Perspectives

2024 was a year full of transformations and challenges for the healthcare industry, as the country navigated an evolving landscape shaped by economic shifts, technological advancements, and political uncertainty. While rising healthcare costs, labor shortages, and medication supply deficits persisted, 2024 also witnessed significant progress in digital health. This progress, characterized by technologies that enable care to extend beyond the four walls of healthcare enterprises, was particularly marked by an expansion in the use of AI technologies.

As we move into 2025, the healthcare industry is positioned for even more significant change. The rapid growth of digital health solutions will continue to redefine care. With rising consumer demand for personalized, accessible treatments and new regulatory frameworks coming into play, we are entering an era where technology and healthcare are more intertwined than ever before. At 7wire Ventures, we see 2025 as a year of continued growth, with evolving opportunities across the sector. Our predictions for the year ahead include:

#1 AI Will Continue Accelerating, but Added Scrutiny Is Coming – AI will continue to play an increasing role in clinical workflows and care delivery. At the same time, guardrails will be developed to ensure quality and safety.

Investment in healthcare AI is expected to reach $11.1B by the end of 2024. Historically, funding in this space has concentrated on administrative use cases, however, 2024 has seen a pivotal shift towards broader adoption of AI solutions in patient care. Health systems are increasingly exploring clinical AI applications including disease screening, patient communication, and clinical decision support. In 2025, we expect AI-enabled solutions to enhance the care journey – from intake and treatment planning to long-term care coordination.

AI is already enabling a more efficient care experience. For example, Transcarent, a 7wire portfolio company, recently launched WayFinding, a Gen-AI platform to empower consumer access to benefits navigation, clinical guidance, and care delivery services in one place. WellSpan Health, a Pennsylvania-based integrated health system, partnered with Hippocratic AI to develop GenAI healthcare agents to directly call patients, target underserved populations, and close care gaps.  We expect AI to continue to be integrated into cloud services, with new offerings built on top of existing platforms for deployment.

At the same time, we believe 2025 will usher more scrutiny on AI – nearly half of AI tools approved by the FDA through 2022 lacked published clinical validation data, and physicians have resisted widespread adoption, citing a need for more clinical proof and increased transparency on how large language models are trained. We predict that while it is unlikely the incoming administration will release federal regulations, there will be more state-level scrutiny and focus on AI governance. Healthcare incumbents and digital health companies alike will need to have robust regulatory expertise to navigate a complex set of state-wide regulations, which may emerge as a key competitive differentiator in a crowded space. In addition, professional societies such as the Digital Medicine Society (DiMe) and the Coalition for Health AI (CHAI) will continue to develop offerings to strengthen buyers’ understanding of AI models.

#2 Continued Increase and Danger of Misinformation – Public trust in the medical profession will continue to deteriorate as misinformation spreads on social media. There is opportunity for digital health companies to help consumers rebuild that trust through greater transparency and education.

With 24/7 access to the internet, social media, TV, and other stimuli – information, and misinformation, is at our fingertips. When it comes to managing our health and wellbeing, this has posed many challenges, exacerbated by the COVID-19 pandemic. While we expect that 2025 will be a year of continued proliferation of health misinformation, we also believe that health institutions are determined to address these issues to start building back trust with communities. The medical community has already been responding, with The Lancet publishing a paper on “Twitter, public health, and misinformation”, and Duke University School of Medicine spearheading a new Program on Medical Misinformation. Significant change is unlikely to happen in 2025, as rebuilding trust will take many years, but we believe that health institutions will double down on their efforts, particularly in response to the incoming administration.

In addition, we believe there is a significant opportunity for digital health companies to help educate consumers and combat misinformation. Summer Health, for instance, provides families with 24/7 access to pediatricians – ensuring consumers receive an evidence-based answer to their questions in 15 minutes or less. FOLX and NOCD have also built robust and curated content for their digital communities, which help educate LGBTQIA+ consumers and members who suffer from obsessive-compulsive disorder respectively. Similarly, companies such as Roon and Mediflix are building communities that educate consumers through videos created by physicians to help replace Google and social-media searches that may lead to misinformation.

#3 Healthcare M&A to Increase – Incoming administration likely to favor large transactions with reduced FTC scrutiny, opening the door to a more active M&A market.

We expect a reduction in FTC scrutiny with the new administration, which will likely boost healthcare M&A activity. With fewer regulatory barriers, large-scale transactions will become more feasible. This shift will create a more conducive environment for well-capitalized companies to pursue strategic acquisitions, driving consolidation in the healthcare sector and enabling large-cap companies to expand their portfolios and buy out competition.

At the same time, while high-profile IPOs such as those from Tempus and Waystar demonstrate that public exits are possible, many startups may struggle to navigate the complexities of the public markets or fail to secure necessary funding. As market conditions remain challenging for digital health startups, a growing number of these companies will likely turn to strategic acquisitions as an alternative route to growth and liquidity. While 2024 has seen fewer peer-to-peer acquisitions in digital health, companies are increasingly acquiring startups to integrate new technologies and expand their offerings. This dynamic will further fuel consolidation in the healthcare sector, as both large and small players adapt to changing market conditions and regulatory environments.

#4 Pharma Pricing and PBMs Continue to Take Heat – Digital health solutions can present a lower cost alternative to expensive medications.

Pharmaceutical spending in the U.S. alone now exceeds $600B annually, with specialty drugs accounting for ~50% of costs. In 2025, the FDA is expected to approve an additional 10-20 gene and cell therapies, which are often priced at well above $1 million. Drug price reduction remains one of the few topics with bipartisan support. Given the new administration’s focus on drug pricing, we expect that there will be increased scrutiny on biopharma in 2025, with a concerted effort to address how Medicare and Medicaid will pay for biologics and gene/cell therapies. As an example, if Medicare and Medicaid expand coverage of GLP-1s to include weight loss, this would amount to an additional $25B in spending for Medicare and $11B for Medicaid over 10 years. States would need to pay an additional $3.8B.

In addition, we believe that the FTC will continue to be active in pursuing PBMs (pharmacy benefit managers), even under the new administration. With multiple transparency policies on the table right now, we believe that PBM reform will be a significant focus for the new administration, buoyed by public support, where more than 80% of Americans report concern that PBMs influence what medicines patients receive and control what patients pay at the pharmacy.

In response to these pressures, we see an opportunity for digital health companies to gain more adoption as payers look to less expensive solutions that can show enhanced clinical outcomes at lower cost. 7wire portfolio company Zerigo is an example of a business that is helping its members with chronic skin conditions delay progression to expensive biologics that have poor side effects. Zerigo’s product offering is an at-home phototherapy device with remote patient monitoring and care management services. WellTheory is another company helping consumers avoid the use of biologics by offering evidence-based nutrition and lifestyle coaching to help reduce autoimmune symptoms.

#5 Medicaid: A Tale of Two Cities – The Trump administration is more likely to enact block grants or work requirements for Medicaid. Red states will pull back on Medicaid expansion while blue states will double down on coverage.

The future of Medicaid will likely see a split path, shaped by partisan division. Under the incoming administration, there is a strong likelihood for Medicaid block grants and work requirements. This may result in states reducing Medicaid expansion and scaling back benefits, thereby increasing the uninsured population. In contrast, blue states are expected to continue doubling down on Medicaid, focusing on increasing coverage and addressing health equity concerns. This divergence of Medicaid support based on political ideologies will continue to create significant disparities in healthcare across the country.

Given the potential for Medicaid funding reduction, digital health companies can play a pivotal role in ensuring vulnerable populations continue to receive access to quality healthcare. For instance, GroundGame.Health (GGH), a 7wire portfolio company, offers a platform to address social determinants of health (SDoH) for underserved populations. The Company represents a crucial connection point between community-based organizations and managed care organizations to ensure that care gaps are closed, and the right services are delivered to members in time of need.

#6 Addressing the Dementia Crisis – GUIDE program to accelerate digital innovations as payers grapple with rising diagnoses and associated costs, though greater reimbursement support is needed.

An estimated 6 million people in the U.S. live with dementia today, growing to 9 million by 2030. At the end of 2023, CMS launched a new program focused on dementia care called the GUIDE Program (Guiding an Improved Dementia Experience), designed to support dementia patients and their caregivers through digital innovations. Companies such as Synapticure and Rippl are addressing unmet needs in dementia care through virtual or hybrid services to diagnose the disease, allow patients to speak with neurologists without a 4-6 month wait-time, and provide care navigation and support. We believe 2025 will be a race for these companies to enroll as many members as possible, aiming to scale quickly and secure a first-mover advantage. In addition, companies focused on caregiver support will continue to receive attention given these tailwinds. For example, 7wire’s portfolio company Homethrive provides family caregivers with coaches and self-serve resources to better equip them to care for their loved ones suffering from dementia.

The GUIDE model reimbursement varies from $65-$390 per month depending on patient acuity and caregiver status. Given the complex needs of these patients and with at least 70% of these patients having more than one co-occurring condition, we believe that significantly higher reimbursement is needed to provide the right balance of clinically impactful services to reduce the total cost of care and improve outcomes. Furthermore, we believe there will be continued tension with payers, as digital health companies aim to capture members as early as possible, increasing diagnosis rates, while payers remain hesitant to do so and cover the high cost of biologics for an even larger population. Eisai’s Leqembi, priced at $26,500/year, is expected to cost Medicare $3.5B in 2025. This pressure will only increase as there are 32 new drugs in Phase 3 clinical trials; the vast majority of these drugs are disease-modifying and, if approved, will likely command high price tags.

#7 Pharma Amps up Consumer Focus – Biopharma increasingly realizes the importance of digital tools for patient engagement and retention and offers platforms and services via partnerships and home-grown offerings.

As biopharma companies face increasing competition, we predict that in 2025, the industry will be more focused on patient engagement and retention. Historically, the industry has been focused on patient acquisition, but as patients and providers have more options for pharmaceutical products, biopharma will need to double down on digital solutions that drive sustained patient retention.

Bayer has launched a business unit specifically to develop consumer precision health products, including a partnership with Huma Therapeutics to help consumers assess cardiovascular risk factors. This quarter, the FDA listed Astellas’ digital health solution, DIGITVA, for heart failure management. DIGITVA combines a digital stethoscope with a smartphone app. In addition, both Eli Lilly and Pfizer launched new direct-to-consumer telehealth platforms that enabled consumers to make virtual appointments and receive prescriptions for medications that could be delivered directly to their doorsteps. We believe efforts similar to these will proliferate in 2025, though this will also engender increased regulatory scrutiny on marketing practices to ensure there are no anti-kickback violations. We also believe that the majority of biopharma companies will need to partner with digital health companies to launch these offerings – after all, biopharma companies’ expertise is in drug development, not digital experiences. As an example, Lilly partnered with 7wire portfolio company, 9amHealth, to offer a virtual care team, at-home care, and personalized care plans through their diabetes management program.

We expect these 7 trends to emerge as we usher in a new administration. Despite uncertainty around the regulatory climate, we have strong conviction that the next year will continue to foster increased innovation in digital health. We remain committed to working with and supporting the great founders who are revolutionizing our healthcare system and continuing our mission to empower a growing number of Informed, Connected Health Consumers.