- Investors are pouring hundreds of millions into startups that are changing how we get healthcare by keeping patients out of doctors' offices.
- These companies are focused on treating conditions like hair loss and erectile dysfunction, or providing birth control. They combine a virtual doctor's visit with a prescription, and the treatments are shipped straight to the consumer.
- But some doctors are worried about what will happen if consumers treat their healthcare as a series of one-off encounters without getting a full checkup.
The future of medicine could look a lot like a box of generic Viagra showing up on your doorstep.
A wave of startups promising to diagnose and treat erectile dysfunction or hair loss, provide birth control, or straighten your teeth, all without leaving your home, has attracted $662 million in venture funding in the past 12 months, by Business Insider's calculations.
That's up from essentially zero in the prior year.
Investors are wagering that consumers will be increasingly willing to shop for healthcare the same way they buy mattresses or fancy wool sneakers online.
The healthcare industry as a whole has been jockeying to stay competitive as companies realize that patients, used to the consumer experience they're getting from Amazon and Netflix, have higher expectations for their doctor's visit.
That's been a driving force behind mega-deals like Amazon's acquisition of online pharmacy PillPack and CVS Health's merger with Aetna. On-demand healthcare options like urgent care have gained in popularity too.
"There are other ways of actually reaching these people and having their demand be met by a new healthcare or consumer offering," Ambar Bhattacharyya, the managing director of Maverick Ventures who leads the firm's healthcare investments, including a stake in generic Viagra purveyor Hims, told Business Insider.
But because these services tend to be focused on a particular condition, it has some doctors worried that patients may be overlooking their overall health. Will the care they're getting for erectile dysfunction, say, be as comprehensive as a checkup with a primary-care doctor?
"We do have concerns about that," Dr. Michael Munger, the president of the American Academy of Family Physicians, told Business Insider. "They're only taking into account one small aspect of the person as a whole."
Some of the services say they can bring care to people who wouldn't otherwise get any. Men are half as likely to go see a doctor regularly as women are, so finding new ways to reach them, such as through these services, could help close that gap.
"What we've found from a positioning standpoint is that men generally are acute-need-focused," Hims CEO Andrew Dudum said.
How it works
The companies offer a more convenient way of getting healthcare, typically combining an often virtual doctor's visit with a prescription they ship to you. There's no wait for an appointment and often no need to leave your house.
A few big factors are enabling their rise. Some of the treatments being offered, such as the erectile-dysfunction drug Viagra, are going generic, making them cheaper for consumers. And the rise of high-deductible insurance plans means people are on the hook for more of their healthcare costs. Legal changes are also making it easier to provide care online, and Medicare might even pay for it too.
The companies are building off successes that have happened outside the pharmacy realm, such as in the teeth-straightening market. Four years in, for instance, SmileDirectClub is up to 2,500 employees, with plans to hire another 1,000 by the end of 2018. And earlier this month, the company announced it had raised $380 million in a new funding at a $3.2 billion valuation.
"It's becoming the soup du jour," Eric Kim, a managing partner at Goodwater Capital, said. Goodwater has invested in companies like Simple Contacts and at-home diagnostics company EverlyWell.
Kim's been investing in direct-to-consumer healthcare companies since 2014, and what appeals to him about the business is that, because there isn't a physical component, the companies can focus on the consumer in a way that a brick-and-mortar doctor's office can't. Ultimately, he sees this being a good entry point into healthcare.
"What I think these direct to consumer businesses are good at over time is being the tip of the spear in your care journey," Kim said.
Andreessen Horowitz partner Vijay Pande said he's still looking for the right investment in consumer healthcare. Pande invests in biotech and healthcare firms, recently leading a $300 million round for a Medicare Advantage insurance startup. Pande said that people are getting more used to shopping around for their healthcare, particularly when they have high deductibles.
"People are very much incentivized to take charge of their own healthcare," Pande said. "That's actually a really important part of healthcare."
For now, the medications that the startups provide — with the exception of birth control — are paid for in cash, and patients can't use their insurance. That could limit the conditions that the companies can tackle when it comes to what patients are willing to pay for out of pocket — typically, cheaper generic drugs.
Other conditions might require more than just a conversation with a doctor to get to a diagnosis, like a testing kit or some other physical supplement that still needs to be worked out.
Simple Contacts' CEO, Joel Wishkovsky, was an early pioneer of online vision screening and is now expanding into birth control. He said that, if anything, the online model provides another choice for consumers, rather than replacing physicians. Patients can still opt to go in person to the doctor if they want, but if they'd rather have a virtual visit that option is now available to them in a way it wasn't a few years ago.
"I don't think you're going to have 100% utilization online," Wishkovsky told Business Insider. "It's reasonable to expect that over the next decade you have large chunks of patients doing things online."
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