Dr. Jeff Wessler (MD MPhil FACC) is a virtual cardiologist, the Founder of Heartbeat Health, and on clinical faculty at Northwell Health.
getty
Imagine if new drugs were developed the way Silicon Valley startups make their products. A few scrappy entrepreneurs would concoct a compound in a rented garage, then try to get as many people as possible to try it.
Nobody would put up with that, of course, at least not after patients were hurt (or worse) by “bugs” in the new drug. We expect, and the government requires, a much higher standard for medical products than we do for our gadgets and online services.
This is a distinction that most companies that build digital health products have missed, which may contribute to why the industry is struggling to raise capital and why some startups struggle to find a profitable business model. I believe the digital health community has adopted too much of our playbook from technology and not enough from healthcare.
Since 2010, companies have raised billions of dollars with a mission to use technology to reinvent how health conditions are diagnosed and treated. Billions more poured into the sector in 2020 and 2021, as investors were likely betting that the Covid-19 pandemic would launch digital healthcare into the mainstream.
It did not. So far, I haven’t seen the emergence of any company that is even beginning to disrupt healthcare delivery the way Uber shook up transportation and Netflix reorganized television.
Investors, meanwhile, seem to be disillusioned. Venture investments into digital health fell to $4.6 billion in 2023 from $17.7 billion in 2021. As of June 10, 2024, S&P’s index of digital health stocks is down 70% from its peak in January 2021. (In this context, digital health companies are those that use technology to prevent or treat health conditions in their patients. There are many companies that have found success selling technology that improves the operations of healthcare providers.)
Some explain the digital health industry’s woes as the inevitable result of the Covid bubble. Bessemer, for example, recently suggested that the sector is following the “hype cycle” so common in other technology markets where the “trough of disillusionment” follows the “peak of inflated expectations.”
As an entrepreneur running a digital health company, it’s clear to me that digital health faces deeper problems than the fickle fancies of investors.
I think we've modeled ourselves too much on Silicon Valley, with its move-fast-and-break-things, fake-it-till-you-make-it style. We’ve built slick apps and sleek devices, but they have resulted in few significant advances in the outcomes that matter: helping people stay well or get better.
Digital health companies could be better off emulating the methodical approach of the pharmaceutical industry. It conducts excellent science because it invests significantly in research and development. Further, it understands its market well enough to identify what will pay off on the business side.
Yes, there are legitimate criticisms of Big Pharma’s pricing and marketing strategies, but these don’t undercut the real value that the industry has created for patients and investors.
Before a new drug is approved, it is tested in vitro and in animal models before undergoing testing for safety and efficacy in humans.
In the United States, the Food and Drug Administration also regulates most medical devices, including some software and mobile apps. Some devices are exempt from FDA review "if they are extremely low risk or very similar to existing devices." Those that "are very important to health or sustaining life," like pacemakers, must prove their safety and effectiveness.
The offerings of digital health companies, however, don’t always fit into these narrow regulatory categories. They often weave together devices (for testing or therapies), apps and digital access to clinicians into protocols meant to treat a particular condition.
Many digital health companies do only the most rudimentary testing on these protocols before bringing products to market. Very few have published double-blind, placebo-controlled studies in top-tier, peer-reviewed journals.
My company, Heartbeat Health, has worked hard to collect data and study our care model. But we’ve been in the cardiology telehealth business for eight years, and frankly, we should have done much more safety and effectiveness research sooner.
Instead, like many other digital health companies, we followed the Silicon Valley playbook, where success is measured by how fast you can bring on new customers and increase revenue.
But now it’s time for all of us in the sector to admit that this land rush approach hasn’t worked. Everyone involved—entrepreneurs, investors and especially health insurers and other payers—could benefit from adopting two concepts that are standard in the pharmaceutical industry:
1. Agreed-Upon Standards For Safety And Effectiveness
Everyone likes to complain about regulation, but in many industries, such as pharmaceuticals, strictly enforced standards and a level playing field make for good business and good customer outcomes.
That said, I’m not sure the right answer here is for the FDA to regulate every aspect of digital treatment protocols. Another option is that the industry could develop a certification program for digital health services. One existing model is the V3 standard for validating sensor-based digital health technology created by the nonprofit Digital Medicine Society.
2. A Longer Timeframe
More testing and higher standards mean it will take longer to get digital health products to market. But there is already a useful model for that: biotech. It can take a decade or more for a startup with an innovative new drug, therapy or device to get it to market. Investors provide capital, understanding they will need to wait for a return. Thankfully, it should take less time to refine and validate most digital health products than it does a complex genetically engineered therapy or pharmaceutical.
I’m sure that some other digital health companies and their backers will object to these ideas as unneeded restraints. It’s true that trading Big Tech’s free-for-all garage for Big Pharma’s meticulous laboratory will slow innovation and encourage some entrepreneurs and investors to seek more amenable markets.
Ultimately, though, raising the bar may be the only way that digital health can achieve its promise. Long-term investors could see returns precisely because patients will receive treatments proven to improve their health.
Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify?
