Medication Adherence Tech: A dynamic and crowded market, but where are the winners in the space? (Part 1 of 2)

By Dan Gebremedhin and Kara Werner
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About the Authors:  is a Principal at , an early stage Health Technology and Services focused VC Firm. He is a practicing physician at the Massachusetts General Hospital, previously served as a Medical Director at the Harvard Pilgrim Health Plan, and spent five years as an entrepreneur in the Health IT Industry. 

is a current member of the 2017 . While completing her MBA at the Kellogg School of Management, she interned at Healthbox and athenahealth MDP. Prior to Kellogg, Kara was a strategy consultant at Accenture, specializing in brand strategy and commercial model redesign for pharmaceutical companies.

Part I:

This is a two-part blog sharing our perspective on health tech opportunities in the medication adherence space. We’ve evaluated several investment opportunities over the first 24 months of our current Flare I fund and wanted to share our findings. In the first part, we will identify many use cases for medication adherence tech and profile several venture-backed startups attacking these areas. In the second part, we’ll address macro factors that are limiting widespread adoption and will consider potential commercial models that can win.

Introduction

Medication nonadherence is . Millions of patients per year do not fill their medications or take their medications as prescribed, costing the U.S. healthcare system  annually. Whether it’s for a simple infection or a life-threatening condition, patients on average take only . Additional data show nearly of new prescriptions are never filled. This is estimated to cause approximately 125,000 deaths and more than 10 percent of hospitalizations per year.

The reasons for medication nonadherence are . In our survey of the market, the most readily identifiable and addressable factors are affordability of medication, inconvenience of fulfillment, forgetfulness/behavior, and inadequate reconciliation. There is a significant component to nonadherence that can’t be understated. We’ve written separately about the importance of treating patients’ co-morbid behavioral health conditions when attempting to improve medical outcomes.

The market opportunity outlined above has motivated nearly to develop software/hardware solutions to attack these problems. Despite early commercial activity and hype, academic studies have about the effectiveness of this tech. Several studies, often , suggest that tech solutions positively impact patient behavior and improve adherence. Conversely, leading academic expert critics such as have published large, academic medical center based RCTs that stoically suggest tech solutions have or health outcomes. Notwithstanding the academic debate, we believe the economic implications of medication nonadherence will drive the market to look for tech enabled solutions to this complicated problem.

Company Landscape

In the below sections, we profile over 25 med adherence tech companies categorized by the major factor they’re addressing. Understandably, any start-up taxonomy is imperfect as some companies evolve from single point solutions to platforms with multi product portfolios.

Cost: Cost is a that many companies have identified as a marketable opportunity to improve access to medications. (Francisco Partners, Spectrum Equity), founded in 2011, came to market connecting consumers to coupons to pay for medication. Since their initial D2C offering, along with of drug information company (Boxgroup, SV Angel), GoodRx has moved into B2B offerings working with , , and to expand real-time cost info. (8VC), a fast follower in the D2C discount card market, to transfer “” traditionally intended for payers to consumers.

(Undisclosed Angels) has developed a tool for employers and payers that evaluates a patient’s medication regimen and for switching to lower cost alternatives. (Summation Health, StartUp Health) is another early stage health tech company providing prompting clinicians to prescribe the lowest cost, appropriate medications at the point of care.

Keys to Win: The early market leaders in this space have jumped ahead by aggregating discounts that were not readily available to consumers who chose to transact outside of the traditional insurance system. However, there is a significant remaining opportunity to market to insured individuals who still struggle with the cost of their prescriptions. To capitalize on this larger market opportunity, companies will need to excel in obtaining and delivering real-time drug cost information in the context of insurance/PBM product eligibility. Further, there is significant opportunity to bring this cost information to the point of care and influence upstream clinician decision making.

Forgetfulness / Behavior Modification: Over 80 million Americans have multiple chronic conditions, causing a and complications. There are several companies that are adopting various form factors to try and reduce this complexity. An early entrant into this market was (Octopus, Merck, 7wire). Launched in 2012, the company developed a that alerted the patient and other stakeholders when doses were missed. The company has since broadened their offering to provide for patients on behalf of manufacturers.

There are a score of companies developing smart pill boxes, bottles, and caps such as (Trinnovate), (GE Ventures), and (Ben Franklin Technology Partners) that alert patients and other stakeholders when doses are missed. Many of these companies have partnerships with pharmacies to manage their form factor supply chain that sometimes competes with a pharmacy blister pack product. (Khosla) is taking an innovative AI-robotic based approach with , who acts as an intelligent assistant in guiding therapy.

There are a group of companies who are working on more technical means to ensure a patient is taking their medication. (Harbin Gloria, Yuan Capital) is notifying the patient and care team when a patient forgets to take their medication via ingestible sensors. (New Leaf) and (Kapor, Dreamit) are using technology to automate (DOT) for special high-interest populations such as clinical trial groups and communicable conditions like Tuberculosis therapy. There are a group of companies that are focusing on using connected devices, such as inhalers, to monitor use of respiratory medications.

Two major players in the space are (Safeguard Scientifics, Social Capital) and (Three Leaf, Zaffre, StartUp Health) who anticipate moving from adherence monitoring to .

Finally, companies like (KPCB, Express Scripts) and (Mansa Capital) are attempting to pre-empt forgetfulness by changing patient behavior through incentives. By creating interactive software products that have elements of and deliver for adherence, the companies have published studies suggesting and change in patient behavior.

Keys to Win: Given the ubiquitous complexity of polypharmacy in patients with chronic conditions, this category has the most market entrants and inherent competition. To separate from the pack, market leaders should aim to not only track adherence, but identify causative factors, and integrate interventions into enterprise workflow to achieve long term ROI. You will hear many of the companies in this space shift their focus from medication adherence to medication “management,” which implies a broader set of capabilities to affecting clinical outcomes.

Medication Fulfillment: Given that millions of prescriptions remain unfilled per year, several companies have looked to fill the fulfillment void through business models ranging from vertically integrated mail-order pharmacies to on-demand delivery services. (Astral, CRV, Founder Collective), founded in 2013 at an , was an early entrant into the space delivering dosage packets targeted to patients with multiple medications. (Thrive Capital) and (Greenoaks, Jackson Square) are examples of focused on improving the consumer experience and competing directly with brick and mortar retail pharmacies. (Lux Capital, Collaborative Fund) works with payers/providers to offer as an added benefit to patients. Given the high cost of fulfillment and logistics services, there is also a growing graveyard of now-defunct start-ups in this space such as (GV, Formation 8).

There are a growing handful workflow solutions to streamline prior authorization processes, given the successful exit of (Francisco Partners) to . A notable entrant in this space is (Qiming, GV, SR One) which provides workflow solutions for specialty providers. Finally, recent buzz was created when Amazon, with its dominant fulfillment and logistics infrastructure, of entering the pharmacy fulfillment space.

Keys to Win: Given the business of pharmacy is largely a distributor model that experiences compressed margins as each additional middleman touches the product, there is a strong desire to move further up the value chain and vertically integrate into a full-fledged pharmacy. That said, attempting to compete with incumbents on cost, scale, and logistics infrastructure is likely a losing battle. Those entrants who have had success have focused on user-centric design, consumer driven experience, and novel forms of member acquisition. As large incumbents look for differentiation in what is a largely commoditized market, next-gen consumer first models could present unique growth opportunities.

Medication Reconciliation / Care Coordination: When a patient’s medication regimen changes, exists to coordinate and communicate the change, a process known as . This inadequacy is exacerbated in , and without a to inform all stakeholders about medication changes, costly medical . To prevent these complications in its , CMS has created a around a reconciliation practice known as (MTM). To maintain quality, CMS directly reimburses MTM activities and ties to MTM measures through its . Several legacy players such as and , dominate this market with servicing Medicare Advantage plans.

The opportunity to service, and potentially disintermediate incumbents in the medication reconciliation space has prompted startups to enter the space. One of the earliest health tech entrants into the medication adherence space was (Aberdare, West Health). RxAnte pioneered a to identify which patients were most likely to be non-adherent, then suggested care coordination interventions to address causative factors. RxAnte was initially acquired by , but ultimately through a subsequent acquisition. (Undisclosed Angels) is a tech enabled services MTM company that provides and safety assessments powered by an analytics and telehealth platform. (Activate, LiveOak) provides a for independent pharmacists to to their respective customer populations.

Keys to Win: The platform nature of providing medication reconciliation services on behalf of health plan customers enables incumbents to be the ultimate aggregators of various forms of adherence tech. We believe that the reconciliation platforms will face buy or build decisions as they move from simply monitoring adherence to impacting it. The reconciliation players are best positioned to take risk on improving outcomes in the current reimbursement landscape, and we believe will look to the startup landscape to acquire technologies to help them succeed.

Conclusion

Many of these companies are fulfilling vital needs along the continuum of the patient journey. As venture investors with a , we are looking for companies that not only drive significant utilization and engagement with great products, but also develop long term customer relationships by providing a series of adjacent products and services. Given the fragmented market in adherence tech, we anticipate there will be a move towards consolidation and verticalization. Those incumbents with financial responsibility for population outcomes will look to acquire or closely partner with the best of breed solutions from the above categories.

In Part II of this series, we will evaluate the commercial models to win in the adherence tech industry and contemplate strategies that entrants can use to gain widespread adoption.

Click here to read Part 2.

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