Investment in mental health treatments is beginning to catch up to the demand

The pandemic fallout
The pandemic fallout
Image: Reuters/Andrew Kelly
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Covid-19 had a tragic effect on the world’s mental wellbeing, leading to an increase in severe anxiety and depression across the globe, according to a new report published yesterday in the medical journal The Lancet. Compared to 2019, cases of major depressive disorder increased by 28% and cases of severe anxiety went up 26%.

Without Covid-19, the researchers estimated after looking at 48 datasets covering 204 countries, there would have been an estimated 193 million cases of depression in the world (2,471 cases per 100,000 people), and  298 million cases of anxiety (3,825 per 100,000) in 2020. Covid-19—and its consequences including grief, illness, and lack of mobility—added millions more cases, particularly where the outbreaks were more severe. Overall, in 2020 there were 246 million cases of depression and 374 million cases of anxiety. Women are more affected than men, accounting for 66% of the additional cases of depression and for 68% of those of anxiety.

Even prior to this spike, only 30% of people globally have reliable access to mental health treatments. According to the World Health Organization, this number drops even further in low- and middle-income countries, where less than 24% of people have any mental health treatment available.

New investment opportunities in behavioral health

In the US, 30% of adults have mental health issues, but only 37% of those who need mental health services have access to them. That’s particularly true in rural areas like Wyoming, where 96% of the population lives in areas with no reliable mental health access, or Utah, where 83% does.

Until recently, this high demand had not resulted in higher supply. Many mental health workers are aging out of the profession, but the low rates of reimbursement for a demanding job with a high risk of burnout have dissuaded new practitioners from replacing them.

But the dramatic increase in the need of mental health services that emerged during the pandemic, has begun attracting investors. That’s in part because the expansion of telehealth services makes mental health businesses easier to set up, especially in areas with low volumes of patients.

Since 2020, behavioral health acquisitions have soared in the US, making the sector the most sought-after in healthcare transactions.  In 2020, venture capital funds invested $1.5 billion in mental health startups, and 2021 has seen an increase in investment of more than 70% over 2020. In the first quarter of 2021 there were 29 behavioral health mergers and acquisitions, and the pace hasn’t relented since.

In particular, private equity has invested in addiction treatment centers, taking advantage of the fact that many existing providers struggled financially during the pandemic. Meanwhile, large telehealth providers—such as K Health and AmWell—continue to acquire specialized digital mental health companies, consolidating remote health services.