• Roland Berger study: Between 2015 and 2020 the digital health market is set to grow from under 80 to over 200 billion dollars
• All market players along the value chain are affected by digitization
• Tech giants and non-industry providers are penetrating the market with innovative business models
• Incumbent market players need to open up to digitization both culturally and structurally

Munich, September 28, 2016

The digital transformation of the health market is gathering pace. Experts from Roland Berger anticipate more than a doubling of the global market volume from just under 80 billion dollars in 2015 to more than 200 billion dollars by 2020 – at average annual growth rates of 21 percent.

"We are currently observing a great deal of momentum in the health market. Young start-ups are coming in with new business models," explained Roland Berger Partner Thilo Kaltenbach. "We are also seeing huge amounts of investment. In the US alone, over 4.5 billion dollars of extra financing went to healthcare start-ups in 2015. Europe remains highly attractive for the start-up scene, too. More than 20 incubators and numerous industry initiatives combine to create a really good environment. Policymakers are also investing: the European Commission's Horizon 2020 initiative, for example, makes 600 million euros available for Europe's digital future."

These new providers are attempting to secure themselves a share of a lucrative market with innovative, digital business models. As they do so they become direct competitors for incumbent firms all along the value chain. All market players would therefore be well advised to lose no time in getting ready for digitization, in line with the findings of the Roland Berger study "Digital and disrupted: All change for healthcare – How can pharma companies flourish in a digitized healthcare world?"

Mobile communications accelerate the pace of digitization in the healthcare industry

"Digitization is adding whole new segments to the health market," said Roland Berger Partner Morris Hosseini. P4 medicine stands for medicine that is predictive, preventive, personalized and participative. Some of its potential uses include facilitating the early detection of cancer and helping in the case of immunological indications. "P4 medicine opens up brand new business opportunities at a stage before the treatment of sick patients even becomes necessary," explained Hosseini.

The segment for mobile services, such as apps for smartphones, is experiencing annual growth rates in excess of 40 percent and is driving the industry's digitization particularly strongly. Start-ups are making it possible, for instance, to have certain illnesses diagnosed by measuring general health-relevant data. Being a constant companion to many people, smartphones can record blood pressure, body temperature, sleeping habits and more. An app can then make an initial diagnosis and advise its owner to visit the doctor if required, and can even recommend suitable medicine. This would be one way of achieving the early diagnosis and treatment of an overactive thyroid, for example.

Digitization affects the entire value chain

"Digitization is impacting the health market in many different ways. These range from diagnoses and treatments, to information-guided therapy, to applications based on metabolomics and microbiomics, and even stem cell therapy through genome editing on the CRISPR-CAS9 platform," explained Morris Hosseini.

Every company in the health market is therefore affected by the digital transformation, as are doctors, pharmacies, patients and governments. Pharmaceutical firms, for their part, are teaming up with tech giants to make new products that can test the effectiveness of their drugs. The digital analysis of health data could enable patients to benefit from individual medication without having to consult a physician or pharmacist. For medical device manufacturers, the future may lie in connectivity. Devices exchanging data with other devices and featuring real-time monitoring could identify the key areas for after-care following a surgical procedure.

"We may well see new business models springing up along the entire value chain," predicted Kaltenbach. "Patients can already get doctors' opinions over the internet today. With additional data, complete online diagnosis with new payment models could be a possibility." Pharmacists could use 3D printing to produce medications in personalized doses. Insurance companies and governments also need to gear up for the new digital reality. "Electronic patient files enable faster and more efficient medical treatment and can shave 80 billion dollars off the cost of the healthcare system worldwide in the coming five years," said Thilo Kaltenbach. "Not only that, but the digitization of data and services will effectively remove the national borders within which healthcare systems currently operate. Insurers should therefore give their product offering a more international outlook and governments should harmonize their national regulatory frameworks."

Spot the opportunities of digitization and turn them into reality

Aside from digitization of the value chain, competition from new market players represents the biggest challenge for established providers in the health sector. Supported by the new technologies, non-industry players are gaining access to specialist knowledge that only the industry itself used to possess.

Start-ups are therefore not the only competitors emerging – tech giants are also among them. Firms in the healthcare market need to gear up for that – and fast, cautioned Thilo Kaltenbach: "Incumbent market players need to open up to innovation culturally and structurally, and they should actively press on with the digitization process now, so as not to fall behind new players. They would be best served by formulating an individual digital strategy and taking the right measures to consistently realize it."