What’s Spurring the Rise of Brazil’s HealthTechs?
While the COVID-19 pandemic continues to put immense pressure on the healthcare system in Brazil, the silver lining is that it is contributing to the meteoric growth in the healthtech sector.
However, COVID-19 isn’t the only reason we’ve seen record VC investment in healthtechs in 2020 and 2021. Here are 5 other reasons why this sector is set to become a hotbed of innovation and growth in the coming years.
1. Healthcare giants are finally waking up
2021 will be the year of healthcare IPOs in Brazil. While in the last 5 years we’ve only seen a handful of IPOs, in the next year alone we expect at least 10 IPOs of large healthcare players. These range from local pharmaceutical companies, diagnostics labs, and multiple hospital groups.
Along with these IPOs, we’ve seen a storm of M&A activity. Hapvida, Brazil’s largest low-cost health insurance player –after going on a buying spree of local insurers and providers– has just announced a $20B fusion with competitor Notre Dame Intermedica. This will create a mega-insurer with more than 10 million lives.
This liquidity is spurring traditional players to enter the healthtech market. For example, Fleury and Sabin, two large diagnostics players, launched a healthtech focused VC fund, called Kortex. RaiaDrogasil, which is Brazil’s largest retail pharmacy with over 40 million monthly customers, is launching its own healthtech platform and recently announced the acquisition of B2C healthtech company Tagfit.
Certainly, with so many “big boys” in the ring now, we expect to see tremendous growth in the launch, funding, and M&A of healthtechs to support these larger companies’ needs for innovation and efficiency.
2. Regularization of Telemedicine
COVID brought about a long-awaited regulatory breakthrough: the legalization of telemedicine in Brazil. As strange as it sounds, for a country as big and diverse as Brazil, up until 2020, the possibility of direct doctor-to-patient telemedicine was not permitted by law. The pandemic forced the government to issue a temporary decree to allow for these kinds of services. Now, there is no going back.
The result was a boom in telemedicine in the country. Existing players, such as Teladoc, grew significantly over the last year. Hospitals –like the premium Albert Einstein Hospital– that were traditionally interested in in-patient and out-patient procedures, began to offer telemedicine services to end-consumers and employers.
However, certain startups also took center stage. Conexa Saúde is one of them, having received $7.5M from General Atlantic and other players. Another company called Vibe, which is focused on the B2C telemedicine segment, raised $10M from European investors. These rounds were previously unheard of before 2020. We expect them to continue to increase in size over the next years as the need for telemedicine keeps growing.
3. Dissatisfaction with Insurance
In the last year, Brazil has seen a number of startups being born with the goal of disrupting the health insurance sector. In the eyes of Brazilian consumers and employers, insurance pricing is not transparent and patient experience is not up to standard.
That’s why players like Alice were able to raise $33M this year –the largest investment in a Healthtech company in Brazil to date. Inspired by Oscar Health in the US, they want to improve the insurance experience for end consumers. A company in this space that targets SMEs is Sami, which raised more than $15M in their last round.
These companies, along with other players like QSaúde, are betting that they can control costs via exceptional primary care. Since they don’t control their own networks, they enter into risk-sharing deals with a limited group of providers. Then they invest heavily in the primary care and telemedicine experience to limit unnecessary healthcare expenditures by patients.
4. Reimagining the role of the employer
An interesting trend that has become particularly relevant in the last year is the role of the employer in healthcare. Though Brazil’s public healthcare system treats 75% of the country’s nearly 210 million people, it is responsible for less than 50% of all healthcare spending. As a result, employers are the big drivers of healthcare spending.
In the past, employers relied on brokers and insurance companies to fully take care of their healthcare needs. However, as costs grew out of control, many employers decided to take things into their own hands. Large employers started to invest in healthcare analytics, hiring services from companies such as Gesto. Others began to invest in primary care, creating partnerships with on-site or near-site clinics, such as Amparo in São Paulo or Livonin the south of Brazil. Other employers opted for digital primary care, such as that offered by Cuidas.
As healthcare costs continue to soar, we expect that employers will have an increasingly larger role in healthcare decision-making. This will require reimagining the role of brokers and insurance companies and stimulate significant innovation in healthtech players who seek to serve this unmet need.
5. Meeting unmet needs
Despite a national free healthcare service (called SUS), Brazil suffers from major inequalities in terms of healthcare access. The COVID pandemic exacerbated a problem that already existed for a long time. However, many healthtech startups are emerging to address these systemic challenges.
One area that is ripe for innovation is mental health. Brazil has 5X less mental health professionals per capita than the US and 10X less than in Europe. 2020 saw the rise of multiple tele-therapy platforms, such as Vittude, ZenKlub, Telavita, Psicologia Viva, and others.
On the other hand, companies like Vitalk are using technology to help automate the therapeutic process and therefore lower the cost of treatment nearly 5 times. They are at the forefront of a wave of potential digital therapeutic companies in Latin America which seek to resolve complex problems such as behavioral health, chronic disease management, and obesity by applying technology to drive down costs.
Other startups treating health from different angles are Nilo Saúde, a startup providing healthcare solutions for people over 50 years old, a growing segment of the population. Theia is tackling maternal health, helping pregnant women buck the alarming trend of unnecessary C-sections, and deal with difficulties that arise during their return to work after pregnancy.
The next few years will spell a flurry of investment and innovation in the healthcare space in Brazil. We expect the same trend to occur throughout Latin America. Despite the painful effect of COVID-19 in 2020 and 2021, there is still a lot of hope that the region will emerge from the crisis better positioned to tackle its healthcare needs.
About the Author
Michael Kapps is the CEO and founder of Vitalk Health, a Brazil-based startup making mental healthcare more accessible. He is a Fortune 40 under 40 Healthcare leader, MIT Technology Review Top 35 Innovator as well as recipient of the Folha de São Paulo / Schwab Foundation's social entrepreneurship award. Michael is Canadian, graduated from Harvard and worked at McKinsey before founding his company.