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Venture capitalists are moving into mental health

September 21, 2020

Topics: Quote of the Day

By Ravi N. Shah, M.D., M.B.A.; Obianuju O. Berry, M.D., M.P.H.
JAMA Psychiatry, September 16, 2020 (Online first)

Mental health care is ripe for innovation. Less than a third of people with mental health disorders receive treatment, and even a smaller proportion receive adequate care. The private sector has taken notice of this economic mismatch (high demand with inadequate supply) and is aggressively pursuing mental health and wellness as an investment opportunity. In 2019 alone, venture capital (VC) companies invested a record-breaking $637 million in more than 60 different mental health–oriented companies, which is more than 22.8 times the investment in 2013. This rapid rise in investment in the mental health and wellness space brings new challenges related to defining, quantifying, and assessing products and services that had previously resided within traditional health care.

Although self-guided smartphone applications and digital products have received a great deal of public attention, the financial market is dominated by companies that provide direct clinician-patient services. Most of these companies focus on anxiety, depression, and insomnia with little emphasis on severe mental illness.

Concerns Related to Private Investment in Mental Health

Physicians, caregivers, payers, and patients should have real concerns about this trend. Silicon Valley’s motto for success, “move fast and break things,” has led companies such as Uber and Theranos to break laws and cut corners. This ethos is not compatible with the Hippocratic doctrine of primum non nocere. Venture capital companies evaluate success in terms of growth of consumers and revenue, with little rigor applied to quality assessment. In fact, Pear Therapeutics is unique in achieving US Food and Drug Administration approval for a prescription digital therapeutic. The National Institute of Mental Health itself acknowledges that there are currently no national standards for evaluating the effectiveness of the hundreds of mental health applications that are available and recommends that consumers ask their health care providers for recommendations. In response, the American Psychiatric Association has developed a framework for evaluating mental health applications but still leaves the work of evaluating effectiveness up to individual health care professionals. Quality assurance is needed not just for products (eg, digital therapeutic tools) but also for services rendered by companies that connect clinicians with patients.

Other specific challenges that VC-backed start-ups must confront include privacy concerns, ability to adapt to personalized needs, applicability for individuals with serious mental illness, and payer adoption. A recent study of 36 mental health applications showed that 92% transmitted data to third parties, but only 69% had a privacy policy. Furthermore, clicking an “I accept” button on a lengthy privacy policy does not constitute informed consent to share protected health information. In addition, digital products are highly structured to facilitate scale, but this uniformity may provide overly narrow solutions for patients, for whom comorbidity is the rule rather than the exception. Few of these companies focus on serving the population with serious mental illness, creating a gap between where investment goes and where it is most needed. Without insurance adoption and reimbursement, only individuals able to pay out of pocket or those whose employers pay for these products will be able to access these innovations, further increasing the mental health equity divide.

Possible Advantages to VC-Led Innovation in Mental Health Care

Despite these concerns, VC-backed start-ups may accelerate mental health care innovation. Companies supported by VC rely on the idea of scale—the ability to grow quickly to serve a large population to maximize return on investment. In the traditional mental health care setting, dissemination of evidence-based treatments is a major challenge because treatments take place as one-on-one encounters over several months. Venture capital companies subsidize start-ups to constantly produce new iterations of their models to generate proof of concept and to refine their product or service as it evolves. This market-based, “survival of the fittest” approach means that companies only succeed if patients use and perceive benefit from these products and services. Given their consumerist mindset, VC-backed mental health companies’ strength is their transparency with diagnosis, treatment process, and costs. These are all steps forward for mental health care in the United States.

The mental health care landscape is changing rapidly, and VC-backed for-profit companies represent a significant force driving these changes. Although the value of this trend is yet to be fully realized, the rise in VC investment in mental health care offers an opportunity to scale treatments that work and address mental illness at the population level. However, quality control, privacy concerns, and severe mental illness are major issues that need to be addressed. As the demand for digital solutions to mental health concerns continues to rise, we will have to wrestle with this question: can VC-backed mental health start-ups move fast without breaking anything?



By Don McCanne, M.D.

Mental health has always seemed to be more or less of an orphan-child of medicine. Although for decades many efforts have been made to reduce inequities in mental health care, tremendous voids remain.

In my practice the affluent patients were able to afford the mental health care that they needed, but the majority of my patients were not. Maybe the acutely psychotic would be locked up for 72 hours, but then they were released to followup that frequently did not seem to exist. The Medi-Cal PPO for which I was a network provider had only one psychiatrist in its network, not in our community, though even he was not available after he was arrested on morals charges. Because I already worked extended hours throughout my career and really didn’t feel competent in providing mental health services anyway, my patients got the short shrift. As I fantasized about the nation eventually enacting and implementing a single payer national health program, I had to take satisfaction in the belief that some day soon mental health services would be available for all, though I was clearly wrong about “soon.”

In the meantime, we have witnessed a dramatic growth in the medical-industrial complex. Venture capitalists have become a major player. As this article mentions, mental health has presented the economic mismatch of high demand with inadequate supply, creating the aggressive pursuit of mental health and wellness as an investment opportunity. The article mentions legitimate concerns related to private investment in mental health, but, from a broader perspective, the culture of the business model in health care exists on a much lower ethical plane than does the culture of the professional service model. The authors state that the venture capital model can be advantageous since it can lead to greater innovation (a term that applies primarily to the business of medicine), and grow quickly to “maximize return on investment.” It is difficult to imagine a worse model of expanding mental health services – passing more health care dollars to capitalists.

The bottom line is still the same. We desperately need a single payer model of an improved Medicare for All to make all health care, including mental health services, affordable and accessible for everyone. I don’t understand why we don’t have it. Maybe I need some counseling.

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About the Commentator, Don McCanne

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Don McCanne is a retired family practitioner who dedicated the 2nd phase of his career to speaking and writing extensively on single payer and related issues. He served as Physicians for a National Health Program president in 2002 and 2003, then as Senior Health Policy Fellow. For two decades, Don wrote "Quote of the Day", a daily health policy update which inspired HJM.

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