The news: Direct-to-consumer virtual care provider Ro acquired 17-month old at-home diagnostics startup Kit, which offers home testing like blood pressure tests and finger prick blood assays.
How we got here: This is Ro’s third acquisition within the past year as it enters hyper-growth mode expanding into various niche pockets of care delivery.
- In December 2020, it snapped up home care company Workpath to deploy nearby clinicians to patient’s homes for blood draws, etc.
- And in May, it spent $225 million to buy reproductive health company Modern Fertility, which offers an app-based platform to track patients’ fertility data.
- We think we could see Ro dive into a space like diabetes management next, considering the massive addressable market (34.2 million patients) and consumers’ growing interest in digitally monitoring the condition.
Trendspotting: As telehealth adoption declines this year, vendors are realizing they need to diversify to hold onto their new customers’ attention for the long haul—many are turning to at-home testing to do so.
- Although telehealth adoption rates are much higher than pre-pandemic leves, usage levels are dropping off compared with adoption rates seen in March and April 2020.
- Part of the reason we’re seeing dropoffs is because some patients are leaning more on hybrid care that combines in-person elements to address some of virtual care’s limitations. For example, while virtual visits are convenient, patients don’t have the tools to conduct lab tests at home.
- As a result, virtual care vendors like Ro, Truepill, and Nurx are adding at-home testing into their toolkits—a move that makes sense, since consumers say they’re more comfortable than ever using at-home diagnostics due to the pandemic.
The bigger picture: While diving into the home testing space can help telehealth companies retain consumer interest, there two major roadblocks deeming at-home diagnostics a risky diversification play:
- Small vendors will face stiff competition from Amazon, which is expanding its at-home diagnostics footprint with more affordable price points. The e-commerce giant recently made its COVID-19 kits available online for $39.99 per kit, while large home-testing vendors like Everlywell sell the same D2C kits for $109. Beyond low prices and rapid convenience, Amazon comes with a massive loyal customer base that makes it the vendor of choice for many consumers—especially since it’ll likely bundle its testing kits with its virtual care services sometime soon.
- There’s no guarantee the FDA will authorize at-home testing for long-term use. The FDA greenlit 389 COVID-19 tests under Emergency Use Authorization (EUA) since the pandemic began—but this authorization could very well be lifted once enough US individuals are vaccinated. As such, it would be a wise bet for telehealth vendors to unveil home testing kits beyond COVID-19 testing: Most of Everlywell’s tests are laboratory-developed tests, which means they’re not subject to FDA review, for instance.