A Report Card for the Digital Health Ecosystem

Thoughts from Qualcomm Life’s Connect2014

Digital health has a pretty erratic grade point average, or so says Dana Mead, a parter at venture firm Kleiner Perkins, Caufield & Byers. He outlined and graded what he called the five most important elements of the digital health ecosystem at Qualcomm Life‘s Connect2014 conference this week in San Diego, and this is how he slices it:

  1. Access to Capital – A

Looking at data over the last quarter, Mead said that about $700 million in funding has been raised in digital health. That’s more than medical device startups raise, about two-thirds of what pharma and biotech raise and about a third of what software/IT companies raised in the same time period. So, not a bad showing for digital health, Mead said.

  1. Access to Great Talent – B-

Mead says digital health has an interesting talent pool, because it comes not only from the life sciences side, but from the digital IT side. It gets tricky, however, when you try to meld the two because so few still really understand both halves of the digital health equation.

“I think the talent is there, but we have a lot of people on the IT side who think that healthcare is totally broken and they’re gonna come over and fix it in an hour – but that won’t happen,” Mead said.

On the flip side, there are a lot of people in healthcare that don’t understand digital technology as well as they should.

“Hopefully people over time, people will develop an appreciation for both sides,” Mead said.

  1. Public Policy Agenda – C

The Affordable Care Act has driven a lot of interest here, Mead said, raising questions like: How will the digital health industry be regulated, or reimbursed? Will it be reimbursed? How we do create standardization in our industry, which always helps drive innovation forward?

The digital health arm doesn’t have enough clout yet, Mead said – particularly around the reimbursement issues that are looming around areas like telehealth.

“We don’t have an organized trade association. We need people who are lobbying at a state and federal level, and get our products reimbursed over time,” Mead said, though he conceded:”But we are seeing some momentum here.”

  1. Sustainable Returns – C

Investors look for patterns, Mead said. They look at what companies have been successful, and what their historical returns have been. However, it’s early yet for the untested field of digital health. When you look at traditional healthcare IT, the returns have been about half of what they are in medical devices and biotech historically, Mead said.

“But unlike devices, pharma and biotech, there are many more acquirers interested in digital health,” Mead said.

  1. Impact on Healthcare System – Cost, Quality and Access – That slacker in the back of the classroom with all the potential in the world

“Not sure it’s worth getting a grade yet,” Mead said. “It’s early, but there’s a ton of potential to move forward.”