Healthcare applications stand out in a time when technology is transforming every area of our lives and offer a glimmer of hope for better access to and control of our health. Healthcare app companies could face a difficult environment beneath the hopeful surface. Healthcare app businesses can find themselves heading for insolvency rather than clear seas due to several causes.
Such is the case of Babylon Holdings Limited, a company with its headquarters in the UK that has been battling for months to get financing for its operations. Last Monday, the digital health startup filed for bankruptcy protection on behalf of two of its American subsidiaries. Since Babylon is requesting Chapter 7 relief, it intends to sell assets rather than make an effort to reorganise.
According to a recent announcement from Babylon, the previously announced transaction planned by AlbaCore and MindMaze for a business combination of Babylon’s key operating subsidiaries with MindMaze would not go forward.
Software development, quality control, regulatory compliance and continuing upgrades must be heavily financed in order to create and sustain healthcare apps. The company’s financial viability might be at risk if development expenditures exceed anticipated income or if maintaining the app becomes too expensive.
Another case of financial struggle is Pear Therapeutics. Despite the efforts to have three FDA-approved apps and although patients and doctors were both eager to recommend digital therapies, these seem to not be enough, as payment for therapies that are clinically required may be refused by payers, such as Medicare. In 2022, according to the company, more than 45,000 prescriptions for Pear’s digital therapies were issued; however, only about half of those were filled and the business was only able to recoup money for 41% of them.
In order to dominate the market, these corporations were encouraged to grow to their greatest size, but now that interest rates are rising, they are having difficulties, while medtech companies have no motivation to buy them out yet.
The road to success is filled with obstacles that can cause financial instability and even bankruptcy, despite the fact that healthcare applications claim to improve our well-being and make managing our health easier. Successful healthcare app companies must not only create cutting-edge products but also have robust plans to withstand the financial storms that threaten them.
The healthcare sector is subject to outside influences such as alterations in patient behaviour, regulation changes, or modifications to reimbursement. Healthcare app companies must be flexible enough to adapt to these changes, as unexpected market changes might derail plans for income generation and put the company’s finances in danger.