As the healthcare industry grows and tech giants are moving into the market, what used to be smartwatches and fitness trackers are turning into health monitors and medical devices as a new health ecosystem emerges. This is a logical development as consumers take more control over their health, and new players offer new products and services.
The annual Apple event on 12 September 2018 was significant in one way. While it didn’t offer more than upgrades to the iPhone X, the new Apple Watch 4 represents a paradigm shift. What used to be a smartwatch, a mobile computer and fitness tracker on your wrist, is now turning into a health monitor with ECG capabilities and Fall Detection. The ECG feature was cleared by the US Food and Drug Administration (the FDA), meaning it can be used as a medical device, highlighting Apple’s increased push to brand the watch as more than a fitness device.
This is one of many signs that tech giants in the consumer space are moving into the domain of medical devices. We would like to call this emerging trend “Healthcare as a Consumer Application”, and we can break it down into a few components.
- “Medical devices” is broadening into the consumer market, as wearables (i.e. smartwatches and other wearable computers) turn from fitness trackers to health monitors
- New players, i.e. both the established consumer tech champions and new startups, are entering healthcare with new products and services
- This leads to several effects, including the unbundling of the physical location where healthcare is produced and consumed, and the consumer in effect becomes a co-producer of healthcare services
What is a medical device and why is it an interesting tech market?
According to the World Health Organization (WHO), a medical device is “any instrument, machine, appliance, implant, software, material or other intended to be used for human beings, for purpose of, for example, diagnosis, prevention, monitoring and treatment of disease, supporting or sustaining life and providing information.” Medical devices are usually intended to monitor a critical health parameter or parameters related to a chronic condition and/or illness. Parameters include blood pressure, temperature, heart rate, galvanic skin responses, skin moisture, and blood sugar/glucose levels. For example, diabetes is a major health issue around the world, and many require their blood-glucose levels monitored constantly. There are several consumer products in the market today for monitoring blood-glucose. Will we see it as a feature in the next Apple Watch?
However, medical wearables, that we can call them, differ from those on the consumer market. Whereas consumer fitness trackers can help users stay in shape, medical wearables can detect life-threatening conditions and collect biometric data to help with patient diagnoses. Medical wearables are more mission-critical than a regular step-counter.
A key reason why wearable medical device adoption is not yet mainstream, is the more demanding safety and accuracy standards they must meet. Regulatory approvals , compliance and insurance issues are factors that must be considered in the broader use of medical-grade wearable devices. Wearable medical products must be validated by relevant authorities, and there’s a big difference between tracking how many stairs a person climbs per day – and measuring an irregular heartbeat that can be a matter of life or death.
The world’s big tech companies are great at producing innovative combinations of hardware, software and data. Thus, they are well positioned to move into the market of wearable medical devices. However, there is a clear distinction between devices and drugs, which are developed and produced by the pharma companies. It’s probably safe to assume that tech companies will not move into pharma as a core business, as life sciences is a very different field from tech and data sciences. However, tech companies are putting capital into biotech, and Google, for example, has participated in several drug-related investments.
Since healthcare is one of the world’s fastest growing industries and usually represents some 10% of any developed country’s GDP, it’s a big and potentially lucrative market. Given also that populations are ageing in most of the western and developed world, older people (i.e. people more likely to have health challenges) is an increasingly important target group. An ECG (Electrocardiography) is for example used to detect Atrial fibrillation (also called AFib or AF), which is abnormal heartbeat that can lead to blood clots, stroke, heart failure and other heart-related complications. It is estimated that 34 million people globally have AFib and 70% are between 65 and 85. Heart diseases is already the number one killer in the US. Meanwhile, the wearable devices market is expected to reach $5 billion in 2018. There you have two converging data points – and insurance companies are actually already subsidizing and prescribing smart watches for their customers.
Big tech is active in digital healthcare in several ways, usually as a enterprise software and data provider. Amazon’s AWS Cloud Computing for Healthcare, Microsoft eHealth solutions, IBM Healthcare Industry Solutions, Google G Suite for Healthcare Businesses and Google DeepMind’s AI-powered solutions for doctors are all examples of this. What we are looking at in this blog is rather how these tech companies are moving into the consumer health market.
What are Big Tech and startups doing in consumer healthcare?
The hardware products, that we usually think of as medical “devices”, range from digital scales, fever thermometers and blood pressure monitors for home use. These have been around at consumer stores for a long time. Now, tech companies are beginning to integrate them into their strategies. The integration of health related products and services into the consumer businesses of big tech companies are made in two main ways. 1) They build their own platforms, for both their own and third-party solutions. 2) They make strategic investments in various healthcare companies, products and services.
Let’s start with tech companies own platforms. Apple has mainly focused on building out its internal healthcare services HealthKit, CareKit, and ResearchKit, and the consumer app Apple Health. HealthKit allows developers to integrate health and fitness apps, and also various medical devices, for iOS and WatchOS. The new Health Records API lets users share their health record data, including allergies, conditions, labs, medications, vitals, and more. With billions of active Apple devices worldwide, there’s a solid hardware and software platform for connecting iPhones and Apple watches to healthcare systems. Meanwhile, Google has launched Google Fit as an integral part of it’s updated Wear OS smartwatch operating system that is now offered in the market to various watch and device manufacturers.
However, tech giants’ main efforts are probably to build health assets by investing in companies. According to research from CB Insights, Google is the most active tech corporate investing in healthcare in the US. Through its various investment vehicles, Google has participated in 14 of the 15 largest healthcare capital raises in 2018 that included big tech companies. All of its activity has gone through the investment arm GV, with 92 healthcare investments since 2012, including parent company Alphabet’s $375 million investment in Oscar, the tech-driven health insurance company. As data is at the heart of digital healthcare, it’s also not a surprise that Google has invested in Verily, a company at the intersection of technology, data science and healthcare with the mission to “make the world’s health data useful so that people enjoy healthier lives”. Sounds like Google?
Nokia bought French consumer health products company Withings (famous for its wi-fi connected bathroom scales) in 2016 and created Nokia Health (then actually sold it back). Apple recently acquired Finnish sleep monitor company Beddit, and also invested in Gliimpse, a Silicon Valley-based startup that has built a personal health data platform that enables any users to collect, personalize, and share their health data. Facebook acquired another Finnish company, Moves, a developer of fitness tracking apps. Amazon invested in cancer diagnostics company Grail and baby monitoring startup Owlet Baby Care (“Track your baby’s heart rate, oxygen levels & sleep”). Microsoft invested in Livongo, a company that uses personalized health insights to treat pre-diabetes, diabetes, and high blood pressure. Once the tech giants establish their consumer health ecosystems, it will encourage other startups, apps, products and services to develop for these ecosystems, and maybe sell their companies to them. Or being disrupted by the tech giants. One of the pioneers in wearable medical-grade ECG-monitors, AliveCor, now faces competition from the Apple Watch 4.
Furthermore, as the market grows, there is always the sensitive issues of privacy that becomes more urgent as more personal and medical data is stored digitally with third parties. Also, misinterpreting the data could be costly, perhaps fatal or at least prompt unwarranted health scares, which could result in unnecessary emergency room visits.
In the Nordics, the most visible example of digital startups moving into consumer healthcare are the “online clinics” like KRY and MinDoktor that offers doctors through video apps. Both KRY and MinDoctor have raised significant capital for further expansion. KRY announced a $66 million funding round in June led by international venture capital firm Index Ventures with Accel, Creandum, and Project A. In September, retail group ICA invested SEK 335 million in MinDoktor. These companies could never have existed without a solid consumer platform of iPhone and Android smartphones. These new digital players also underline another effect in the shifting digital healthcare landscape – the unbundling of time, place and services.
Healthcare in new places, produced and consumed in new ways
A professional healthcare environment is a hospital or a clinic where you’re likely to meet highly trained healthcare specialists; doctors, nurses and therapists. In contrast, a consumer healthcare environment is typically your own home. It can also be your workplace, gym or outdoors.
In traditional healthcare, the service is typically produced and consumed in the same physical location, the hospital, the clinic or possibly by a doctor visiting you in your home. We can now see an “unbundling” of healthcare services, meaning that it can be produced in one place (the doctor sitting in a call center communicating via video) and consumed in another (the patient’s home). Or the patient can provide data through her wearable (instead of coming to the hospital) and transmit it to a doctor at another place, or maybe an AI in the cloud.
Healthcare thus increasingly involves the consumer as a “co-producer” of the services, while the other co-producer (that was previously a doctor) might be a health analytics algorithm in a cloud. Thereby, the healthcare service is increasingly produced outside the traditional environment, i.e the hospital.
According to a study in the scientific journal Nature, Google’s DeepMind has trained its algorithms to detect over 50 sight-threatening conditions to the same accuracy as expert clinicians, and recommend the most appropriate course of action for patients. Diagnosing eye diseases from ocular scans is incredibly time-consuming for doctors due to the complexity. Due to the aging global population, eye disease is also becoming more prevalent not less, increasing the burden on healthcare systems. Imagine making an eye-scan with your smartphone’s camera and then send it to Google Cloud for analysis, and you have an image of the future of healthcare with devices, consumers and AI working together. There is already iris-scanning security technology in use in smartphones.
Another example of this “unbundling” of services, producers and places is when traditional healthcare systems (i.e., patient electronic health records) extend to patients through consumer interfaces where patients can access the systems directly themselves. BCB Medical, a software company Standout Capital has invested in, together with Elisa, Finlands biggest telecoms operator, have combined their expertise and digitized the clinical pathway for specialised asthma care with remote measuring and asthma registry. The measurements taken by the patient through an asthma pipe connected to a smartphone via Bluetooth are forwarded straight to the electronic health record system used by the healthcare personnel and combined with the data in other healthcare systems. This enables remote care, continued monitoring, saves the patient and health providers from time consuming medical appointments, and gives the professionals more time for actual healthcare work. The new service is already in use at HUS, the Hospital District of Helsinki and Uusimaa.
“The data collected from the remote measuring by the patients is combined with the care data stored in the asthma quality registry. The care data in the registry has been entered there by healthcare professionals, or it has been automatically obtained from the medical information systems through integrations. All this data is combined in one view so that the healthcare personnel have all the essential information they need in order to provide the best care for the patient” says Petteri Viljanen, CEO of BCB Medical.
In summary, what are the implications of the “Healthcare as a Consumer Application” trend? We think that it is fair to assume that:
- We are likely to see more consumer medical devices (i.e. innovations combining hardware, software and data for the benefit of health) from big tech companies
- Big tech will continue to invest in healthcare (both their own platforms and putting capital into other companies) at an increasingly active pace, as this new medical consumer market develops
- Meanwhile, new startups and products will enter the larger ecosystems to offer more ways for consumers to run parts of their healthcare themselves
- The consumer applications will merge with the powerful capabilities in Google Cloud, AWS and Azure (think how an AI will interpret your health data), to form new services
- Existing healthcare software will increasingly offer consumer extensions so patients can export and import data themselves, outside the hospital environment.
- As data is at the core of this trend, the development will put even more emphasis on collecting, owning and using data for various purposes, and making sure the data stays private and secure
To conclude, we expect to see much more of the Healthcare as a Consumer Application trend in coming years. It will continue to be an exciting investment area.