Digital health primitives and the Cambrian explosion of consumer digital health
With the recent proliferation (and mini-Cambrian explosion) of consumer digital health companies, I wonder if we have reached a seminal point in the reduction in cost, time and risk of starting up a digital health company.
I really got started on this idea when diving deep into the company Truepill last year. Truepill is behind the pharmacy automation (API to order and deliver medications + add your brand on the bottle) of a lot of the high growth consumer health brands of the last couple of years including hims & hers, k health, Lemonaid Health, Nurx, and Ro (a SignalFire portfolio company) among others. The company is trying to bill itself as the AWS or Stripe of healthcare, effectively building the primitives of a digital health service as Ben Thompson described in his essay about AWS in 2016. Truepill is also building a telemedicine network for the required physician review of patient-driven Rx requests / consults, which may be taking advantage of some of the de-regulation of telehealth requirements. To top that off Truepill is building their own brands like Ahead in the US for mental health support, along with Eve (women's health in the UK) and Betterman (men's health in the UK, which is...interesting because hims also has a UK presence). Finally, it looks like Truepill is making a bet on helping legacy players in the healthcare industry, for example helping health plans build a better white-labeled member experience.
So medications, telemedicine and even brands become commodities. Your moat as a consumer health company is in the amount of venture capital you can raise to acquire customers at a high NPS (hopefully very high to capitalize on WOM marketing and to reduce CAC spending), in the seasoned team that can execute against this plan, and how fast you can exit to public markets or a larger incumbent (e.g. Care/of exiting to Bayer) to continue to build on your capital advantage. Maybe the best team to execute on these companies are those with e-commerce / digital marketing / growth experience (for example that seems to be Redesign Health's plan with Proper in hiring Nancy Ramamurthi who is a former Walmart e-commerce exec, and with Ever / Body in hiring Amy Schecter who is the former CEO of Glamsquad). What happens when CAC goes up with increasing competition? Can one company create multiple "ghost" brands to A/B test branding/value prop and use a future directory of these companies (Google/Facebook controlled by virtue of ad spend) to distribute their product and fine tune until they find the right mix a la ghost kitchens on DoorDash? Are we close to seeing Clubhouse rooms promoting these brands with influencer pushers? (ok, that was tongue-in-cheek). What happens when Amazon decides to hit the gas on Amazon Care and Pharmacy and/or package their offering into Prime, and subsequently price everyone out?
It seems like in this new consumer health world, evidence generation is a much lower priority than building accessible, user-friendly on-ramps onto generic primary care medications/treatment for [name your condition], relying on consumer self-selection. This builds a whole new set of railroad tracks for healthcare delivery to consumers without the traditional intermediaries, which is admittedly exciting.
Is part of this driven by the increasing share of HDHP (high deductible health plans) among employers where an increasing share of initial cost is borne by the employee, and/or the staying power of some of the ACA exchange plans with Oscar Health's market cap (and gig economy company market caps) as a potential signal of the opportunity? Possibly, though I suspect there is more to the story.
Is it a good thing that there are a lot of copycat consumer health businesses being created (how many ED/hair loss medication delivering startups do we need)? I don't know, I guess competition is good to build better consumer experiences, but in a relatively unregulated space what does that mean?
Can digital therapeutics / disease management apps take this new set of railroad tracks to deliver their products to consumers instead of having to sell to employers and benefit exchanges? Maybe, but given very low eligible enrollment rates for employee benefit subsidized solutions, maybe not.
Finally, are we looking for our keys under the streetlight, when the focus really should be on international markets like India with inherently higher consumer share of healthcare costs?