Sector Dive: Enterprise Health & Wellness Tech Industry

Updated: Mar 18, 2021

The new era of patient-driven care is pressuring health facilities, pharmacies, and wellness providers such as gyms and spas to incorporate digital technologies into daily practices. To satisfy this increasing demand, innovative products such as data collection and analysis software, practice automation tools, records and information management, and patient and customer engagement solutions are emerging. These offerings help enterprises to provide better care, reduce costs, reach new markets and customers, and comply with regulations.

As of H1 2020, the enterprise health & wellness tech industry is valued at around $640 billion, and is projected to grow at a 14% CAGR, reaching $1.3 trillion by 2025. VC deal activity within the space has also spiked significantly as healthcare organizations, clinical trial organizations, employers, and policymakers adopt related initiatives.

In this article, we will focus on two fast-growing categories within the enterprise health sector: prescription tech and customer acquisition tools.

Prescription Tech

The prescription tech vertical is further categorized into three subsegments: pharmacy automation technology, e-prescription, and e-pharmacy. Players in this space focus on revamping the value chain of prescription receipt. Industry growth is mainly driven by improved digital infrastructure, a growing need to reduce medication error, and consumer and hospital demand. The market is estimated to grow at a 16% CAGR from $60.8 billion in 2019 to $150.7 billion in 2025.

Industry Drivers:

  • Improved digital infrastructure: Internet penetration, the growth of mobile applications, e-commerce, and improved healthcare IT has helped paved the way for the prescription tech market.

  • The shift toward decentralized pharmacies: In a decentralized pharmacy, a pharmacist positioned on a particular hospital ward performs both clinical and distribution services. As a result, different from a centralized pharmacy, more medications are kept within the medication room.

  • Ongoing efforts to reduce medication error: Medication and dispensing errors are recognized as leading causes of hospital readmissions across the globe. E-prescribers are emerging to solve this, which can decrease medical errors by eliminating handwritten prescriptions, providing decision support tools, and reducing fraud and abuse in the prescriptions of controlled substances.

  • Growing consumer demand in the face of the pandemic: There is a rapidly increasing consumer demand for e-pharmacies that driven by home delivery, discounts, and vast drug availability. E-pharmacies allow patients to avoid visiting a pharmacy in person, a valuable feature for the elderly and prevent spread of infectious diseases, such as COVID-19. It is expected that COVID-19 could drive e-pharmacy adoption.

Companies in the prescription tech segment raised roughly $22 million in venture funding in the second quarter of 2020, down from $45 million in Q1 2020. Deal count through H1 2020 has remained on pace with 2019.

Customer Acquisition Tools

The customer acquisition tools vertical is categorized into two segments: scheduling & marketing platforms and corporate distribution. Industry growth is mainly driven by the corporate distribution category and the growth of technological innovations, the shift in consumer behaviors, and cost-saving opportunities. The market is projected to grow at a 10% CAGR from $324.5 billion in 2019 to $588.9 billion in 2025.

Industry Drivers:

  • Expanding datasets and AI: AI is transforming the corporate wellness industry by creating personalized employee experiences. It allows employees to gain access to relevant and timely information. By leveraging big data, wellness programs will be able to create a better user experience based on the employee’s preferences and wellness goals.

  • Increasing use of online search and scheduling tools: Healthcare search engines have become prevalent, which has driven the need for services that can help healthcare providers optimize their online presence through SEO and other digital marketing strategies.

  • Ongoing corporate strategies to reduce healthcare costs: Corporate wellness initiatives have the great potential to reduce health-related costs, a powerful incentive to provide preventative health and wellness services.

Companies in the customer acquisition tool vertical raised roughly $85 million in venture funding in the second quarter of 2020, down from $523 million in Q1 2020. However, Q1’s large deal value was primarily due to ClassPass’ $285 million Series E, which lifted the company to unicorn status.

The COVID-19 outbreak exposed the inadequacies of health systems in addressing fast-spreading pandemics. Consequently, significant investment is expected into companies working to mitigate outbreaks. We here at Bridge Point Capital are committed to recognizing and seizing investment opportunities in this fast-growing field, while minimizing the investment risks for our investors. We expect a near-term spike in demand for businesses operating in this space, as organizations that focused on public health are urging for tools to help monitor and minimize virus spread. Given our current experience, consisting of creative value-creation strategies and our long-term focus in the full private equity investment process spanning from deal-sourcing to exit, we are here to establish a sustainable investment platform for our investors and partners.