Healthcare companies are under increasing pressure to go digital amid the rise of "super consumers" — patients who are more informed and demand more control over their health. And with that, venture capitalists have spotted an opportunity.

The struggle for many in the healthcare industry has been a lack of in-house expertise in technology to guide their digital plans. A Sept. 10 Morgan Stanley note titled "Future Proofing the Boardroom" said companies should "consider tech expertise as a criterion for board nominees," pointing out that the consumer sector has already taken measures to include tech in their strategies.

Certain pharmaceutical giants have turned to the growing number of start-ups at the intersection of healthcare and technology, a field dubbed digital health. Novo Nordisk A/S, Novartis AG and Eli Lilly and Co. are among the big healthcare names that have teamed up with smaller but fast-moving digital health upstarts — Glooko Inc., Cota Inc. and Livongo Health Inc., respectively — in clear efforts to adapt to the shifting, technology-heavy landscape.

Healthcare venture capital firms, some of whom have traditionally been attracted to popular areas like oncology, are being joined by their more tech-focused peers in building companies that marry the two sectors to better serve consumers.

The first half of 2018 set a venture capital fundraising record for digital health at $4.9 billion raised, a whopping number indicative of the continuing upward trend beginning in 2016, according to a report by Mercom Capital Group LLC.

"Technology is becoming more reliable; healthcare has come to accept patient-consumer reading electronic devices," Pamela Spence, life sciences industry leader at consulting firm EY, said. "That's also fueled the consumer end — consumers are more demanding, more empowered."

Healthcare consumers will seek out more personalized products and services, according to EY's life sciences industry outlook for 2018.

Mercom's July 16 report broke down the areas of digital health funding and found that, in the second quarter, 71% had gone toward consumer-centric healthcare rather than healthcare practice-focused developments. An influx of telemedicine — services delivered over the phone or computer — and wearable devices for personal health, such as the new Apple Watch and those sold by Fitbit Inc., as well as mobile health apps denotes further overlap of consumer goods and healthcare, especially as more consumers seek to gain control over their health and well-being.

A shifting healthcare landscape

Healthcare is an industry historically slow to change, in part due to patient safety concerns. But the landscape is changing, EY's Spence said.

"Consumers, not organizations, are now at the center of this market paradigm," EY wrote in its Life Sciences 4.0 report.

Spence said companies must now ask themselves if their business models will allow them to remain relevant over the next five years. Part of that, she said, means greater focus on the consumers, and tech can "help us understand what products will be most relevant, most impactful in an individual way."

The overall paradigm shift in consumer healthcare could extend to oncology.

"Oncology and immunotherapy, in the immediate term, will lend itself more acutely to personalized care," Spence said. "The very mention of disease is very personal within each person's biochemistry."

Companies such as Cota Healthcare and Tempus Labs Inc., for example, focus on personalized care for cancer patients.

Imaging, diagnostics and chronic disease management are also promising areas for digital health, EY's Sept. 24 annual medtech report said. Glooko and Livongo both provide consumer-focused tools for diabetes management; Livongo raised $105 million in April 2018. SomaLogic Inc., which has raised almost $400 million since January 2017, specializes in diagnostics and biomarkers. EY's report showed that "investors reward innovative medtechs," citing a 124% uptick in value for earlier stage, non-imaging diagnostic companies as a "signpost" of demand for personalized data and care. In addition, Menlo Park, Calif.-based GRAIL Inc., which develops blood screening tests for cancer detection, boasted the highest medtech venture round from July 2017 to June 2018, with $300 million raised in May.

Trends spurring investment — and pressure to evolve

EY's U.S. life sciences leader James Welch said the "pure financial firepower" of the top 10 technology and retail companies outpaces the entire medical technology industry put together. The medtech report also highlighted major companies' lack of research and development investment, particularly in digital capabilities.

"Some of the bigger medtech companies are focused on short-term returns to shareholders and buybacks, at the expense, in some ways, of R&D," Welch said.

EY's Life Sciences 4.0 report emphasized a need for "platforms" to support consumers.

In one of the top five disclosed mergers and acquisitions in the digital health arena, Roche Holding AG acquired Alphabet-backed Flatiron Health Inc. for $1.9 billion. Flatiron Health developed clinical intelligence data platforms that provide a structured way to search patients' records across treatment sites.

A February 2018 Forbes article surmised that Flatiron's value was in its focus on the customers. The company says on its website: "Each patient’s story has the unique potential to teach us something new about the way cancer works, and help us find more effective treatments, faster." Roche's top four best-selling medicines are used to treat different forms of the disease.

As healthcare consumers increasingly look for affordability, convenience and transparency, merging health and tech — like Flatiron, which Forbes dubbed a "health tech startup" — may help healthcare companies adapt to the changing environment.

EY noted that, in medtech, artificial intelligence "is already sweeping through the imaging sector" and robotic surgery is gaining ground as well. Clinical insights drawn from data will play a major role and possibly even replace devices as the "key value driver," according to EY.

There is "great potential" for tech companies and healthcare to work together, Welch said.

"The capabilities tech companies bring to the table are fantastic, not just in strictly technology but in their ability and experience around consumer engagement, consumer trends and individualized connections to consumers," Welch said.

Spence suggested that the proliferation of digital health and consumer empowerment may eventually lead to preventive healthcare overtaking treatment-focused healthcare, paving the way for an even broader overlap in health and wellness consumer applications.