Grim Reaper…

Do you know how many people died worldwide last year?

According to the Ecology Global Network, 55.3 million people died which, one might say, compares “favorably” to the 131.4 million who were born (~250 births every minute) globally. The causes of death, while numerous, provide a somewhat morbid roadmap as to where one might expect future innovation. Venture investors look for technologies that will have the greatest impact on the largest number of people (“big market syndome”). Dow Jones VentureSource reported that the two most active biotech sectors in 2017 were the immuno-system and blood categories, which together raised $5.3 billion.

In particular, biotech VCs have done a marvelous job over the last few decades backing entrepreneurs who are developing therapeutics to address many of the most prevalent diseases. And now here comes the healthcare technology sector (software and services), which saw $5.8 billion invested in 2017 per Rock Health data. The promise of these novel technologies is to better manage the contributing conditions to underlying diseases (“social determinants”) and to also provide adjunct therapies (“digital therapeutics”).


Another approach to how best frame the opportunity for VCs is whether the disease is avoidable versus unavoidable. Or communicable versus noncommunicable. Arguably, healthcare technologies should have relatively lower development costs and may have greater impact on the avoidable conditions. These technologies promise to meaningfully improve the overall healthcare system through which we all navigate, as well as modify individual behaviors that may exacerbate underlying disease conditions.

The dramatic increase in mortality rates for conditions that may, in part, be addressed by compelling new healthcare technologies now under development has not gone unnoticed either. Painfully, the devastating opioid crisis and surge in suicides has caused entrepreneurs to scramble to develop novel behavioral and addiction treatment platforms. One might hope that solutions coming to market now may turn the purple bubbles to orange, much like the biotech industry has done to a host of other diseases (see below). Interestingly, the Census Bureau blames, in part, the dramatic decline in the labor participation rate from 67% in 2000 to 63% today on the opioid crisis.

Mortality Disease

Of course, a population is not static. The United States has over 325 million people and a collective household net worth of $98.75 trillion (ratio of net worth to disposable income is 7:1). The intersection of health and wealth management is increasingly important as clearer insights emerge about the impact of wealth on health. The U.S. savings rate declined markedly from 5.98% in 2016 to 3.74% in 2017, making unexpected healthcare expenditures particularly perilous for many. The top 1% in the U.S. accounted for 39% of household net worth, according to recent quarterly Fed data (it was 30% in 1989). Clearly financial pressures will reduce investments a given population might make in its own well-being.

Frustrating to many U.S. healthcare economists is how to account for the phenomenon that the significant investment in healthcare in the U.S. is not directly leading to better relative life expectancies. Obviously, there are many confounding factors at work here (environment, diet, genetic) but one would naturally expect that a better capitalized healthcare system would generate relatively better life expectancies. More innovation will be needed to make the U.S. system more intelligent and anticipatory; that is, intervene earlier, often before there is even a specific issue (a “health expectancy” curve that measures quality of life over time is needed).


There are hidden costs with such an expensive healthcare system which are only now starting to be understood. A recent Kaiser Family Foundation survey found that of all families struggling to pay medical bills, 29% ultimately suffered a significant long-term decline in overall household income. Those reductions in income were meaningfully greater than the actual direct medical expenses incurred. Interestingly, and somewhat unexpected, MIT research published in New England Journal of Medicine determined that only 4% of household bankruptcies were due to medical expenses (common perception is that number was closer to 50%), perhaps suggesting that families will ultimately pay medical bills before other bills.

The Journal of the American Medical Association recently reported that people who lost 75% of their net worth in a two-year period were 50% more likely to pass away in the next 20 years. The cost of healthcare looms threateningly over the most vulnerable members of society, such as those who are already below the poverty line, which happens to be nearly 20% of all children in the U.S. The long-term costs to society with having one-fifth of the population at risk of growing up in poor health will be staggering. Is there a connection between the concentration of wealth and the overall health of a population? May well be.



Socio-demographics will also play a significant role over the next few decades in the general health of the U.S. population. By 2035, according to the Census Bureau, the number of people over 65 years of age will be more than half the population. By 2045, Whites will be less than 50% of the population. By 2060, there will be 404 million residents, with 17.2% being foreign-born. While population growth rates have moderated in recent years, the complexity of the population will increase, adding significant new and unexpectant pressures on the healthcare system.

Innovations in artificial intelligence and robotics should assist the broader healthcare system to improve care at lower costs. In 2016, there were 6 million consumer robots sold in the U.S.; analysts predict that number will be 42 million by 2019, many of which will have healthcare applications. It will be interesting to see when the number of robots and humans “created” each year converge. Ironically, robots have an even shorter life expectancy than humans.


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5 responses to “Grim Reaper…

  1. Rather than just looking at health expenditure, it would be interesting to look at the relative cost of training a doctor, employing a doctor for 20 years, cost of a basket of pharmaceuticals, cost of nurses etc to determine if there is more money flowing through the system generally, rather than the specific treatments / population health is the problem. It’s likely to be a combination of factors but speaking as someone married to a PCP in the UK, if she were in Boston vs London, she would be earning more than 2x what she’s paid now against more or less equivalent living costs/standards.

  2. Todd Hixon

    Much of the biopharma investment from both VCs and industry is going into treatments that have dramatic benefits for small population groups at six-figure cost/patient. This can have a good ROI: people find a way to pay, as you point out. But it has little impact on population health. Improving population health requires a different kind of investment that the U.S. healthcare system resists, for various reasons. However, digital healthcare initiatives naturally address population health and are making progress.

  3. robmccray

    Michael – very well done, as usual. Based on 15 years experience with Alliance Healthcare Foundation I can confirm that there is a direct relationship among the three personal factors of education, wealth and health. With a mission to improve the health and wellness of challenged populations in our San Diego/Imperial counties region, we are more concerned with chronic disease and conditions causing early death than late-in-life diseases. Most of our investments are in social rather than healthcare enterprises. Some are intended to improve efficiency in healthcare and all are intended to minimize our beneficiaries’ need for healthcare services (beyond prevention).

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