Digitalization in Health Care

Healthcare has been slow to embrace digitalization, but growing tech investment and pricing pressures could bring disruption sooner than many expect. Digitalization has transformed virtually every sector, from retail and media to travel and finance; but it's been slow to gain a foothold in the healthcare industry, which is heavily specialized and regulated, walled in byzantine mazes of patents and intellectual property rights, and guarded by scientists, well-heeled research labs and some of the largest corporate players, from hospital systems and health insurers to Big Pharma. Digitalization in healthcare has been skin deep. Think fitness trackers, consumer electronic medical records, or outpatient management and billing. It has yet to, say, double the rate at which laboratories are creating breakthrough drugs or lower the cost of treatment and medications. Online retail hasn’t revolutionized how much consumers are paying for their prescriptions. Digitalization may hold the key to improving drug development and supply-chain management, delivering greater efficiency and transparency that can result in new, better and cheaper drugs and healthcare, with far-reaching ramifications for both tech and healthcare companies and investors, as well as regulators, policymakers, care providers, and patients fueling the populist backlash against rising costs.

Digitalization has already made its mark in some segments of healthcare, notably consumer wearables, medical devices and evidence-based medicine. Over the past couple of years, however, major tech companies have ramped up their investments in healthcare ventures, suggesting that they will broaden their reach. Although the biopharma sector hasn’t adopted digitalization in a meaningful way, changes here could have significant implications for society and investors. One way that digital can have a clear impact: helping the drug industry develop, test and get approval to market new medicines or devices. Wearable devices or mobile apps that track a range of physical traits to gauge how patients are doing in large clinical trials can bring in real-time data and updates. These are now largely collected via periodic visits to labs or hospitals, which are time-consuming, labor-intensive and costly. They also depend on human reliability, both in the trial patients and those collecting the data.

While the impact of digitalization on drug companies hinges on price transparency and technology integration, investors should also consider how the shift to digital has played out in other industries, including media, retail and travel. To be sure, a number of factors offer biopharma companies some degree of protection. Intellectual property rights to research results, drug compounds, treatment methodologies, testing, diagnostic and manufacturing patents, all present high hurdles to digital disruptors. The scientific expertise and regulatory knowledge required to develop, test and get approval to market drugs also give incumbents a significant edge.