Direct-to-consumer health: Will it stay or will it go?
May 14, 2021
12 min read
The expanding ecosystem of DTC health brands and the shift toward increasingly complex care
Despite the current energy and institutional investment in direct-to-consumer (DTC) healthcare, just a few years ago industry experts warned that the DTC bubble would soon burst. At the time, commonly cited factors included:
- The change-averse nature of healthcare providers—especially connected to provisioning care and interacting with software systems
- The high cost of patient acquisition
- The challenges around maintaining patient engagement over time
- The inherent challenges of digital continuity of care
However, since the onset of the COVID-19 pandemic, the world of virtual healthcare has experienced explosive growth, with particular success among DTC companies. These digital healthcare companies offer innovative solutions to age-old problems that have plagued healthcare in the US market.
The birth of direct-to-consumer healthcare was dominated by the model of selling generic drugs for specific health concerns to consumers. Companies like Ro and Thirty Madison, having raised $876 Million and $70 Million respectively, pioneered this model with a variety of pharmaceutical brands. Take Keeps, a pharmaceutical brand under Thirty Madison that focuses exclusively on men’s hair loss. Keeps allows men over 18 who are struggling with hair loss to consult a licensed physician, choose from a set of treatment plans, and receive prescription finasteride or minoxidil at their doorstep. While this “consultation-to-prescription” model is effective for treating specific concerns like hair loss, it has its limitations. Namely, a DTC healthcare landscape that consists primarily of these types of companies becomes highly siloed and requires consumers to engage with a different company for each health issue that crops up. And for companies, the consultation-to-prescription model can hinder long-term patient engagement, since many patients will only require medication for a period of time.
As the DTC health category has grown, companies have increasingly turned to more complex virtual care platforms that use a wider variety of tactics to meet more patient needs and keep those patients engaged for longer. Companies that began with the consultation-to-prescription model for specific health concerns are expanding to offer a wider range of services and products, while many new companies are leading with a complex care model. Although DTC health companies still face challenges, the future offers opportunities for more integrated and holistic care that serves patients better and for longer than disparate, highly siloed care.
This article will look at the benefits, challenges, and opportunities within direct-to-consumer health, while also categorizing the existing market based on care goals, tactics, and target populations.
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The DTC model offers a variety of advantages to both providers and patients over traditional care pathways. With care available at one’s fingertips, patients can address many of their healthcare needs without having to leave home and often at a lower cost. Meanwhile, providers can utilize various digital tactics to treat patients more efficiently. This section will explore the additional benefits that come with virtual care.
Better Economics: Offering products and services directly to consumers can improve companies’ bottom line and lower prices for consumers. DTC companies can improve profit margins by circumventing traditional intermediaries and reducing distribution costs and inefficiencies. Subscription payment models, which are popular in DTC health platforms, also offer companies a consistent and reliable revenue stream. As a result, consumers benefit by receiving many types of care at a lower cost. For example, since online DTC players entered the hair loss space, the price of Finasteride for consumers has dropped from $70 per month to about $30 per month.
Efficiency: The digital-first nature of most DTC brands increases efficiency, meaning doctors can serve more patients in the same amount of time. This is significant given the overwhelmed and stressed state of the United States’ healthcare system, which is short on healthcare facilities and both primary care and non-primary care specialty physicians.
Convenience: The same convenience that consumers have come to expect from shopping, travel, and financial management now extends to health. Patients can access healthcare services from the comfort of their own homes and have medications shipped to their doorstep, avoiding the hassle and frustrations of waiting rooms and the in-person pharmacy. The DTC approach may be particularly beneficial for people lacking consistent access to care because of financial, social, cultural, or geographical barriers, many of which have been exacerbated by Covid-19.
User Engagement: The DTC model can empower consumers with easily accessible information and services, allowing them to take a more proactive role in managing their health. Many companies are seizing the opportunity to not only provide products and services, but also offer specialized knowledge about poorly understood health topics.
Personalization: Many DTC health platforms collect information about users in order to personalize their experience through tailored content, symptom tracking and visualization, or condition-related recommendations. The growing use of data tracking through wearable devices and apps also empowers patients to more directly monitor behaviors and health outcomes over time. With online access to a plethora of health information, consumers are better equipped to understand their health, while digital health services with access to this data are able to better personalize their experience. Today’s DTC health companies have access to a number of tools that they can use to communicate with—and offer care to—patients.
With many clear benefits to applying the direct-to-consumer model to virtual healthcare, there are also a number of market factors that have propelled DTC adoption and success. The COVID-19 pandemic has created unprecedented need for virtual care while other developments like regulatory changes and expiring patents are making it easier for entrants to get a foot in the door.
When examining the growth of virtual care, the numbers speak for themselves. In Q4 2020, global Venture Capital funding for digital health came to $4.5 Billion as year-over-year funding increased by 165% compared to $1.7 Billion during the same period a year prior. DTC brands like Ro are leading the game with staggering investments. Most recently, Ro raised $500 Million in new funding, resulting in a massive private capitalization of $876 Million.
COVID-19: As the global pandemic has necessitated more digital and low-touch care delivery, DTC companies have stepped up to the plate to meet the demand for virtual care. With most of the US population having experienced stay-at-home quarantine orders, Covid has also exacerbated consumer concerns over physical and mental health, especially for younger age groups and those managing a chronic disease. The physical effects of Covid diagnoses and the toll of Covid-induced isolation on mental health has only fueled interest in—and demand for—virtual DTC healthcare options.
New legal openings for technology: The Affordable Care Act expanded the use of telehealth at the federal level for patients on Medicare, but left telehealth reimbursement policies up to individual states for patients covered by private insurance or Medicaid. There has since been an ongoing state-by-state debate about “health parity” or whether telehealth visits offer the same level of care and quality as in-person appointments and therefore whether they should be reimbursed as such.
This debate took a sudden turn in 2020 when the COVID-19 pandemic necessitated a sudden shift to virtual care and telehealth visits across the country. Health plans and state governments alike made emergency concessions regarding reimbursement for telehealth to allow providers to continue to serve patients during the pandemic’s peak. It is unclear whether these policies will be upheld as states recover from the pandemic, but the widespread adoption of telehealth over the past year will likely nudge policymakers in that direction.
Increasing costs of care: The cost of healthcare is rising faster than the median annual income in the United States. As of 2019, the US spent nearly $11,000 per capita on healthcare, more than any other high-income country. With the high cost of deductibles, copays, and insurance, patients face a substantial burden in paying for care. This has led many consumers to take a more active role in understanding and evaluating how they utilize the healthcare system, opening the door for direct-to-consumer companies who speak directly to patients about their services and costs.
Widespread patient frustration: In addition to the rising cost of care, the healthcare industry has not previously felt pressure to pay a premium to create a strong patient experience. This is in part because insurance companies have not historically reimbursed care differently based on patient satisfaction. Care is also so siloed that each provider owns only a very small piece of the broader patient journey. For patients, however, this has led to widespread frustration and dissatisfaction when navigating traditional care pathways.
The average patient does not understand how service costs are calculated and in many cases does not know what their insurance company will cover until after a visit or procedure is complete. There is also no central guidebook or resource to help patients understand who to see for what medical issue or condition, leading many people to bounce from PCP to specialist and back without clear answers. One 2019 survey found that nearly half of American respondents, 43%, were “not very” or “not at all” satisfied with the US healthcare system.
This is where DTC health companies are able to set themselves apart. Like many consumer technology companies, direct-to-consumer health players are able to build a loyal audience because of their focus on excellent user experience and customer support. Most of these groups invest heavily in education resources to ensure that all customers have access to clear and accurate information about the company’s area of medicine. DTC companies are also purposefully transparent about pricing—whether a subscription, cost per visit, etc.—in contrast with the often confusing and opaque cost structure of traditional pathways.
Expiring patents. Expiring drug patents have also catalyzed the rise of DTC virtual health. Many medications that were once protected by patents are now fair game for any company to rebrand and build services around. As DTC review site Fin vs Fin identifies, men’s health companies Roman and Hims have capitalized on the opportunity to rebrand by launching their own hair loss subscription services after the expiration of Merck’s patent on Finasteride in 2014 .
Broader shifts toward DTC: A final force at play in the rise of DTC health is the broader success of direct-to-consumer products and services across industries. DTC marketing has proven successful particularly within the e-commerce space because of its ability to offer convenience, simplicity, and often affordability to consumers. Many direct-to-consumer brands have completely upended traditional retailers through their use of digital channels, excellent user experience, and a community of loyal shoppers. This shift has normalized direct-to-consumer models across industries and paved the way for the same expectations of convenience, clarity, and enjoyment among healthcare consumers.
The DTC Healthcare Landscape
The current landscape of direct-to-consumer healthcare companies is vast, diverse, and growing. In order to understand the various niches and markets that make up the DTC healthcare landscape, it is useful to categorize companies based on:
- Care goals and type of care offered
- Tactics used to treat patients
- Population served
There are four main categories of care into which most digital health companies fall: primary care, chronic condition management, elective subspecialties, and acute care.
- Primary Care: DTC health companies that fall under the primary care category typically offer care for a variety of patient needs and serve as a one-stop resource for general health concerns. The spectrum of conditions treated by primary care doctors ranges from headaches to abdominal pain to mental health conditions and beyond. As the first point of contact within the healthcare system, primary care professionals also serve as a connection to the fragmented world of healthcare, ensuring that patients get the appropriate care. Through routine check-ups, primary care becomes essential for prevention and early detection of disease, so much so that adults with a primary care provider have 19% lower odds of premature death than those who only see specialists. The digital nature of DTC primary care can be more accessible and appealing to customers who would rather discuss their health issues virtually. It also gives providers more tools to personalize care and target specific populations.
- Chronic Condition Management: Companies focused on chronic conditions, unlike primary care, are highly specialized and offer more long-term care for patients. Chronic conditions—including cancer, diabetes, heart disease, stroke, hypertension, heart disease, respiratory diseases, arthritis, obesity and oral diseases—are among the most prevalent and costly health conditions in the United States. About 45% of the population suffers from at least one chronic disease and that number is growing due to the country’s aging population, coupled with existing risk factors like tobacco use and poor nutrition. Not to mention that chronic diseases are responsible for seven out of 10 deaths in the US and kill more than 1.7 million Americans each year.Prevention and management of chronic conditions are thus essential for improving quality and length of life. As companies roll out virtual services, it is imperative that they provide the same personal experience as an in-person visit, especially since those with chronic conditions are most likely to value a sustained relationship with their provider. Despite possible challenges to providing the same quality and continuity of care, taking a virtual approach to chronic care management offers benefits that include increased access to specialized care and reduced chances of hospital readmissions, with the help of tools like remote patient monitoring.
- Elective Subspecialties: Digital health companies focused on any of a variety of elective subspecialties offer targeted services for concerns outside the scope of a primary care provider. The range of concerns falling under the subspecialties category varies from smoking cessation to ADHD management to dermatology and acne treatment. Unlike primary care companies, DTC companies in the elective sub-specialties arena offer care only for specific health conditions rather than a set of general health concerns. In addition, the DTC model allows patients to access care directly from subspecialty companies rather than having to visit a primary care doctor, get a referral to another specialist, and make another appointment, a process that can be long and overly complicated.
- Acute Care: Generally, acute care involves active treatment for brief, yet severe medical conditions and concerns including urgent care, emergency room services, and intensive care. Given that many acute illnesses and injuries require high-touch, in-person care in settings like emergency rooms, it is typically harder to innovate digitally in this arena. While companies like Doctor on Demand and Carbon Health offer so-called “urgent care” for concerns like cold and flu symptoms, skin conditions, and allergies, these virtual clinics cannot offer the same breadth of treatment as in-person urgent care centers and hospitals that treat all acute health conditions.
Today’s DTC health companies have access to a number of tools that they can use to communicate and offer care to patients. These tactics include:
- Education: Patient education is integral to nearly every direct-to-consumer health company. As explained above, part of what makes DTC health so successful is its ability to take seemingly complicated care pathways and simplify them to make all aspects of care more transparent. This starts with patients’ understanding of the very condition or area of medicine that a specific company serves. Education materials may be delivered through articles or guides, blogs, newsletters, FAQs, a personalized feed, or community forums.
- Synchronous video consult: Real-time video interactions between patient and provider often serve as a substitute for in-person doctor visits. Telehealth adoption has soared in the last year, with 46% of consumers now using telehealth and 76% interested in using it going forward. These numbers top the mere 11% of consumers using telehealth in 2019.
- Asynchronous messaging: Messaging allows patients to communicate directly with providers to ask questions or receive additional information without scheduling. The asynchronous nature of messaging through a patient portal or app allows flexibility for providers who can reply to patients between appointments or other administrative tasks.
- Online patient portals: Most virtual health provider organizations have a digital platform where patients can access information about appointments, care, or prescriptions. These patient portals are typically associated with a unique patient account and are accessible through a web or mobile application.
- Data or symptom tracking: Many platforms collect and analyze data about patient health—either self-reported or synced with wearable devices. This may include condition symptoms, sleep quality and patterns, blood pressure, oxygen levels, and heart rate. Livongo, which provides virtual diabetes prevention and management care, provides customers with their own health monitoring devices to track health measures from home. Other companies like SteadyMD have digital health platforms that integrate health data from consumers’ favorite apps and connected devices.
- In-person clinics: Some direct-to-consumer provider organizations serve patients through both virtual and physical channels. For instance, Tia offers some care virtually through telehealth and asynchronous messaging, but also leverages brick and mortar clinics to deliver in-person care for things like gynecological exams, acupuncture, and bloodwork.
- Digital pharmacy & prescription drugs: While most digital-first providers prescribe medications, some direct-to-consumer companies include (or are directly connected with) online pharmacies that can ship prescriptions directly to patients’ homes. Others—like Hims and Hers—offer only their own branded version of generic drugs.
- At-home diagnostics and labs: Tests and labwork that used to require an in-person appointment are now also being brought into the home. Kits that test for food sensitivities, sexually transmitted diseases and infections, vitamin deficiencies, viruses like COVID-19, and other concerns are ordered and shipped directly to patients.
- Online screeners and self-diagnostics: Self-assessments ask patients to identify their symptoms and other health concerns, collecting an initial set of data used by providers to prescribe medication and create treatment plans. Online screeners often serve as the first step in patient onboarding.
- Peer community: For some conditions and medical areas, social support is key to patient recovery. Monument offers both group counseling with membership as well as an anonymous online community where members can post updates and questions and receive encouragement from others changing their relationship with alcohol.
Each company uses a variety of these tactics to deliver care and as the field becomes more crowded, more and more companies are expanding care delivery to include a combination of diverse techniques.
The below features many direct-to-consumer health companies categorized by care type and the tactics they use to serve patients. While some of these companies also reach patients through other channels (health plans, employers, etc.) they all have a prominent DTC business line. If you know of any companies we missed, send them to email@example.com.
As shown in the table above, the direct-to-consumer field also varies by target patient population. Some companies target certain segments of the population based on specific demographics (gender, age, sexuality, etc.), while others simply target those with certain health conditions (diabetics, smokers, etc.).
Many of the companies that target specific demographics aim to address health disparities around quality, access, and utilization of care. For instance, companies focused on queer and trans health offer specialized care for members of the LGBTQ+ community, who have historically lacked access to sufficient healthcare that is safe and inclusive. Examples include Folx Health and Plume Health, which offer a range of services like gender-affirming hormone therapy, STI kits, mental health care, and more.
There are also companies that aim to better serve BIPOC patients, who are often let down by race-based inequalities that have long plagued the US healthcare system. Spora Health is a “culture-centered” provider offering primary care services for people of color, while Hurdle Health offers “culturally intentional” mental health services for patients from “diverse and ethnic social backgrounds.”
Targeting specific population segments helps companies better understand the end user and tailor care to their specific needs and experiences.
The Future of Complex DTC Healthcare
As the direct-to-consumer health field grows, niche product or service offerings are being challenged by companies that claim to “do it all.” Many provider organizations are building or acquiring virtual care services to offer a broader range of care tools. This leads to a rise in complex virtual healthcare—more comprehensive and holistic care offered by a company through the use of diverse digitally-enabled tactics and services.
Companies that once focused on prescribing generic medications for a few health concerns or tracking specific patient data are expanding to treat a variety of patient concerns in different ways. Take women’s health, for example. Just a few years ago, the industry’s biggest DTC women’s health companies were essentially online platforms for tracking periods or prescribing birth control. Now, companies like Tia don’t just allow users to track and understand their period, but serve as a provider for primary care, gynecology, mental healthcare, and acupuncture. In addition to treating a wide variety of health concerns, Tia’s model utilizes several care tools, including telehealth visits, asynchronous messaging, an online patient portal, and in-person clinics. Their rapid growth and expansion is evidenced by the recent partnership with CommonSpirit, one of the country’s largest nonprofit hospital systems. Together, the groups plan to open additional Tia clinics in the Phoenix area and beyond.
Many consumers want their healthcare products prescribed by their providers and directly integrated into their existing healthcare services. The complex virtual care model that companies like Tia are following allows patients to rely on one virtual platform to meet most of their healthcare needs, rather than having a different company prescribe treatments for every health issue. This means that the DTC healthcare market is becoming less siloed and fragmented than it originally seemed, thanks to the use of more care tools and improved business models that let companies integrate a broader spectrum of categories of care.
Even companies that focus on one specific health concern (rather than primary care) are becoming more comprehensive as they combine care tactics to better treat patients. Heartbeat Health is a startup working to improve the way cardiovascular health is delivered, with a “digital first” model that sets patients off on the right foot for receiving quality care. The Heartbeat app is a “full-service telemedicine platform” that gives patients access to on-call physician care through telehealth and asynchronous messaging, as well as robust data, insights, and analytics through the use of data tracking and remote and in-person diagnostics. By supplementing Heartbeat’s in-person care offerings with remote patient monitoring and telehealth communication, the app is making it easier for patients to stay on top of their health and access care whenever they need it, while allowing cardiologists to better monitor and treat patients.
Despite dramatic growth in DTC healthcare, there are still challenges that companies and the industry as a whole must confront and overcome.
Regulations: As DTC healthcare continues to grow, so does the need for more robust development of guidelines and regulations. The current regulation of digital healthcare offerings remains imperfect and with the rapid expansion of DTC products and services, federal regulators like the Food and Drug Administration (FDA) are still catching up to create appropriate standards. Given that DTC products are able to bypass typical filters and safeguards of the healthcare system, there is risk that low-value or even harmful products can enter the market, even from companies with good intentions. Going forward, then, regulators, clinicians, and researchers must work together to minimize risk while maximizing benefit.
Vetting Criteria: With DTC healthcare services and products being marketed directly to consumers as the name suggests, they often operate outside of traditional clinical procedures and bureaucratic hoops. While this allows for more rapid innovation, it also puts the onus on patients to research and choose the right solution for their needs. For DTC companies with no FDA regulation, big tech companies are really the only gatekeepers to consumers, determining which applications make it onto their respective app stores. With such a vast landscape of companies, reviewing options can be time-consuming and difficult for consumers, not to mention there is no real framework for analyzing the quality of care being provided and how different companies compare. Better guidelines from regulators and a reliable rating system or set of criteria would better equip patients to take control of their health and make decisions with confidence.
Health vs. Wellness: The innovation of healthcare offerings and cultural shifts toward promoting healthy lifestyles has blurred distinctions between healthcare and wellness. While this trend isn’t unique to the direct-to-consumer segment of healthcare, its effects are particularly noticeable. This is especially true for DTC products that make explicit claims about wellness or lifestyle but also imply health benefits for medical conditions. The challenge of understanding and clarifying the health vs. wellness distinction ties back to concerns over regulations and the need for vetting criteria, which could help assess and categorize companies for consumers.
Digital direct-to-consumer health companies offer the convenience, efficiency, affordability, and customizable experience that many consumers want from their healthcare. As market factors like COVID-19 and regulatory changes support the growth of the DTC healthcare landscape, companies continue to innovate in order to serve patients better and for longer. Specifically, by utilizing a wider variety of care tactics, companies are providing care that is more complex and comprehensive. This is a pronounced shift from earlier DTC approaches focused on offering generic prescriptions or short-term care for a small range of health concerns. Looking forward, it will be interesting to watch how companies respond to challenges as they look to maintain growth and keep consumers engaged.
Nina is a research fellow with HTD exploring topics at the intersection of healthcare and technology. She is pursuing a degree from Brown University.