
Digital health covers a wide range of technologies, medicines and services, and can include personalised medicine, telehealth and telemedicine, wearable devices, mobile health technologies and health IT.
ANDHealth, with whom Allens has worked closely, is one of Australia's leading health technology commercialisation organisations and supports startups in the digital health sector using a non-profit, non-equity-taking model.
This is ANDHealth's second detailed report on the state of the sector, following on from its first report Digital Health: The Sleeping Giant of Australia's Health Technology Industry, which was published in July 2020. A lot has happened in the sector since then—here are the key trends and challenges which ANDHealth has highlighted for the Australian market in the new report.
Recent developments in the digital health sector
In many respects, the COVID-19 pandemic has catapulted industry growth into new heights, with an increased global push for shifts in policy and a new, sharpened focus on the need for innovation and technologies in the digital health sector.
Since 2020, ANDHealth has seen a 74% increase in the number of digital health companies in its pipeline. However, while there has been a 20-fold increase in global investment in the digital health sector in the last 10 years, there has been a slowdown in digital health funding in 2022 (particularly in the first half of the year) and some companies are reporting a pause on their plans to go public. This is, of course, not unique to this sector and is a result of the softening macroeconomic environment.
In Australia, a number of important and positive systemic changes have also taken place since ANDHealth's first report, including:
- regulatory reform for software-based medical devices, which helps align the Australian regulatory framework with international ones and reduces or removes regulatory burden on manufacturers in the sector (see our previous Insight); and
- reimbursement for telehealth for all Australians via Medicare.
Another item to watch out for is the launch of the new National Digital Health Strategy by the Australian Digital Health Agency. This is expected during the course of 2022, which is when the current strategy expires. The new strategy will cover the next five years up to 2027.
Challenges and barriers for Australia
ANDHealth considered the lack of clear, accessible and easily navigable reimbursement pathways to be a key barrier to the uptake of digital health solutions in the Australian market. The prevailing expectation in the Australian market is that the consumer will pay, which limits potential market access and revenue and further entrenches healthcare inequities. This is also contrary to experiences elsewhere in the world, eg in the US and Germany, where reimbursement frameworks allow governments and insurers to be the primary payer. As a result, Australian innovators with the highest potential may be forced to move overseas (and early in their growth phase) instead of entering the home market.
Further, ANDHealth identified a significant gap in investment and support for the sector in Australia as compared to other markets where it is common to have fund managers and VCs with digital health-specific mandates. For example, only 13% of companies in ANDHealth's pipeline that have disclosed their financing had accessed VC financing, as compared to 37% from family, friends, angel investors and high-net-worth individuals. With 85% of companies in its pipeline indicating they will seek to raise capital in the next 12 months, the availability of what ANDHealth calls 'experienced and patient' capital will be critical to take these companies to the next stage and enable Australia to become a global player in this space.
Areas of focus
ANDHealth also provided some insights on the clinical indications and end users which are being targeted by the companies in its pipeline.
Interestingly, a sizeable portion of the companies (23%) indicated their primary clinical focus as 'agnostic', ie that their solutions are not specific to a particular clinical indication. This is indicative of the significant potential which lies in the versatility of digital health, as the development of one solution can benefit a wide range of fields. The next largest area of primary clinical focus is mental health (15%).
As for intended primary end users, the split is fairly even between patients/consumers (41%) and health practitioners (39%). However, there is a clear, broader market trend of direct consumer engagement/empowerment driving the development and adoption of digital health technologies. This means the risks of users misusing the technology or misunderstanding what it can or cannot do will likely be amplified and therefore will need to be proactively managed.
Investment and government support key to awakening the giant
The lack of an Australian reimbursement framework and dedicated investment for digital health was a popular topic of conversation amongst industry representatives attending the launch. Another key challenge highlighted at the launch event was the need to make digital health a core part of delivery of healthcare services, with ANDHealth making a call to the government for a strong emphasis on producing further guidance on the implementation of digital health.
However, Bronwyn Le Grice, CEO of ANDHealth, shared her great optimism and excitement for the future of the Australian digital health sector and sees immense opportunities for Australian innovators in this space to make global impact.