The recipe to put big financing together
The healthcare market is preparing for the transformation needed to face the growing problems of the healthcare system: remote patient care, persistent diagnostics, and improving targeted treatments. Addressing all these issues, as well as the digital transformation of the healthcare system, will require large sums of money, and also concentrating existing funds.
Some companies have already started teaming up with promising firms to strengthen their research teams. Others, like Cigna, have started their own venture funds, in an effort to identify and direct new investments into researching new drugs, new healthcare solutions, and more targeted treatments and care.
Cigna Ventures will finance healthcare startups focusing on analytics, digital health, retail, care management. The payer started the fund in order to pinpoint and evaluate early-stage innovation in the healthcare system and pilot new ideas to be used in creating a meaningful return on Cigna’s investment. Cigna Ventures expands the payer’s current investment portfolio and includes five venture capital partners and direct investments.
How will the new venture operate
Cigna Ventures was created to help Cigna identify, assess, and sponsor early-stage innovation ideas. Cigna Ventures will concentrate on investments in areas like healthcare network optimization, improving risk assessment, and patient care plan assessment. Cigna Ventures is also interested in companies that strive to improve member wellness, customer service and experiences, and therapeutic solutions. Other areas of interest for the company are care enablement, sites of care, and patient access to care.
“Cigna’s commitment to improving the health, well-being, and sense of security of the people we serve is at the front and center of everything we do,” said Tom Richards, senior vice president and global lead for strategy and business development at Cigna.
“The venture fund will enable us to drive innovation beyond our existing core business operations, and incubate new ideas, opportunities, and relationships that have the potential for long-term business growth and to help our customers.”
Previous investments paved the way for this move
This new venture does not come as a complete surprise, since Cigna previously invested in up-and-coming digital health optimization companies. Cigna’s major investments include series C funding for Omada Health, a digitally-supported therapeutics company, and other investments in companies such as Prognos, Contessa Health, MDLIVE, and Cricket Health, which all offer similar health related services.
“Our partnership with Cigna has been about so much more than capital,” said Sean Duffy, co-founder and CEO of Omada. “The ability to collaborate with, learn from, and integrate deeply with a health services company so dedicated to delivering a 21st-century care experience to its customers and clients has enabled us to accelerate innovation, advance our capabilities, and grow our customer base.”
Cigna’s investment in Omada included a $50 million investment and a partnership in a diabetes prevention program that showed participants were hitting a 4 to 5 percent weight loss target with a medical cost savings of $500 to $1,000 per patient. Omada’s focus on “operational innovation” to make the product consumer friendly and making extra efforts to bill as a provider also prompted Cigna to invest.
Cigna, on a buying spree to face Amazon
Cigna has been spending a lot to buy businesses in order to create a new strengthened organization able to compete with the likes of Amazon. According to techcrunch.com, Cigna’s stock plunged in March after the company made public the $67 billion acquisition of Express Scripts. That deal is reportedly about to finalize, since Express Scripts stockholders approved Cigna’s acquisition proposal, the transaction being scheduled to close December 31st.
The company’s move is part of a growing trend for of payers launching early-stage investment funds as a way to head off potential disruption from startups and newcomer on the healthcare market, as Amazon-Berkshire-JPMorgan joint health venture.
Healthcare startups have received increased funding this year, according to PricewaterhouseCoopers and CB Insights MoneyTree Report, $10.6 billion was invested in health-care deals in the first half of this year.
Concurrently, health insurers have been creating venture-capital arms to generate profit. UnitedHealth Group Inc. said in November that its Optum unit was creating a venture arm with $250 million in funds. Humana Inc., Kaiser Permanente, and a group of Blue Cross and Blue Shield insurers, all have venture units. Competition is high, and it remains to be seen if Cigna Ventures will be up for the challenge.