October 2021 • PharmaTimes Magazine • 18-19
//DIGITAL //
Digital transformation
opportunities for the NHS
As the global healthcare industry has seen unprecedented challenges, Lorne Daniel explores developments in how the sector is functioning from a broader perspective
Since March 2020, with the outbreak of COVID-19, the NHS has faced the biggest challenge in its 73-year history. Not only has it had to deal with the pandemic itself: handling a sudden shortage of PPE, staff, beds and equipment; assembling a testing and tracing regime; and delivering a complex national vaccine roll out.
But now the NHS faces an unprecedented backlog of urgent non-COVID work, a mountain of routine care and check-ups to eventually catch up with. The healthcare industry in general has been slow to adopt digital technology, but it can bring efficiency, time savings and cost reductions, all very much needed in the healthcare sector in the years ahead. Health-tech suppliers have shown themselves keen to step forward and help the industry through the crisis, but what is the scenario for investors?
As the global healthcare industry has seen unprecedented challenges, from limited resources to diverted spending and a shut-down of virtually all non-essential care, we’re seeing developments in how the sector is functioning from a broader perspective.
These challenges have been a catalyst for health-tech developments. In response to the pandemic the healthcare system rapidly implemented new tools, many technology-based, to allow healthcare to be delivered when physical contact is not possible. The approach to using digital tools in healthcare provision is undergoing a substantial and rapid shift. Many of the technologies adopted during the first phase of the pandemic were already well established but not widely implemented; the maturity of the technology enabled the provision of healthcare through remote consultation to be much more prevalent much more quickly.Since March 2020, with the outbreak of COVID-19, the NHS has faced the biggest challenge in its 73-year history. Not only has it had to deal with the pandemic itself: handling a sudden shortage of PPE, staff, beds and equipment; assembling a testing and tracing regime; and delivering a complex national vaccine roll out.
But now the NHS faces an unprecedented backlog of urgent non-COVID work, a mountain of routine care and check-ups to eventually catch up with. The healthcare industry in general has been slow to adopt digital technology, but it can bring efficiency, time savings and cost reductions, all very much needed in the healthcare sector in the years ahead. Health-tech suppliers have shown themselves keen to step forward and help the industry through the crisis, but what is the scenario for investors?
As the global healthcare industry has seen unprecedented challenges, from limited resources to diverted spending and a shut-down of virtually all non-essential care, we’re seeing developments in how the sector is functioning from a broader perspective.
These challenges have been a catalyst for health-tech developments. In response to the pandemic the healthcare system rapidly implemented new tools, many technology-based, to allow healthcare to be delivered when physical contact is not possible. The approach to using digital tools in healthcare provision is undergoing a substantial and rapid shift. Many of the technologies adopted during the first phase of the pandemic were already well established but not widely implemented; the maturity of the technology enabled the provision of healthcare through remote consultation to be much more prevalent much more quickly.
What is health-tech?
Health-tech covers a variety of hardware, software and services with applications ranging from clinical administration, education and communication, through to general wellness and disease prevention, patient diagnosis and treatment, all within the context of providing human care services.
Global buyers of health-tech include hospital groups, pharmacies, local/national government, educational institutions, companies and private individuals.
This is a huge global market, even prior to the healthcare spending focus precipitated by the pandemic. The primary value proposition offered by digital health technologies is cost reduction. Healthcare is expensive; clinical staff are expensive to train and employ. Equipment and pharmaceuticals are likewise limited. The application of technology can reduce cost and increase efficiency; patient care at home is far less expensive than in the ward.
Healthcare takes up 20% of total public spending (£190bn of £943bn in the 2022 UK public sector budget) and 24% of central government spending.
Technologies in care delivery (for example, remote monitoring and care, digital therapies and disease management solutions) have the greatest cost-savings potential benefiting payers (state insurers or patients). Finance and operations technologies (i.e. workflow automation and care-coordination tools) can increase operational efficiency and productivity for healthcare stakeholders.
The other key benefit of health-tech is improved healthcare outcomes. This might be in terms of general well-being/prevention, earlier or more accurate diagnosis, swifter/better treatment or faster/cheaper pharmaceutical development.
Key areas of health-tech excitement
Key areas of health-tech excitement
There are four broad areas of interest for investors when it comes to health-tech:
1. Healthcare administration systems
Traditionally the biggest market in health-tech is administration systems: covering a wide range of healthcare administration from Electronic Medical Records, to departmental systems and care pathways to patient billing systems. Most of the largest health-tech businesses are found in this area, given its size and age. However, this is a crowded and mature area.
2. AI-enabled drug development
Several start-ups are using AI to assess the huge volumes of data required to improve drug development. These include Insitro, Atomwise and XtalPi. Between them, they received over $1bn of funding in the last year. In April, tech giant NVIDIA partnered with AstraZeneca and the University of Florida on new AI research projects to accelerate drug discovery and patient care.
3. Remote healthcare / diagnostics
Telemedicine and remote healthcare is a relatively new but large and growing market, with platforms utilising improved modern telecoms – internet and mobile, text voice and video – to connect patients and clinicians, replacing the traditional personal contact and examination. It also allows patient communities for shared experience and support. This area has been given great impetus by global lockdown and social distancing.
4. Healthcare training / education
This is effectively a subsector of the ed-tech market but given the cost, time and resource constraints involved in training clinicians, there is a particular opportunity in the application of technology in this field, and multiple suppliers have sprung up utilising innovative technology such as VR and haptics.
This will be a high growth area in future; in November the NHS published its National Strategic Vision for simulation and immersive technologies in health and care to explore how tech can help the learning and training challenges. A fascinating example of the power of technology here is the Lindsay Virtual Human Project offering digital voyages through the human body and 3D4medical, a UK start-up bought by Elsevier which is proving vital for medical students.
‘Health-tech suppliers have shown themselves keen to step forward and help the industry through the crisis, but what is the scenario for investors?’
Current health-tech investment
Software and related technology companies dealing with healthcare, from electronic health records and point-of-care solutions to billing and compliance, are in high demand. Venture interest has been steadily increasing over the past decade. Although the number of deals each year has remained largely similar since 2016, average deal sizes and total funding have steadily increased.
Across the pond
The pandemic has excited global investor interest; the US digital health venture fund Rock Health noted a record $14bn in digital health funding in 2020. This has continued into 1Q21 with a record $6.7bn investment, the average deal size jumping 45% to $45.9m.
The pandemic in 2020 also saw upheaval in terms of significant IPO and M&A activity. After several years of very little activity, a wave of health-tech companies have joined the US public market since 2019.
We are currently seeing a large number of flotations in the US, most utilising Special Purpose Acquisition Companies (SPACs). The first four months of 2021 have seen more public listings of health-tech companies than in all of 2020 and, in 15 months, over a dozen have undertaken SPAC mergers.
Looking at the UK
The UK has yet to see this health-tech IPO trend. Diaceutics, provider of data analytics and implantation services to the pharmaceutical industry, joined the market in 2019. Since then just Kooth, a mental healthcare platform, joined AIM in September 2020.
The healthcare sector in the UK is of course dominated by the NHS and it is the key customer for most UK health-tech suppliers. As with any modern enterprise, NHS services are dependent on IT systems. Political expediency means that frontline care and staffing levels are the spending priority, so much of the NHS IT is outdated. Not only is modernisation required, but the NHS must also enable new ways of working and care delivery in the age of ever improving and cheaper technology, allied to internet and mobile connectivity.
Thus (as in private enterprises) the NHS has been undergoing a digital transformation to enable health and care to be delivered flexibly and remotely where necessary, well as to swiftly provide more detailed, accurate and timely information to both clinicians and patients.
Patients will be enabled to access medical information and advice without face-to-face contact. Better data will underpin clinical decision-making, vital research and government planning to help the NHS manage anticipated demand, as well as threats like those we are experiencing now.
There are lots of opportunities in healthcare and technology is set to be at the heart of innovation across all sectors and geographies. Without a doubt, this is a booming industry that investors should take note of. For further information on the specific prospects of certain health-tech companies, take a look at the FinnCap report, ‘The Joy of Techs’ that analyses this further. N.B. Please note that this is subscriber access only
Lorne Daniel is director, Research at finnCap