The State of Healthcare AI: March 2025 Brief

Welcome back to our State of Healthcare AI Brief for March 2025!

I’m going to try something different this month (format-wise), given the feedback with these monthlys. There’s so much news and progress each month that even I’m having a hard time keeping up, but these briefs are meant to summarize the funding and happenings each month.

With that said, AI healthcare startups raised $1.8 billion in March.

This month was a big month for drug discovery companies, and for the first time since we’ve been writing these briefs, the US didn’t completely dominate the funding rounds.

If you’re short on time, I’ve now made a quick TLDR snapshot below, and the startup funding database is at the end of the brief.

As always, if you missed my review last month, you can catch up here in the February Report.

TLDR: March at a Glance

• Total raised: $1.8B across 48 deals

• Top 3: Isomorphic ($600M), Lila Sciences ($200M), Insilico Medicine ($110M)

• Drug discovery made up more than half of total funding

• UK nearly matched US in total funding, but only due to one giant raise

• Policy moves from India, China, and the UK suggest real-world deployment is underway

• Clinical AI sentiment is splitting, workflow tools gaining traction, diagnostic tools facing more scrutiny

• WHO and EU continue to shape global standards

• Patients are beginning to use AI to challenge the system, not just interact with it

March’s Funding Overview

AI healthcare startups raised $1.8 billion across 48 deals in March. That’s a jump from February’s $1.5 billion, with most of the capital concentrated in just a few big rounds. The top three fundraisers accounted for over half of that total, with all three related to drug discovery.

Three companies stood out with substantial funding rounds for this month:​

1. Isomorphic Labs raised $600 million to scale its next-gen drug design engine. Backed by Alphabet (Google) and built on the AlphaFold lineage, the company is aiming to expand both its internal programs and pharma partnerships.

   Would it be bold for me to say Google just might be one of (if not) the largest pharma company in 10 years?

2. Lila Sciences raised $200 million to build automated science factories, labs where generative AI and robotics run experiments in a closed loop. The platform is designed to test ideas at scale, adjusting in real-time based on results.

   Although not a direct healthcare company, I included Lila because their system has already been explored for possible use in medicine and antibody discovery (potentially as therapies), although nothing concrete has been disclosed.

3. Insilico Medicine, a premiere AI-drug discovery startup brought in $110 million to support its fibrosis drug through pivotal trials and to advance its humanoid lab robot. The company continues to lean into automation, combining generative models with robotic systems to streamline early-stage research.

Funding Breakdown by Application

Drug discovery dominated again, pulling in $949 million, more than the next four categories combined. Isomorphic, Lila, and Insilico alone brought in nearly all of this month’s drug-related capital. Though this shouldn’t be too much of a surprise since drug discovery is a capital-intensive road, should any one drug succeed, it’s also massively lucrative.

What stood out this month was the middle of the pack. Diagnostics ($251M), patient monitoring ($245M), and AI-enhanced research ($232M) all landed within a tight range.

Administrative and operational tools dropped to $171M, a change from last month when this category came in second. It could be a timing issue or a sign that investors are moving toward companies with broader scientific or therapeutic impact. However, it’s hard to spot any trend given a short time frame.

Surgical assistance raised nothing for the second month in a row. Adoption remains slow, and the bar for clinical proof is still high. Investors may be looking for lower-friction AI solutions before backing more robotics-heavy investments.

Geographic Funding Trends

Usually every month, the US consistently accounts for more than 70% of funds raised. This month is a little different with the UK at $643 million, but that’s only because of the one raise by Isomorphic Labs.

Outside those two, the funding picture dropped off quickly. Germany came in at $33 million, with smaller rounds scattered across the UAE, Poland, Australia, and a handful of others.

Of course, I do have to make a comment about Canada, which for the month of March wasn’t great. Canada, filled with so much potential and talent still lags behind when compared to the rest of the world in terms of funding.

10 Key Trends and Events to Watch in Healthcare AI

It’s hard to keep up with healthcare AI, but here are the ten key trends and events I think we should all be watching closely. Some of these made headlines, while other may have flown under the radar. Either way, these are the ones I believe could influence where Healthcare AI goes next.

1. U.S. State-Level AI Bills Heat Up

Federal AI regulation has been stalled since Trump’s rollback, but several states moved forward this month anyways. Texas introduced a comprehensive "Responsible AI" bill that would hold developers directly accountable for biases in healthcare algorithms. Meanwhile, California continued pushing ahead with transparency rules targeting clinical AI tools.

For companies looking to scale nationally, this patchwork is going to be a problem. Investors are already asking about state-by-state compliance. It’s clear a US strategy now has to include a legal map.

2. Insurers Hit with “Robo-Denial” Lawsuits

Cigna got hit with a class-action lawsuit last month over its use of AI to deny insurance claims. The system allegedly rejected hundreds of thousands of cases, sometimes in just over a second. This obviously has quickly turned into a patient safety and trust issue.

The American Medical Association is calling for regulation, and more scrutiny is coming. Startups building tools for payers should take note; this could cool off investor interest in that corner of the market, at least for now.

3. UK’s NHS Reboot Opens AI Opportunity

One of the more overlooked changes came from the UK. The Starmer government announced NHS England would go back under direct government control, scrapping its independent structure. The message was clear: the system needs a reboot and AI is part of it.

Hospitals in London started outlining rules for safe and responsible AI use immediately. For companies looking to get into public health systems, this kind of policy shift could make the UK a much more viable entry point.

4. China’s Quiet Push Beyond Open-Source Models

China didn’t make as much of a splash in March as it did in February, but there were still plenty of activity to watch for. Government agencies expanded funding for AI in diagnostics and hospital automation, building on February’s open-source DeepSeek model release.

With state funding and cheaper, more capable models, Chinese companies are becoming serious competition especially for startups still tied to high-cost proprietary models.

5. India’s Healthcare AI is Already Operational

Last month’s big AI funding announcement in India is already being deployed. Apollo Hospitals has rolled out AI across its entire network. They’ve automated clinical notes, discharge summaries and day-to-day admin tasks. Doctors reportedly got back multiple hours a day.

India isn’t waiting to pilot things, it’s rolling them out. That makes it one of the more interesting markets to watch, especially for companies looking to show real-world traction outside the US and EU.

6. Japan and Singapore Lay Foundations for Healthcare AI

Japan and Singapore quietly made meaningful progress this month. Singapore’s health ministry launched consultations for clearer guidelines on AI use in clinical settings aiming for practical guidance without hindering innovation. Japan did the same with universities creating new collaborative medical AI research centers.

Both countries often get overshadowed by bigger players like China and India but these subtle steps could set the stage for reliable, regulated healthcare AI markets. I’m watching to see how quickly these foundations turn into actual market opportunities.

7. Pharma is Deepening its AI Integration

This month AstraZeneca showed just how deep AI is being integrated into pharma. At a recent biotech conference AstraZeneca described AI as their “thought partner” for discovering new drugs not just a tool for crunching numbers.

Pharma’s increasing reliance on AI validates the technology’s potential beyond smaller startups. If you’re tracking the market this tells me that AI healthcare companies partnering directly with drugmakers are likely to see sustained growth and a clearer path to meaningful adoption.

8. WHO Moves Forward on Global AI Governance

The WHO launched a new “AI for Health Governance” hub in the Netherlands signaling its intention to shape global standards. Italy followed suit aligning its national policies with the EU’s AI Act.

It’s easy to overlook international bodies when thinking about market forces but these initiatives could have a big impact. Companies already comfortable with EU standards will benefit the most. For others this might mean tougher global market entry down the line.

9. Clinician Sentiment Splits Over AI Adoption

Underreported but important trend: clinician sentiment towards healthcare AI is splitting. On one hand the ECRI highlighted poor AI governance as a major patient safety concern. On the other hand doctors are enthusiastically adopting “ambient AI” tools for tasks like patient documentation and workflow automation.

From my perspective understanding this divide matters. Investors and startups focused on workflow and efficiency tools might see easier adoption while those developing diagnostic or insurance focused AI will need to navigate heightened skepticism.

10. Patients Are Starting to Use AI to Advocate for Themselves

Finally, a smaller but fascinating trend emerged: patients increasingly turned to consumer-facing AI tools to challenge healthcare practices directly. Reports highlighted people using tools like ChatGPT to decode complex medical bills and push back on unfair hospital charges.

Not the biggest news but I found this interesting because it suggests a more empowered patient community. AI in healthcare might not just be top down, it could be coming from patients themselves and potentially change the dynamics of healthcare AI.

Final Thoughts

March brought a different energy compared to February. Last month’s funding was well distributed among the six different sectors (except for surgical), while this month saw massive funding for drug discovery. It is ironic that given the economic market, there’s a general sentiment that investors are looking towards more growth and early proven companies, yet here they are, pouring money into ultra-high-risk ventures like drug discovery.

Policy shifts also picked up pace in March. February was the beginning of some early news such as India’s funding announcements, China’s open-source models, Europe’s AI Act going live. March seemed to follow through. India started deploying AI in hospitals. China expanded state support. The UK laid out its path for AI in public healthcare.

If you follow my newsletter, you would have noticed that our “product pipeline” section has featured many more FDA (or other regulatory bodies) approved devices and healthcare AI applications. This means that we’re seeing startups proving their technology and are looking to market over the next few months!

Hope you enjoyed this month’s brief, I am tinkering with the format and structure of these monthly briefs, if you have any suggestions, don’t hesitate to let me know!

See you back next month.

March’s Top 20 Healthcare AI Startup Database