Increasing Investments into Healthcare Innovation

In the past decade, technology has increasingly become more advanced across all sectors. Specifically, the healthcare field has chosen to adapt to this new landscape by implementing various technologies into how physicians work in everyday practice. In the past, large pharmaceutical and biotechnology companies typically have run the innovation in the industry. However, in recent years, a shift has seen individuals that would be working for large conglomerates and developing novel technologies there are starting on their own with smaller teams to ultimately create a product (similar to the concept seen ABC’s Shark Tank). These early stage companies are known commonly as “start-ups”, with cities such as San Francisco (“Silicon Valley”), Boston, and New York City acting as hubs for innovation within healthcare and biotechnology (Philippidis). In fact, venture capital firms, investment firms that are providing money for start-ups and seed companies, have progressively become more intrigued by the mass breakthroughs within medicine.

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UPMC Presbyterian [Photograph].
In only the first half of 2018, nearly $11 billion was invested into healthcare startups, putting the industry’s start-up companies on pace to becoming a part of the med-tech’s largest investment year (Lagassse). By comparison,  in 2017 alone, $15 billion dollars were invested into healthcare-based start-ups. 2018 is well-above the quarterly pace to break this record, with the second quarter alone of 2018 reaching approximately thirty “mega-rounds”, which is when the funds for a company exceeds $100 million. The biotechnology industry as a whole has seen the largest rate of investments consistently when compared to other large sectors (10 statistics).

Much of the funding in the space is going towards medical therapeutics companies, specializing in highly innovative fields including stem cell development, surgical robotics, and three-dimensional printing. And while private investors are leading the path in these investment opportunities, many hospital systems are starting to take notice. Several extensive hospital networks, including Kaiser Permanente, the University of Pittsburgh, and New York – Presbyterian, have created their own venture arms to broaden their reach to facilitate technological progression into their own hospitals (Where Hospitals are Investing). These hospitals have invested into a variety of fields, from medical devices and diagnostic tool investments to the consolidation of smaller hospitals into their hospital system (Where Hospitals are Investing).  As opposed to a regular venture capital firm, early stage companies sometimes prefer giving investment opportunities to hospital-based firms because venture firms sometimes pressure the companies to look for an “exit opportunity” after a few years so that the venture firm can maximize its profit (Modern Healthcare article).

On the other hand, investments made by a hospital into a company is primarily done to increase the efficiency of the hospital while simultaneously improving patient care in the long-term (Barkholz). For example,  the University of Pittsburgh Hospital System’s (UPMC) invested in Vivify Health, a software development company that is innovating the digital health industry and attempting to increase accessible care (Barkholz). When  Vivify chose UPMC and a couple of other non-venture fund investors, they dedicated themselves to helping physicians in practice use their system. Currently, over 600 hospitals use Vivify (Barkholz).

There is a long road ahead for physicians being able to implement the current technological advancements into their everyday practice. However, the visionaries that currently exist in health-based technology have big dreams for the future. While many of the inventions in medicine right now definitely seem far-fetched, they are much closer to coming into fruition than they would without the assistance of venture investments.

Edited by Jin Yoo.

References

Barkholz, D. (2017, April 8). Hospital-based venture funds bet big on health startups. Retrieved from https://www.modernhealthcare.com/article/20170408/MAGAZINE/304089896

Healthcare venture capital soaring toward $15 billion in 2018. Retrieved from https://www.healthcareitnews.com/news/healthcare-venture-capital-soaring-toward-15-billion-2018Oliver, E. (2018, February 21).

Philippidis, A. (2018, October 31). Top 10 U.S. Biopharma Clusters. Retrieved from https://www.genengnews.com/lists/top-10-u-s-biopharma-clusters-2/

Where Hospitals Are Investing And Acquiring In Private Markets. (2017, July 18). Retrieved from https://www.cbinsights.com/research/hospitals-providers-startup-investments-acquisitions/

10 statistics on US venture capital funding in healthcare. Retrieved from https://www.beckersasc.com/asc-turnarounds-ideas-to-improve-performance/10-statistics-on-us-venture-capital-funding-in-healthcare.html

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