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When big valuations rest on a government’s whim

Midway through October Ping An Good Doctor had a market cap of US$6.8bn. That is until the Chinese government released a 2,000 word circular on the ‘regulation’ of online doctors and shares tumbled 40%. Telehealth is by many accounts booming but some very large valuations are hanging on some very fine regulatory threads.

As most of the world deregulates digital health, China has instead swung the opposite way. It has banned AI as a substitute for doctors, is forcing online providers to provide physical clinics, wants patients to have a diagnosis before seeking an online consultation, and bans e-prescriptions. Bye-bye ecosystem.

In the wider market, the lifting of these restrictions is seen as the key to scalability. Deregulation has encouraged investment in European markets for telehealth, telemonitoring and digital therapeutics.

Chinese providers are keen to put a positive spin on it. WeDoctor, owned by Tencent, is positive, saying that it will push the sector to standardisation. But WeDoctor has been trying to IPO since at least February and executives are being silenced across the whole tech sector.

Large providers in Western markets, like Teladoc which has a market cap of $22bn and Babylon valued at $4.2bn, would like to believe that their ‘more progressive’ regimes would never claw back the deregulation that has enabled them to grow so fast.

But you never know. The move from China shows that telehealth will remain an inherently risky sector for many years to come, even after large groups embed themselves deep within healthcare systems, as is starting to happen across all continents.

For now, and for some governments, there is no such thing as ‘too big to fail’ in digital health.

We would welcome your thoughts on this story. Email your views to Rachel Lewis or call 0207 183 3779.