Going back to basics to advance digital health
Embracing the potential of digital health
Digital health is revolutionizing healthcare—a claim substantiated every day by innovators and investors alike. Whether it’s consumer-facing technology like mobile healthcare apps, fitness trackers, wearable devices, telehealth systems, software-as-a-medical device (SaMD), clinical decision support (CDS), or AI-driven health IT systems, there is little dispute that digital health promises to drive earlier diagnoses and interventions, improve outcomes, support more engaged patients, and positively impact the overall quality of human life.
Regulatory and financial challenges in the digital health ecosystem
Despite many years of investment and fanfare in the digital health space, innovators remain waiting for the impact and investors for the value. In 2023, digital health startup funding was at its lowest since 2019. This “new normal” is characterized by fewer deals, smaller deal sizes, and fewer investors, according to a report from digital health strategy group and venture fund Rock Health. This significant contrast from the record-setting digital health funding year in 2021, which saw $29.1 billion, highlights how many companies have struggled to navigate insurance coverage issues, securing new monetary avenues, labor and supply shortages, cyber security, and data privacy concerns. Throw into the mix the consistent flux around the role regulatory oversight plays, and perhaps it is no surprise the state of the digital health ecosystem is where it is today.
Numerous digital health organizations are undergoing significant restructuring steps to optimize processes or, like many in 2023, having to close their doors and file for bankruptcy. For example, Babylon Health, perceived as a leader in AI-based telehealth services and celebrated as a forward-thinking force in healthcare with significant scientific contributions, ultimately fell to financial pressures and regulatory concerns over the safety of its AI chatbot. There has been similar churn with leading global life sciences companies as Biogen—which launched in 2021 with the lofty goal of merging biology and technology—shut down its Global Digital Health unit and exited a joint study with Apple to analyze iPhone and Apple Watch sensor data and metrics to measure cognition wellness. In a statement, a Biogen spokesperson cited “Biogen Digital Health is evolving. We are currently assessing our digital strategy and potential for future investments in the space.”
Declaring commercial aspirations for digital health
In contrast, AstraZeneca announced in late 2023 that it was establishing a new business unit focused on digital health solutions called Evinova. While many pharma companies have publicized their expensive, resource-consuming partnerships and investments in digital health over the last decade, this is a bold declaration of a long-term vision with commercial aspirations for digital health within an established pharma company. Given the long years of investment with limited return on value, we expect to see similar declarations across the industry—whether to announce withdrawal or a double-down in the digital health space, as companies become more forthcoming in their vision and discerning in their investments moving forward.
Regulation's role in the future of digital health innovation
All eyes from digital health startups, investment institutions, global pharmaceutical companies, and clinical care teams alike will again focus on regulation’s role in 2024 and beyond. In areas often cited as the pinnacle are a class of digital health solutions commonly referred to as SaMD, comprised of in vitro diagnostics (IVDs) and CDS systems that perform medical functions and are an integral part of decision making along the entire clinical care continuum for teams and their patients. These pioneering technologies detect the risk of disease, predict the progression of disease, and enable the right treatment decision at the outset.
In September 2022, the FDA released its revised role in the regulation of CDS, mobile medical applications, and medical device data systems, which broadened regulatory oversight over software tools that had previously been exempted. In Dec 2022, the FDA also updated its Digital Health Policy Navigator, a tool developed by the agency’s Digital Health Center of Excellence, to help the industry understand what innovations would be subject to regulatory oversight. In 2023, we witnessed the debate over whether the FDA’s revised regulatory oversight violates Congress’ intent in enacting the 21st Century Cures Act. Regardless of the position taken, we believe the impact on the innovators from developing these software tools continues to be significant into 2024 and beyond.
A back-to-basics approach
It is clear digital health is no longer in its infancy. Life sciences executives are laser-focused now more than ever on how to meld digital health into their broader organizational strategy. However, given the reduced investor funding, economic climate concerns, and uncertainty on regulation, we’ll see an overall tighter control on budgets, a renewed focus on measurable clinical and financial value, increased mergers and acquisitions or perhaps closures entirely, and a continuation of layoffs.
The digital health approach for 2024 and beyond will highlight value from inception. This back-to-basics strategy will reset the evolving digital health ecosystem with transparent, explainable, and repeatable processes, ensuring they are audit-ready with a human-centered focus on security, privacy, and regulatory compliance.
Slalom contributors: Anh Duong, Alvin Lee
