Digital healthcare is drawing global attention as the world undergoes the Fourth Industrial Revolution and the Covid-19 pandemic.

Korea also stresses the need to develop a digital healthcare industry, but the related market is not growing. According to the Korea Health Industry Development Institute, the Korean market size stood at 1.35 trillion won ($1.04 billion), accounting for a mere 0.6 percent of the global digital health market in 2021.

Why does the Korean digital healthcare industry remain sluggish?

Kim Chi-won, managing director of Kakao Ventures, emphasized that for digital healthcare startups to succeed, they should grow into “businesses.” Instead of promoting digital devices as “good,” they must show “clear results,” such as medical cost cuts or improved treatment accuracy.

Kim is an internal medicine specialist who graduated from Seoul National University College of Medicine. He worked as a management consultant at the global consulting firm McKinsey, and as a doctor at Samsung Medical Center. Afterward, he has run Seoulwise Convalescent Hospital and took charge of the digital healthcare investment business at Kakao Ventures.

The digital healthcare expert who experienced clinical and industrial fields recently released a book, “How Digital Healthcare Becomes Business 2: Live Action.” The new book deals with devising a business model in the digital healthcare industry. It contains various contents, from the medical market’s characteristics to examples of digital devices getting insurance benefits and business expansion models through collaboration to help readers understand the overall industry.

Kim advised that setting business targets for winning insurance benefits in the U.S. market is realistic. To receive insurance coverage, they should integrate more data and enhance their accuracy by, for instance, developing devices that affect the direction of disease treatment and combining biopsies with medical records.

He also stressed that Korean digital healthcare companies should have “Korean characteristics” to advance to the U.S. market. In other words, they should deal with areas where many studies are conducted within Korea.

Korea Biomedical Review met with Managing Director Kim to see why the businesses should target the U.S. market instead of Korea and what they should prepare for developing the domestic digital healthcare industry.

Question: You said business is essential for digital healthcare use in medical fields. What does that mean?

Answer: They need to understand the market. They should precisely set digital healthcare devices’ use to make them used in clinical fields. Rather than major medical areas that are difficult to accept right away, such as confirmation, companion diagnostics (pre-diagnosis to see if a particular drug will work for a patient) or artificial medical intelligence (AI) area will be easier to start.

For instance, I think it will be challenging to use brain waves that confirm schizophrenia even if businesses develop them. On the other hand, when using schizophrenia drugs, medical workers generally apply to patients in the order of drug prices from cheap to expensive. So, if a company can develop a brainwave diagnosing device that can tell that cheap drugs do not work for a specific patient and expensive drugs should be used initially, insurance companies will find it sufficiently worthwhile.

Finding out what’s wrong with a patient’s health is not sufficient. It is vital to prove that "the patient has improved this much" using this device. The degree of impact on patients must be significant, and, to do so, it should be closely associated with treatment. In case the influence of a digital device is far from the treatment method, even if any difference is derived, it will likely conduct a simple follow-up observation and be of little use to the patient.

Q: Can you give some examples of Korean companies that set their devices’ use appropriately?

A: A case in point is Lunit SCOPE, developed by the medical AI company, Lunit. Lunit SCOPE detects cancer cells that express a specific gene (PD-L1) targeted by immunotherapy Keytruda through a pathological biopsy. If the device can pick out patients whose treatment works well, it will benefit the pharma company because more patients will use its drug. It will help insurance companies because they can save costs by skipping meaningless treatments.

Q: Is there any trend unique to the domestic digital healthcare sector?

A: The digital healthcare area is broad and difficult to characterize. For example, look at the model Kakao Ventures has invested in recently. In that case, it is paying attention to companies that use dual data.

ARPI is one of them. The company has referred to electronic medical records, X-rays, and electrocardiogram readings of patients who visited emergency rooms and turned them into data by connecting them to what happened next. In this case, the level of artificial intelligence can be much higher than that of those who have only seen X-rays or electrocardiograms.

Prevenotics is also noteworthy. It is developing a high-accuracy diagnostic aid device for gastroscopy using double data. It doesn’t just show the endoscopic doctor pictures and materialize their findings. Still, it produces an answer after combining it with the actual biopsy results of the photo. In addition to diagnostic accuracy, it is also impressive that Prevenotics made a gastroscopy diagnostic device, not a colonoscopy. This is because the field of gastroscopy has been studied more in the U.S. than Korea. Digital healthcare devices must enter the U.S. We must find something to do well in such a developed market.

Q: You stress the need to advance to the U.S. market. Any specific reasons?

A: It isn't easy to produce profits in the Korean market. As medical expenses are cheap here, it will be challenging to make a big profit even if insurance is applied. Besides, there are no systems other than health insurance established in Korea. Aside from insurance, they can sell digital healthcare products to employers or use B2C (business to consumers), a transaction in which goods and services are provided directly. However, both types are used sparingly in Korea.

Q: Giving insurance benefits for digital treatments is being discussed in Korea, too.

A: It is true such discussions are going on. However, according to what’s been announced, the authorities say, “We will give it on a cost-based basis until it proves its value." This cost base doesn't mean the cost of clinical trials and national software delivery standards exist separately. In the end, the profit will be small.

Even if developers prove their devices’ value, it will not produce significant revenue even if they receive 80 percent of medical costs in insurance because medical fees here are cheap. Also, even if the reimbursement issue is solved and efficacy is proven, it is uncertain whether the domestic medical market is ready to use digital treatments.

Q: If so, what should they do to develop Korea’s digital healthcare sector?

A: Considering the digital healthcare industry’s export, too, I hope the government will create an environment to produce minimal data at home. It should set reimbursement standards to help create data. It is imperative to set profitable uses to create a good business model. Still, many people don’t understand such a need. Talents who experienced the global digital healthcare market are necessary to solve this matter, but Korea lacks such expert manpower. It is also necessary to train such talents.

I hope medical professionals will show even a fraction of interest in checking what their patients need. However, they are now unfamiliar with digital healthcare. They need to prescribe if there are treatments that can be prescribed and use them in the medical field.

Q: As a digital healthcare expert, what advice will you give to medical school students?

A: Although they may find digital healthcare a new term now, if and when the concept becomes natural, it will remain “healthcare.” As it can become one of the critical pillars of healthcare, they had better pay attention to it as a medical professional if for no other purpose than treating their patients well.

More specifically, they can actively participate in the area by, for instance, directly contacting digital health companies. However, you can find various events at a click. These days, some also offer long-term online seminars.