This year has seen a significant rise in digitalisation across almost every sector, with the pandemic acting as a catalyst for change in communication and innovation methods. There has been a universal acceleration of technology adoption throughout the world, and the health sector has certainly not been an exception. While a general sense of transformation across the healthcare industry before March already existed, the spread of COVID-19 expedited this digital revolution (see Figure 1). However, it is vital for those in the digital medicine business to approach the market carefully and understand how to use the tools they are developing should they wish to remain viable after this initial surge in demand.
Figure 1. Change in usage of online health resources in the US in 2020. The Economist.
Even before the pandemic, hype was being built around the concept of platforms that allowed patients to talk to their doctor online. Now, the teleconsultation market has seen a surge of interest and investment. On the 2nd of December, JD Health, the digital healthcare unit of Chinese e-commerce giant JD.com, raised 3.5 billion USD in Hong Kong’s second largest IPO this year. The company has performed exceptionally well this year, realising a 1.3 billion USD revenue in the first half of 2020 – a 76 per cent year-on-year increase. JD Health offers its clients services including online health consultations and online pharmacy products, and has seen a sharp increase in users since it made its health consultations free at the start of the coronavirus outbreak in China in January.
Smaller telemedicine start-ups have also benefitted from the excitement around digital health services. French online medical consultation start-up Doctolib announced that its video consultations in Europe had escalated from 1,000 to 100,000 per day this year. Babylon Health and Kry, two other telehealth platforms, have experienced similar success in 2020. Despite this, however, there is concern as to whether these start-ups will continue to thrive in the near future. There is increased competition due to current video communication platforms like Zoom and existing hospital information systems which are expanding their communication features, placing pressure on start-ups that offer software for patient-doctor calls. While start-ups like Kry in Sweden had initially been leading the teleconsultation race in the early stages of software development, other public healthcare organisations are now fighting back with their own digital services. Figure 2 shows how existing healthcare providers are increasingly taking a larger proportion of doctor-patient digital meetings than telemedicine companies.
Figure 2. Graph showing that telemedicine visits are skyrocketing, but are increasingly delivered via existing providers, not telemedicine platforms. Healthy Ventures.
Telemedicine start-ups do not compete on technology so much as other features like cost, convenience and geographic coverage. This means that they are essentially service providers, so prices are likely to fall as competition increases. Margins will be driven down, and companies risk a race to the bottom – a dangerous gamble given that most of these start-ups are not profitable yet. The solution may be to combine these companies with existing businesses that have an existing strong customer base. One example of this was Amazon’s acquisition of Health Navigator, a healthcare start-up that offers diagnosis and treatments on its digital platform, in 2019. The deal helped Amazon to expand Amazon Care, its telemedicine programme, and increase its digital health presence.
Despite the hopefully eventual decline of COVID-19, the US telehealth industry is forecast to grow 30 per cent annually over the next five years, with revenues projected to hit 10 billion USD. The companies most likely to succeed in the industry are those that provide extra services on top of teleconsultation, giving them an edge on the competition – for example, offering prescription medicine or specialising in specific diseases – and those that can integrate themselves with larger, more established organisations.
By Hortense Comon
Sector Head: Hermione Scott