Vijay Patel, CVS Health Ventures, on the imperative to invest in digital health
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In this episode, we chatted with Vijay Patel, Co-Founder and Partner at CVS Health Ventures, a $100M fund dedicated to investing and partnering with high-potential health technology startups aimed at building towards CVS’ vision of creating more consumer-centric care. Prior to this role, Vijay held several leadership roles at CVS Health in Strategic Partnerships and Innovation with a focus on Digital Health. Vijay holds an MBA from the Sloan School of Management at MIT, and dual Bachelor’s Degrees in Economics and Systems Engineering from the University of Pennsylvania.
We discussed:
The establishment of CVS Health Ventures as a fund dedicated to digital health opportunities, creating the potential for longer-term strategic actions and extended time horizons for realizing investment payoff
The mandate of CVS Health Ventures to not only invest in but also partner with high-potential, early-stage digital health companies to forward CVS Health’s strategic goals of making health care more affordable and accessible for consumers
Leaning into CVS Health’s role as a trusted health care provider in communities by continuing to partner with local and national organizations to expand health care access
Investing in behavioral health, diagnostics, and virtual care delivery assets and capabilities — trends accelerated by COVID-19 and likely to persist
Start to 12:42: Deep dive on CVS Health Ventures
Pivot into health care: Vijay began his career at Bain Capital, focusing on investments across industries. Vijay pivoted into health care at CVS through a Penn alum who was launching a new team at CVS Health in 2015 focused on digital health care solutions. Vijay’s role was to figure out how to partner with companies to develop digital health care products beyond the investment angle. The goal of this group was to consider how products and technology weave together to create a consumer-centric suite of products and services that support CVS Health’s overall vision for delivering care.
Mandate of CVS Health Ventures: CVS Health Ventures is a dedicated corporate capital fund focused on investing and partnering with high-potential, early-stage health companies to make health care more affordable, accessible, and simple. In building a portfolio of companies, CVS Health Ventures sees its role as not purely a financial investor, but seeks to partner with these companies to bring strategic value to entrepreneurs and innovators by providing access to the CVS Health network including distribution networks, and unlocking human talent.
On the investment thesis: CVS Health is a broad organization with a multitude of provider, direct-to-consumer, and payer assets. The fund is administered at an enterprise level, affording CVS Health Ventures the ability to examine opportunities across the full health care ecosystem in line with CVS Health’s own reach. The fund’s focus is on technology-enabled digital solutions, specifically:
1. Care delivery and transformation
Solutions in virtual care and home health
2. “Whole-person care”
Social determinants of health
Behavioral health
3. Consumer-centric health care services
Leveraging CVS Health’s connection with consumers: The fund builds on CVS Health’s role in engaging consumers within its drugstores across the U.S. and the deep brand recognition it commands amongst consumers. Notably, CVS Health Ventures aims to focus on:
A. Pharmacy
B. Health care financing and price transparency
C. Technology-oriented capabilities, including AI to enable CVS Health’s overall mission and to tap into synergies with other CVS Health data assets
The imperative to invest in digital health now: While CVS Health has had prior success in partnerships and investing in health care companies, enterprise involvement has largely occurred in an opportunistic manner. Creating a dedicated fund will focus efforts on earlier stage initiatives and support these companies to better compete with others in the early-stage digital health care space.
Comparison with competitors: CVS Health Ventures looks to differentiate from similar investment funds formed from larger enterprises through its status as a separate entity that is still integrated within the broader business development function at CVS Health. The goal is to source potential partnerships and deals to invest in while maintaining the responsibility to shape strategic partnerships in service of overall enterprise business goals around digital health.
Aetna expands CVS Health Ventures’ reach: CVS Health’s acquisition of Aetna broadens the set of stakeholders within the CVS Health network with deep expertise at the local and regional markets. These local and regional stakeholders provide more information about local providers and ongoing innovation, opening channels for collaboration with local business leaders. In addition, local market familiarity also creates the potential for initiating partnerships within a local market to test out and adjust the partnership model as needed before scaling more broadly.
“Our hope with CVS Health Ventures is to not just think about ourselves as a fund or as pure financial investors. We hope we can bring strategic value to entrepreneurs and innovators who are doing the really hard work of trying to tackle these complex issues. Our ability to enable what we hope are meaningful commercial and distribution arrangements can help us facilitate, test, and learn with these companies and accelerate the promise of technology and health care to deliver less expensive, more convenient, and overall more effective solutions.”
12:42 to 20:53: On the broader digital health industry
Evolution of digital health at CVS Health: When Vijay joined CVS Health in 2015, the enterprise had just made the decision to consolidate digital health assets under one leader. Not only was the focus on digital health new for CVS Health, but Vijay was also learning more about the digital health industry coming from a generalist investment background. To build a deeper understanding of the digital health market, Vijay’s met with many digital health startups to build a solid understanding of the market and what was important.
On the importance of patient privacy and data security: Vijay quickly learned about the importance of IT security, HIPAA, and patient data privacy. CVS Health retains great responsibility in safeguarding patient health data, and as an organization places a premium partnering with organizations that have robust systems in place to protect patient privacy. Attention to privacy and data integrity are table stakes for CVS Health and a core part of the diligence process when determining which companies to work with.
Defining success: For CVS Health Ventures, a successful partnership entails alignment across business unit leaders and other key stakeholders on achieving the overall enterprise strategy, and incubating a product or service that drives value and adoption with consumers. A positive consumer experience is the ultimate measure of success. To ensure the enterprise is delivering the best possible consumer experience, Vijay works closely with CVS Health leaders to identify capability gaps to inform which digital health companies to prioritize. This includes selecting companies that have an acute understanding of not only the broader health care system, but also reimbursement models, patient privacy, and HIPAA.
Longer timeline for realizing returns: The establishment of a separate fund with a distinct pool of capital affords CVS Health Ventures the ability to take more risks in opportunities with longer-term time horizons for realizing returns. This better equips CVS Health Ventures to evaluate the potential of companies instead of focusing primarily on short-term commercializable success. CVS Health Ventures also investigates shorter-term opportunities, which entails examining harder metrics such as ROI.
Example of a successful collaboration with “Unite Us”: Unite Us is a company focused on utilizing social determinants of health to build local networks with resources to address health care gaps. CVS Health partnered with Unite Us to support CVS Health’s efforts in specific Medicaid markets. This collaboration has been successful in achieving near-term impact by connecting community members with critical resources in housing, employment, and food security while also positioning CVS Health as a thought partner to shape a longer-term vision for addressing structural barriers to health care access in the community.
“What we’re looking for is potential. Is there a potential here with this entrepreneur or this technology to really meaningfully shift our approach in delivering care and support our customers?”
20:53 to 27:19: On working with entrepreneurs and investors
On startup maturity: CVS Health Ventures currently invests at the Series A to Series B stages, where the product has been defined and is within commercial range. Moving forward, CVS Health Ventures may consider companies in the seed stage, but is focused currently on more developed early stage opportunities.
On the best ways for entrepreneurs to engage with investors: Both entrepreneurs and the CVS Health Ventures team should research each other’s strategic priorities and businesses before the initial meeting. Aligning on what is critical for both parties and building baseline knowledge is key in establishing a strong foundation and symbiotic relationship. In addition, transparency and honesty in articulating the challenges and opportunities in working together is also important.
On working with other investors: Collaborating with other investors is a critical aspect of investing in early-stage companies. At CVS Health Ventures, acting as a good investing partner entails building a reputation as an authentic and straightforward investor through open and honest discussions with other investors and entrepreneurs about the fund’s priorities. This also includes being responsive to market timelines and participating in market structures. CVS Health Ventures also strives to thought partner with companies and other investors especially when the investment company faces challenges.
“Something that excites me is that [health care] is challenging, and there are real problems to solve. Coming to a conversation with a solution-oriented mindset and a passion to really understand the underlying issues associated with a problem [is key].”
27:19 to 37:44: On predictions for trends in health care and CVS Health’s role
Effects of COVID-19: COVID-19 has ushered in meaningful changes that will likely persist in health care. One meaningful shift is in the adoption and persistence of virtual care and its importance in the broader delivery of care. In addition, diagnostics is another area that became important during COVID-19 and an enormous part of CVS Health’s operations in 2020 as CVS Health supported one of the largest testing networks in the U.S. CVS Health also announced a new clinical trials business following a need that was identified and accelerated through COVID-19.
A focus on behavioral health: CVS Health is prioritizing behavioral health and its importance on holistic patient care. Vijay observes there has been meaningful traction amongst companies developing innovative approaches to behavioral health from care navigation to incorporating solutions addressing specific disease types (e.g. substance abuse disorders, eating disorders) within behavioral health solutions.
On CVS Health’s roles as a payer and provider: Through Aetna, CVS Health aims to bring the right set of assets to the market under its benefits structure. Through its extensive MinuteClinics and pharmacies, CVS also acts as a provider that regularly interacts with customers. CVS Health’s multifaceted roles pushes CVS Health Ventures to consider investment opportunities across the broad spectrum of health care.
On the CVS Health brand and role in the broader community: Many retailers, including CVS Health, command consumer trust and brand recognition. COVID-19 in particular has highlighted CVS’ role in dispensing care in communities through its testing and vaccination programs, especially in rural neighborhoods with less immediate access to traditional health care providers. Continuing to partner with organizations embedded in communities to enhance CVS Health’s care delivery model is a core part of the CVS Health Ventures mission.
On addressing health inequities: Reducing health inequities is a critical part of CVS Health’s organizational priorities, and thus also a focus for CVS Health Ventures. Many of the areas CVS Health Ventures is working on, from virtual care delivery to home health, are geared towards providing more access to quality care in innovative ways that reach underserved communities. Vijay also collaborates closely with colleagues at CVS Health on the product, corporate giving, and community affairs teams to identify partnerships to accelerate community health goals beyond purely commercial opportunities.
37:44 to End: Personal and professional advice
Focus on a few things that are important: Take the time to reflect on what you want to optimize in your career, especially during a career switch. For Vijay, continuing to learn and grow professionally was a key dimension he sought to refine. The curiosity to learn more encouraged him to accept his first role at CVS Health despite a lack of prior experience in health care.