Impact Investing in the Healthcare Industry

October is Breast Cancer Awareness month and it is with great sincerity that we at Koined express our support for all those affected by breast cancer. In light of this month, we want to spend some time discussing impact investing in the healthcare industry.

In 2019, the healthcare industry was valued at over $10t. The industry is enormous and touches the life of every person on earth, but it fails. It fails people every day because the stewardship of human life and the fundamental goals of traditional capitalism are not aligned. This is perfectly illustrated by the former CEO of Turing Pharmaceuticals, Martin Shkreli, who raised the price of Daraprim from $13.50 to $750 in one night. Shrekli is now in federal prison….but not for that. The price of Daraprim and other drugs that provide effective treatments to common ailments remain sky-high.

Why is this? To paraphrase Congresswoman Alexandria Ocasio-Cortez, it’s because healthcare has no elasticity. There is no price at which a consumer will choose illness and death over life-saving medicine and treatments. This power imbalance creates an environment where providers of those treatments and medicines can charge anything and raise prices on a whim. Moreover, as medical products and services have been marketed toward those with money rather than those without it, a massive gap in access to medicines and treatments grows wider between the rich and poor every day.

That said, there is a rising tide of impact capital being deployed in the healthcare industry to develop new models of care that are sustainable, fair, and accessible to everyone. These efforts include healthcare-focused impact funds like the UNICEF USA Bridge Fund, the Global Health Investment Fund, and the HealthQuad Fund. Firms such as these have placed over $100m of impact investment in new companies and projects.

Impact investment is also being pursued by major healthcare firms. MSD, or Merck, recently launched an internal impact investing group that has allocated $50m and placed over $40m with various impact investment funds. Though $50m is just drop in the ocean for Merck whose revenues topped $46b in 2019, it is a start.

Healthcare impact investment is hard to quantify and measure because existing metrics like the number of clients served or medicines sold do not do much to illuminate the added social value to an underserved community rather than the extracted financial value.

Moreover, many non-medical investments could be considered healthcare investments like investments in affordable housing. A study by the Urban Institute found that “homelessness and housing instability are associated with anxiety, depression, and other negative health outcomes”, so by providing affordable housing an investment firm could be accidentally improving the future health outcomes of their renters or buyers. This unintended benefit is great, but it is hard to capture in impact market analysis.

Key Sources:

“Healthcare impact investing complements our day-to-day work, says MSD”

“IRIS+ Healthcare Metrics”

“A Decade Marked By Outrage Over Drug Prices”

“Why Hospitals and Health Systems Are Becoming Impact Investors”

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