Medical crowdfunding is often viewed as a helpful and supportive campaign for patients who are in utmost need of funds. The funds raised through medical crowdfunding would give them an opportunity to seek the medical care required. Health workers are aware of the growing financial impact of health-related crowdfunding.
Countries embrace the concept of crowdfunding as it helps to expand the health market. In addition, it also improves individual contribution, provides funding to neglected health issues, and encourages community engagement. Crowdfunding is an essential tool for understanding the need and importance of finances in the healthcare sector. Crowdfunding plays an important role in health research, commercial innovation, and non-profit health initiatives.
Crowdfunding also offers a possibility of access to funding for scientists who can make important contributions to neglected medical research subjects. Some of the valuable non-profit healthcare programs also benefit from new financing driven by various types of health crowdfunding. Thus, the opportunity to expand funding for non-profit ventures can be guided better with some sound evidence and priority healthcare setting. Crowdfunding for for-profit health ventures is a promising sector as it allows SMEs to effectively compete in the overall health sector.
Crowdfunding allows health researchers and SMEs to validate the profitability and worthiness of a venture to larger and major private investors leading to an increase in financing. Hence, the regulators are working on improving the stability of the crowdfunding market, but there is an increasing need for regulatory harmonization of crowdfunding across borders. Also, the risks associated with illegal activities could further threaten the fledgling crowdfunding market – policymakers should approach this issue at the earliest and effectively. The economic risks include principal-agent relationship and the associated information asymmetry. Thus, the targeted regulation that minimizes steep information asymmetry gradients between initiators and funders plays an important role. For instance, endorsing a credential body by relevant scientific associations would be more valuable for a crowdfunding project as it would increase its credibility and boost the healthcare value of the project.
The economic benefits of crowdfunding are as follows:
- It helps create economic participation of people and organizations from all levels such as local, national, and global.
- Crowdfunding facilitates individuals and organizations’ access to financial support.
- It also helps to raise awareness for causes such as cancer care and cancer treatment.
- It engages people for contributions and that helps improve social engagement.
As every coin has two sides, there are some disappointing facts about crowdfunding. Some common economic risks associated with crowdfunding for cancer are as follows:
Crowdfunding is an inefficient method for a priority health setting – The decision of allocating finance would depend on the funder’s sentiments, and thus it is inefficient for a healthcare setting. Also, patients support the short-term plans of new research at the expense of long-term medical evidence production. Additionally, a crowdfunded research or a clinical trial will not go through the extensive, rigorous review process to validate the preclinical study evidence.
Financial risks – Many countries are making amendments in their regulations to allow non-accredited investors in investment-based crowdfunding. However, this may expose inexperienced retail investors to an increased financial risk. Also, financial risk is associated with donation-based or reward-based crowdfunding, in which there is a possibility that the project will not be able to generate sufficient amounts as per the goal. In addition, other financial risks associated with these types of transactions are the transaction fees applied by the platform providers that can also lead to economic inefficiency. It has been observed that around 5% of the amount is charged as a transaction fee. This additional transaction fee would also lead to financial risk with donation-based or reward-based crowdfunding.
Unclear regulatory framework of crowdfunding – The currently available regulatory definitions for crowdfunding are unclear and hence, the policymakers are not clear about what the existing or future crowdfunding regulations would be. Regulators operate with limited knowledge, experience, and the risk that applies to the regulatory framework that differs from the model of crowdfunding. Some of the important regulatory considerations would include the size of equity offerings, registration of national licensing authority, capital requirements, number of investors per offer, restrictions on who can invest, and restrictions on the amount to invest.
The issue with due diligence, accountability, and transparency – The source and transparency of information between the funder and the project initiator is very important, and maintaining accountability and due diligence during the complete process is very challenging. The majority of the responsibility to maintain transparency and due diligence falls on the project initiator, as he/she needs to provide the relevant and required information as and when asked by the funder. An important issue of transparency can affect the intellectual property rights of crowdfunding projects. The project initiator should balance the responsibilities for the information provided and share the details with competitors. Thus, there is a high financial risk with the project initiator.
Risk of money laundering and fraud – The process of online crowdfunding can leave the contributors in two minds as the traditional legal system rules would not help secure the funds raised through this medium. There are many examples of legal cases against crowdfunders, who have fraudulently collected donations for medical conditions that are not there. The relatively small contribution and non-compliance of the project initiator to channel the funds to the person in need may lead to fraudulent behavior of the project initiator. In addition, project initiators do not have the motivation to protect their reputation as they are anonymous and are frequently one-off participants. Thus, there is a risk for money laundering, this monetary fraudulent activity can end up supporting some other legal offenses such as terrorism, narcotics deals, and other illegal activities. Thus, fraud and money laundering restrict people from participating in crowdfunding activities.
Some of the advantages and disadvantages of crowdfunding include:
Advantages
It is one of the best sources to raise money.
It is a great platform to pitch your requirement on the online platform, which leads to attracting the attention of many people including media.
Sharing your ideas on an online platform would help you get feedback and expert guidance.
Investors or contributors can track the progress of the project.
It is also a good way to raise awareness about rare diseases.
The project that is for a rare disease would immediately grab people’s attention, which would help generate the finances at the earliest.
Disadvantages
- Not all projects that are scheduled for crowdfunding would achieve their desired target or goal.
- You need to work on generating confidence in investors or contributors.
- There is a possibility of fraud.
- Platform fees can be a barrier.
Conclusion
Crowdfunding on social media and other online platforms helps build small donations or contributions that can turn into a substantial amount, and this can lead to a change in the treatment and awareness of a medical cause such as cancer. Medical crowdfunding can help ease the stress and sharpen focus on treatment and healing.
Crowdfunding helps spread the story of your difficult phase of pain among your friends, family, and others. It also makes the process of raising money for the additional heavy medical expenses easier. When the medical bills are mounting, crowdfunding can help you withdraw the money as soon as you start receiving them. In addition, crowdfunding can also help raise awareness among people for some rare medical conditions.
There are various online platforms that can help patients, their families or friends to create a crowdfund for the treatment or care of the patient. However, growing monetary flow has negatively influenced this market and unsafe practices are increasingly supported through crowdfunding. Financial risks, unclear regulatory framework, and risk of money laundering are some of the disappointing facts associated with crowdfunding for cancer.
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