With President Obama winning another four years in the oval office, the palpable uncertainty created by the Supreme Court ruling on the Affordable Care Act has been supplanted by a more stable outlook for the healthcare industry overall as 36 million more Americans join the health insurance ranks as we enter 2013.
So, with that issue resolved, what can healthcare startups and emerging growth-stage companies expect in 2013? Here are six trends to watch:
- The medical device tax will hamper innovation. The fiscal cliff deal maintained the 2.3 percent tax on medical devices that was set to take effect on January 1, 2013. That’s a big obstacle for any emerging growth company selling a medical device. Since the tax covers revenue, companies that are still growing sales now have another hurdle on the path to profitability. They’ll try to pass that cost on to others when they can, but in some cases, they’ll have to eat the cost themselves. This cut into revenue will reverberate within these companies and ultimately limit their ability to innovate.
- Healthcare IT remains a VC darling. This spring, Medicare will update its reimbursements. Rumors abound that Medicare will take a hatchet to a lot of services as well as doctor and hospital fees in order to save money. That could ultimately make healthcare IT companies, which don’t face these regulations, even more attractive to VCs.
- More opportunities for actionable diagnostics. Reducing the cost of healthcare will remain a priority in 2013, and healthcare reimbursements will likely remain in place for solutions that do so. VCs will favor actionable diagnostics, which do the job of doctors more efficiently and accurately by diagnosing a patient and prescribing a customized therapy based on the patient’s symptoms and biology, in some cases using DNA sequencing to pinpoint the most effective medicine, strength, and dose for a particular patient. Such technologies will trim healthcare costs by saving time and money that might otherwise be spent on multiple tests or one-size-fits-all therapies that aren’t always effective.
- U.S. venture capital continues extending to China. Six major U.S. venture capital firms now have operations in China, because they believe China offers better healthcare investment opportunities than the U.S. In aggregate, more than $1 billion of venture capital has moved over to China, where the regulatory process is quicker and reimbursement’s more generous, making it faster and easier to get products to market.
- Therapeutics need to go the extra mile. A decade ago, there was a simple, two-step process for a successful therapeutics company to prove it’s worth acquiring: Prove the drug works and identify who will buy your company. Now companies need at least Phase 3 data — the final trial before a drug is commercialized — to have a hope of being acquired. In the near future, these same companies will likely have to commercialize the drug and show that people are actually using it before anyone shows interest in an acquisition.
- Philadelphia grows as an epicenter for healthcare IT. The Philadelphia area is already rife with pharmaceutical and healthcare support companies, not to mention the area’s five medical schools. It’s evolved to the point that even West Coast healthcare technology shops, such as Symphony Health Solutions, feel the need to have a Philadelphia presence, and are opening local offices. It’s also nice to see local organizations working to build momentum behind this trend, including the University City Science Center.
Regardless of the regulatory obstacles that some companies might face this year, 2013 presents plenty of opportunities for companies to provide innovative new products and solutions to reduce the cost of healthcare, create actionable information for treatments, and bring healthcare closer to patients.