Healthcare is one of the most highly regulated industries in the world, and rightly so – standards are necessary to keep people safe and healthy. Yet for startups it means that entering the market and competing with incumbents can be exceptionally difficult, and innovation has suffered as a result.
But now, Germany has moved to accelerate the digitalization of healthcare, giving healthtech companies and investors significant new opportunities and unprecedented access to a market of 73 million users.
In a model that’s the first of its kind in Europe, the Digital Healthcare Act (DVG) includes provisions for doctors to prescribe apps to patients and for their statutory health insurance to cover the cost. Reimbursement will be easier for companies with digital health solutions. And the government is extending its investment of €200 million per year in its innovation fund until 2024.
“This is completely changing the game for many startups and making room for new buyer journey paths to blue ocean opportunities,” says Jan Skóra, Senior Product Design Consultant at Netguru.
What changes does the Digital Healthcare Act introduce?
The goal of Germany’s Digital Healthcare Act is to stimulate the innovative power of the country’s healthcare system and promote digital transformation. In a nutshell, the main changes the Act introduces include:
- Healthcare providers can now prescribe medical apps and the cost will be covered by the country’s public health insurance.
- Telehealth will become routine and doctors will now be able to advertise services on their websites.
- By January 2021, all insured patients will have access to an electronic health record.
- Paper-based prescriptions and communications such as doctor’s letters, faxes, and certificates of disability will be made electronic.
- Anonymized patient data will be available to research organizations and universities for research purposes, promoting new discoveries in drug and therapy development and advanced machine learning solutions.
- Pharmacies and hospitals will be required to connect to the Telematics Infrastructure, a secure communication network.
- Financial support for innovation and digitalization is ongoing, with €200 million per year available until 2024.
Dominik Sievert, Founder and Managing Partner at inveox – a young medtech company striving to make cancer diagnoses faster, safer, and more reliable – welcomes the changes.
“The new Digital Healthcare Act (DVG) is a necessary step in modernizing Germany’s healthcare system and improving the quality of care for patients,” he says. “We believe the biggest opportunity in the digitalization of healthcare actually lies in the data itself and the analysis of it to improve our healthcare.”
Nicolas Weber, Founder at medneo GmbH – an innovative company offering clinical images on demand, with over 20 diagnostic centers in Germany, Switzerland, and the UK – agrees that the changes are positive on many levels.
“First of all, it encourages hospitals, doctors, and the overall healthcare industry to think more in digital terms,” he says. “Secondly, the industry will – with being open to more digital solutions – have to optimize workflow processes in the radiology sector.”
The current state of the healthtech market
The global digital health market – which includes telehealthcare, mHealth such as wearables and apps, health analytics, digital therapeutics (DTx), and digital health systems like electronic health records (EHRs) – was valued at $106 million in 2019. Its value is expected to increase six-fold in the coming years, hitting $639 million by 2026.
Although growth in the market is strong, healthtech companies are required to comply with strict regulatory requirements around efficacy, safety, data security, and data protection and can face lengthy approval processes. As a result, some investors have admitted avoiding healthcare products altogether due to the added complexity and potential for failure.
This is a key issue that Germany’s Digital Healthcare Act aims to address. Simplifying the approval process and opening up access to a large market should increase interest among investors.
Drivers of growth in the industry include rising demand for medical care, a growing number of smartphone users, and increased public awareness around the importance of health and fitness. At the same time, the COVID-19 pandemic has caused a spike in demand for digital health technologies such as telemedicine.
Interestingly though, while COVID-19 has moved the industry forward in terms of adoption, it has mostly been in well-known services. For example, when booking a doctor’s appointment, the patient was already familiar with ‘the product’.
The only change is that it’s now provided in a different format. Therefore, services that can be easily converted to digital will have the greatest potential. More innovative solutions will still need to work their way along the innovation curve.
In terms of established players, the market is highly fragmented – the top five companies account for less than 25% of the overall market share. Top companies include GE Healthcare, Allscripts Healthcare Solutions, Cognizant Technology Solutions Corporation, IBM, and Koninklijke Philips.
Who are the key disruptors in healthtech?
Innovative solutions making an impact in healthtech tend to fall into five broad categories:
- Telemedicine – remote consultations, care, and advice using telecommunication technologies.
- Symptom checkers to automate triage (virtual triage).
- Digital therapeutics (DTx) – therapeutic interventions driven by software programs to prevent, manage, or treat diseases.
- Digital behavioral biomarkers – using passively collected data on users’ behavior from wristbands, smartwatches, and smartphones to detect health issues.
- The use of Big Data and AI in clinical decision support systems.
Despite the challenges of breaking into the healthtech market, the following companies have introduced products and services that are changing the dynamics of the industry:
Leading the charge is mySugr, a company that aims to improve the lives of people with diabetes. mySugr allows users to collate all of their therapy data in one place and also integrate the platform with their blood glucose meters. Since the first version of the app was launched in 2012, it has attracted more than two million users in over 70 countries.
Clue is a menstrual tracking app and health resource that aims to empower women and lets users track their periods, fertility, cycle patterns, and symptoms alongside access to educational content. Launched in 2013, the app has now grown to accommodate 12 million monthly users, and the company has secured almost $30 million in funding.
Pear Therapeutics is a market leader in Prescription Digital Therapeutics (PDTs) – software used to treat diseases. The company is transforming medicine with clinically validated software-based therapeutics that “provide better outcomes for patients, smarter engagement and tracking tools for clinicians, and cost-effective solutions for payers.” Founded in 2013, Pear has since successfully closed three rounds of private fundraising, totaling more than $134 million.
Capitalizing on the abundance of data generated by smartphones and connected sensors, Evidation is a health data analytics company whose mission is “to enable and empower everyone to participate in better health outcomes.”
With more than three million individuals using the company’s app to form a diverse pool of virtual research participants, Evidation is transforming how diseases are identified, treated, and monitored. The company is backed by 14 investors and has raised funding totaling $106 million over eight rounds.
Part of the global Docplanner Group, ZnanyLekarz aims to enhance the patient journey by making it easier to find a doctor and book an appointment. The company also helps doctors manage their practice and improve their online presence. With a presence in ten countries around the world, Docplanner Group serves more than 30 million patients every month and is trusted by over two million doctors.
Infermedica is an AI-powered solution that helps guide patients to the right care at the right time with its symptom checker and triage services. Founded in 2012, the company has performed more than seven million health checkups and boasts 93% accuracy in its diagnostic engine. Infermedica has secured more than $15 million in funding to date.
Telemedico provides an international platform that helps to connect patients with doctors for consultations via video call, chat, or telephone 24 hours a day, 365 days a year. Featuring access to doctors with more than a dozen specialties, the company aims to offer fast, comfortable, and affordable treatment. Telemedico was founded in 2014 and has since won multiple awards for innovation.
Looking to the future
In my opinion, getting to the point where your product or service is reimbursed is the holy grail of digital health. Before, it was very hard, only possible with private insurers, and the process took years. Now, the public insurance market is open to startups as well.
That said, it’s not yet clear how soon companies will see the effects of the Digital Healthcare Act. The process is still lengthy as you need to prove the effectiveness of your solution and ensure safety for patients, but I believe the chances of being reimbursed are much higher.
Dominik Sievert also highlights that the draft Future Hospital Law (KHZG) announced by the Federal Ministry of Health on 2nd September 2020 is another welcome addition.
“It enables hospitals to invest in digitalization and ensure optimal patient care,” he says. “Patient safety is of utmost importance to us. As such, we stand behind both these laws as they drive the digital transformation of Germany’s healthcare system forward for the benefit of patients.”
Incumbents will need to consider how new entrants into the market will affect their strategies to avoid being outpaced
“These companies are offering solutions that could help incumbents survive in the new world—whether they become partners or disrupt them,” according to a report by Deloitte.
The COVID-19 pandemic has certainly highlighted the need for digital innovations. While Germany has been slow to adopt telemedicine, demand skyrocketed in the wake of the crisis. Kry, a European telehealth startup, reported a 350% rise in the number of doctors using its services between February and March 2020.
Whatever the future holds, the actions of Germany’s government will undoubtedly create numerous opportunities for healthtech companies and hopefully inspire other countries to open up their healthcare systems to digital innovation.