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Keywords

health; healthcare; innovation; investment; venture capital; insurance; hospital; technology; policy; business; finance; patent; drug law; pharmaceuticals; intellectual property

Abstract

In recent years, the landscape of venture capital (VC) investment in healthcare technologies has been altered by the introduction of new types of VC firms: those that have emerged from hospital systems and health insurers. However, the legal literature has not yet analyzed these new VC firms, the role they may play in healthcare innovation, and how innovation law and policy ought to consider their involvement. Hospital system and health insurer VC firms operate very differently than traditional VC firms, even those that have historically developed healthcare specializations. Instead of simply investing capital into start-up firms, hospital system and health insurer VC firms may also offer access to their networks of healthcare providers and to patient data, resources which may not be accessible to start ups who partner only with traditional VC firms. When investing, hospital system and health insurer VC firms also act both as user innovators, hoping to adopt the technologies they invest in for themselves (to deliver care at a lower cost or to increase revenues), and as traditional investors, hoping to sell the technology to other hospital systems or insurers. Due to these dynamics, hospital system and health insurer VC firms do not fit easily within traditional healthcare innovation paradigms. As a result, they may be able to serve a unique innovation-encouraging role within the broader healthcare system, particularly with their specialized knowledge about healthcare delivery and services. They may also play a larger role in developing novel healthcare technologies, including those involving artificial intelligence. But they may also engage in innovation-stifling activities, either by investing in technologies which have insufficient evidence of safety and efficacy or by limiting the dissemination of innovative technologies. Legal and policy interventions may help encourage these innovative activities while simultaneously redressing potential patient harms.

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