5 ms·

Why Silicon Valley Is Running Scared From Health Care

67 points by waxymonkeyfrog 15y ago

cantastoria 15y ago
I think another factor is that it's really, really hard to get your products into hospitals. Most hospitals are part of large networks and can't make independent purchasing decisions. The entire network has adopt your product in many cases. So you're looking at low-volume, high touch sales that have a long cycle. Not to mention all the regulatory crap you have to deal with and the coming 2.3% excise tax on total revenue that medical device manufacturers have to pay thanks the Health Care Reform bill. It's easier to just make a Groupon clone and call it a day.
- famousactress 15y ago
  With over a decade building products that are used in them, I'd agree but it's even worse than that. The sale is so abstracted it's nuts. Purchasing decisions are made by group-executives, for hospitals, for users (doctors, nurses, pharmacists, patients). The distance between the users and the buyers is awful. I think it's easily the largest problem in getting quality innovative products into the hands of acute-care clinicians.
  - patrickwiseman 15y ago
    I think IT and devices are two different problems entirely. Most of the healthcare groups I've worked with have their IT purchasing decisions made by the IT department with minimal input from the senior staff or medical staff. The IT departments are making their decision based on begin largely underfunded and are trying to implement any solution that requires the least amount of effort on their part because of labor cost savings. Which is why you don't have too look very hard to find high cost solutions with terrible interfaces for physicians but decent interfaces for IT administrators. Medical devices have mostly been vetted by physicians and provided to the IT department who tries to discern what works well in their current network. All the fat cat decides is a yes or no to the entire proposition. It's a people system, sales isn't about convincing one person its about convincing many. The largest problem is always in getting innovative products into the hands users. With IT its no different than normal and with medical devices you have to make disclosures to the FDA because of patient safety considerations, but this paperwork isn't particularly difficult.
- baran 15y ago
  Healthcare products can generally fall into two categories (1) the game-changing technology and (2) everything else. #1 above will sell itself (think implantable glucose monitor). #2 will sell well if it solves one of the top three problems the organization is facing.
waterside81 15y ago
Not sure I agree with the 3 reasons stated but I'd add a 4th: the politics of the health care system makes it a people problem, not a technology problem. The technical solutions to "fix" health care exist (EMRs, Big Data solutions etc.) however the political capital is often lacking in environments where it's all about covering your own ass. Having had experience in deploying a web app in the VA, I can personally attest to the lack of competence at the executive level at large hospital institutions.
tonywebster 15y ago
'Disrupt' has an entirely different meaning when you're working in healthcare or government, where there's an intimidating culture of politics, status quo and big money. Actually, those sectors are probably the ones that need disrupting the most. There's two distinct things here: medtech/biotech and software. The former is riddled with patents, government approvals, waiting periods and stonewalling by the very hospitals and insurance companies that are supposed to want healthy people, etc. Software is easier: an easier EMR (they exist) might remove complexity in daily life for medical professionals, but I'm waiting to see a startup make an impact in the way of meaningful doctor-patient relationships, especially outside of a static, single clinical visit.
- VladRussian 15y ago
  >'Disrupt' has an entirely different meaning when you're working in healthcare or government if it has any meaning at all there. You just can't provide an alternative government (like better police, tax collecting, military or child protective services ... :) or other official monopoly protected services (law, medicine, ...) for it is just illegal (ie. they are protected by the real threat of government's violence). Look at Uber which even didn't try to provide an alternative cab service, they only tried to provide a partial alternative _to_ cab service which is official monopoly (again - protected by government's violence, and yes, Silicon Valley, especially new generations of it, doesn't deal well in the realm of violence)
jswinghammer 15y ago
You can probably generalize this and bit and say that capital is currently flowing to activities that are expensive. In this case the activity that everyone is trying to "fix" is marketing. It's insanely expensive to market products and services. Reducing costs there would free up resources to go to things like biotech or whatever else people would rather capital go towards. I try to stay value free in my judgments on this topic so I'm not really moved by this to begin with. I realize that there is a lot of money spent on health care but that money is spread among a lot of different activities so it's not something a startup could target and hope to fix on a large scale.
krschultz 15y ago
My senior design project was for a medical device company. Five of us worked our ass off for 4 months to come up with a machine that would assemble parts of a biomedical device. At the end our system worked great, and it clearly would have saved the company tens of thousands of dollars a year in wasted product. Everyone at the company was very excited about it, and they planned to use it on the actual factory floor. It was going to take 2.5 years for the FDA to approve it. In the meantime, it sat on a shelf waiting and waiting and waiting. With timelines like that, nobody can accomplish anything without billions and billions of dollars.
- bmj 15y ago
  This. If your hardware/software requires FDA approval, quick and dirty is NOT an option. And, I think unless you are know that domain (that is, the FDA approval process), you are likely to just give up because of how difficult/time-consuming it can be.
reasonattlm 15y ago
The best thing that the software / information management community could do here to massively disrupt the whole ball of wax is to make medical tourism as easy, intuitive, well-reviewed, and transparent as travel for other reasons. A lot of rationale for this can be found here: https://www.opencures.org https://www.opencures.org https://www.opencures.org/content/open-cures-speed-clinical-development-longevity-science https://www.opencures.org/content/open-cures-speed-clinical-... Doing this shouldn't be (as) hard, and it certainly doesn't require you to become another cog in the the bloated regulatory command and control structures that's hamstringing the pace of progress in medicine. There should be greater competition between regions in provision of medicine and strictures on research, and helping to make that happen is a noble goal.
- VladRussian 15y ago
  >to massively disrupt the whole ball of wax is to make medical tourism as easy, intuitive, well-reviewed, and transparent as travel for other reasons. well, considering how Google was hit for advertising Canadian pharmacies, you wouldn't want your medical tourism review/info startup be under US jurisdiction.
  - cpeterso 15y ago
    Perhaps countries that are popular destinations for medical tourists might want to fund incubators for medical tourism startups?
    - VladRussian 15y ago
      just wait until Cuba embargo and travel restrictions come down: http://www.wired.com/wired/archive/12.12/cuba.html http://www.wired.com/wired/archive/12.12/cuba.html Like Mafia 60 years ago and US government during last 10 years, the medical industry may just happen to discover the benefits of such close, yet completely outside of US laws (or pretty much any laws that can't be worked around with money), location.
  - jjtheblunt 15y ago
bh42222 15y ago
The last paragraph of that article is prophetic. Large regulators almost never shrink, or become smarter, or more efficient. At best they tend to grow very, very slowly - at best. We (high regulation) are going to experience many fewer unwanted side effects from medical innovation. We are also going to have less medical innovation. Other places (with low regulation) will have a lot more people suffer form unwanted side effects of new medical treatments, devices, drugs, etc. But they will also have a lot more treatment options, and a lot cheaper treatment options. All other things being equal, where would you like to live?
kkowalczyk 15y ago
There are 2 things that bother me about this article. 1. They say US has the best (most advanced) health care technology but not the most affordable or even effective (in that Americans don't have the longest life expectancy). They should at least mention that it raises the question: what good is having this technology if most people can't afford it or it's not more effective than technology available elsewhere? Shouldn't we care more about making existing technology more affordable and effective rather than chase the latest technology gizmos? 2. They say that the problem is that health care technology development is halted due to less VC investments that are diverted to web startups. At the same time they claim that medical tourism is on the rise because people can get more advanced treatment outside U.S. That squarely contradicts their claim that U.S. health care technology is most advanced and hints that the problem is primarily regulatory (i.e. FDA approval process takes longer than such processes in other countries) and not just lack of funding.
- Goladus 15y ago
  They should at least mention that it raises the question: what good is having this technology if most people can't afford it or it's not more effective than technology available elsewhere? Shouldn't we care more about making existing technology more affordable and effective rather than chase the latest technology gizmos? They're separate questions. In many cases, the best way to make technology more affordable is to improve the technology. Furthermore, developing new treatments where none existed before might make healthcare seem more expensive but in fact it's a flawed comparison. The cost before the treatment existed was essentially infinite. In some ways, better insurance can actually aggravate the situation, because existing drug companies have no real incentive to do serious innovation. They're already collecting enormous revenues from prescriptions and would probably just as soon not have any technology disrupt that model.
  - derleth 15y ago
    > existing drug companies have no real incentive to do serious innovation This is just massively ignorant. Who do you think funds drug research now? Not just the initial 'this substance looks kind of interesting', but 'we have to get this specific drug from the concept stage through FDA approval'.
startupcomment 15y ago
Are the factors that the author describes serving to concentrate innovation in large pharma and large device manufacturers?
aubergene 15y ago
"U.S. healthcare system the envy of the modern world." I greatly prefer the UK's NHS, the US system is an expensive nightmare.
- hugh3 15y ago
  Anyone who doesn't have extensive experience with both is poorly qualified to comment, I think. There are great things and lousy things about the US healthcare system. In terms of the people and the facilities, nothing is better. But the financial and administrative side of things can be a nightmare.
- rilkeanheart 15y ago
  Having launched web applications in both markets I can say with a high degree of confidence that both systems are far from perfect. However, I think the US system suffers the most because it is "stuck in the middle". It struggles to benefit from innovation because antiquated payment models often delay (if not outright discourage) it. E.g., use of e-mail is a NEW phenomemon for many US docs. So we don't get the benefit of truly free markets working quickly to highlight/exploit inefficiencies. On the flip side, we get the bloat but not the benefits of a single payer system- even though most care is paid for by the government. I think a single-payer system would be a local maximum but a truly free market would be the most optimal.
run4yourlives 15y ago
> "But today, this system is in collapse, jeopardizing the very foundation of what has made the U.S. healthcare system the envy of the modern world" I'm pretty sure there are no modern western nations that "envy" the US heathcare system as it stands. I know that in Canada it is viewed as something slightly more sinister than Satan himself. (To our own detriment, admittedly)
shithead 15y ago
Fifty years ago, a 'harmless' sedative was withdrawn from the market because babies were being born without arms or legs: http://en.wikipedia.org/wiki/Thalidomide http://en.wikipedia.org/wiki/Thalidomide Once bitten, twice shy.
healthtech 15y ago
Regulation is a killer, I've seen it in action. Just today I was running the numbers on a major SW development project for the health tech firm I work for and basically concluded our whole $40M R&D investment is going to have a massive negative NPV. Why? Because of delays due to regulation. Regulation required more developer time and resources, which definitely put a dent in our projects financials. But the real killer is that it delayed us getting to market by almost a half a year and the results of the slowdown and inefficiencies in development are causing us to roll out a lot more slowly. So I am too painfully aware of the effects of regulation on health technology.

I think another factor is that it's really, really hard to get your products into hospitals. Most hospitals are part of large networks and can't make independent purchasing decisions. The entire network has adopt your product in many cases. So you're looking at low-volume, high touch sales that have a long cycle. Not to mention all the regulatory crap you have to deal with and the coming 2.3% excise tax on total revenue that medical device manufacturers have to pay thanks the Health Care Reform bill. It's easier to just make a Groupon clone and call it a day.

famousactress 15y ago
With over a decade building products that are used in them, I'd agree but it's even worse than that. The sale is so abstracted it's nuts. Purchasing decisions are made by group-executives, for hospitals, for users (doctors, nurses, pharmacists, patients). The distance between the users and the buyers is awful. I think it's easily the largest problem in getting quality innovative products into the hands of acute-care clinicians.
- patrickwiseman 15y ago
  I think IT and devices are two different problems entirely. Most of the healthcare groups I've worked with have their IT purchasing decisions made by the IT department with minimal input from the senior staff or medical staff. The IT departments are making their decision based on begin largely underfunded and are trying to implement any solution that requires the least amount of effort on their part because of labor cost savings. Which is why you don't have too look very hard to find high cost solutions with terrible interfaces for physicians but decent interfaces for IT administrators. Medical devices have mostly been vetted by physicians and provided to the IT department who tries to discern what works well in their current network. All the fat cat decides is a yes or no to the entire proposition. It's a people system, sales isn't about convincing one person its about convincing many. The largest problem is always in getting innovative products into the hands users. With IT its no different than normal and with medical devices you have to make disclosures to the FDA because of patient safety considerations, but this paperwork isn't particularly difficult.
baran 15y ago
Healthcare products can generally fall into two categories (1) the game-changing technology and (2) everything else. #1 above will sell itself (think implantable glucose monitor). #2 will sell well if it solves one of the top three problems the organization is facing.

waterside81 15y ago

Not sure I agree with the 3 reasons stated but I'd add a 4th: the politics of the health care system makes it a people problem, not a technology problem. The technical solutions to "fix" health care exist (EMRs, Big Data solutions etc.) however the political capital is often lacking in environments where it's all about covering your own ass. Having had experience in deploying a web app in the VA, I can personally attest to the lack of competence at the executive level at large hospital institutions.

tonywebster 15y ago

'Disrupt' has an entirely different meaning when you're working in healthcare or government, where there's an intimidating culture of politics, status quo and big money. Actually, those sectors are probably the ones that need disrupting the most. There's two distinct things here: medtech/biotech and software. The former is riddled with patents, government approvals, waiting periods and stonewalling by the very hospitals and insurance companies that are supposed to want healthy people, etc. Software is easier: an easier EMR (they exist) might remove complexity in daily life for medical professionals, but I'm waiting to see a startup make an impact in the way of meaningful doctor-patient relationships, especially outside of a static, single clinical visit.

VladRussian 15y ago
>'Disrupt' has an entirely different meaning when you're working in healthcare or government if it has any meaning at all there. You just can't provide an alternative government (like better police, tax collecting, military or child protective services ... :) or other official monopoly protected services (law, medicine, ...) for it is just illegal (ie. they are protected by the real threat of government's violence). Look at Uber which even didn't try to provide an alternative cab service, they only tried to provide a partial alternative _to_ cab service which is official monopoly (again - protected by government's violence, and yes, Silicon Valley, especially new generations of it, doesn't deal well in the realm of violence)

jswinghammer 15y ago

You can probably generalize this and bit and say that capital is currently flowing to activities that are expensive. In this case the activity that everyone is trying to "fix" is marketing. It's insanely expensive to market products and services. Reducing costs there would free up resources to go to things like biotech or whatever else people would rather capital go towards. I try to stay value free in my judgments on this topic so I'm not really moved by this to begin with. I realize that there is a lot of money spent on health care but that money is spread among a lot of different activities so it's not something a startup could target and hope to fix on a large scale.

krschultz 15y ago

My senior design project was for a medical device company. Five of us worked our ass off for 4 months to come up with a machine that would assemble parts of a biomedical device. At the end our system worked great, and it clearly would have saved the company tens of thousands of dollars a year in wasted product. Everyone at the company was very excited about it, and they planned to use it on the actual factory floor. It was going to take 2.5 years for the FDA to approve it. In the meantime, it sat on a shelf waiting and waiting and waiting. With timelines like that, nobody can accomplish anything without billions and billions of dollars.

bmj 15y ago
This. If your hardware/software requires FDA approval, quick and dirty is NOT an option. And, I think unless you are know that domain (that is, the FDA approval process), you are likely to just give up because of how difficult/time-consuming it can be.

reasonattlm 15y ago

The best thing that the software / information management community could do here to massively disrupt the whole ball of wax is to make medical tourism as easy, intuitive, well-reviewed, and transparent as travel for other reasons. A lot of rationale for this can be found here: https://www.opencures.org https://www.opencures.org https://www.opencures.org/content/open-cures-speed-clinical-development-longevity-science https://www.opencures.org/content/open-cures-speed-clinical-... Doing this shouldn't be (as) hard, and it certainly doesn't require you to become another cog in the the bloated regulatory command and control structures that's hamstringing the pace of progress in medicine. There should be greater competition between regions in provision of medicine and strictures on research, and helping to make that happen is a noble goal.

VladRussian 15y ago
>to massively disrupt the whole ball of wax is to make medical tourism as easy, intuitive, well-reviewed, and transparent as travel for other reasons. well, considering how Google was hit for advertising Canadian pharmacies, you wouldn't want your medical tourism review/info startup be under US jurisdiction.
- cpeterso 15y ago
  Perhaps countries that are popular destinations for medical tourists might want to fund incubators for medical tourism startups?
  - VladRussian 15y ago
    just wait until Cuba embargo and travel restrictions come down: http://www.wired.com/wired/archive/12.12/cuba.html http://www.wired.com/wired/archive/12.12/cuba.html Like Mafia 60 years ago and US government during last 10 years, the medical industry may just happen to discover the benefits of such close, yet completely outside of US laws (or pretty much any laws that can't be worked around with money), location.
- jjtheblunt 15y ago

bh42222 15y ago

The last paragraph of that article is prophetic. Large regulators almost never shrink, or become smarter, or more efficient. At best they tend to grow very, very slowly - at best. We (high regulation) are going to experience many fewer unwanted side effects from medical innovation. We are also going to have less medical innovation. Other places (with low regulation) will have a lot more people suffer form unwanted side effects of new medical treatments, devices, drugs, etc. But they will also have a lot more treatment options, and a lot cheaper treatment options. All other things being equal, where would you like to live?

kkowalczyk 15y ago

There are 2 things that bother me about this article. 1. They say US has the best (most advanced) health care technology but not the most affordable or even effective (in that Americans don't have the longest life expectancy). They should at least mention that it raises the question: what good is having this technology if most people can't afford it or it's not more effective than technology available elsewhere? Shouldn't we care more about making existing technology more affordable and effective rather than chase the latest technology gizmos? 2. They say that the problem is that health care technology development is halted due to less VC investments that are diverted to web startups. At the same time they claim that medical tourism is on the rise because people can get more advanced treatment outside U.S. That squarely contradicts their claim that U.S. health care technology is most advanced and hints that the problem is primarily regulatory (i.e. FDA approval process takes longer than such processes in other countries) and not just lack of funding.

Goladus 15y ago
They should at least mention that it raises the question: what good is having this technology if most people can't afford it or it's not more effective than technology available elsewhere? Shouldn't we care more about making existing technology more affordable and effective rather than chase the latest technology gizmos? They're separate questions. In many cases, the best way to make technology more affordable is to improve the technology. Furthermore, developing new treatments where none existed before might make healthcare seem more expensive but in fact it's a flawed comparison. The cost before the treatment existed was essentially infinite. In some ways, better insurance can actually aggravate the situation, because existing drug companies have no real incentive to do serious innovation. They're already collecting enormous revenues from prescriptions and would probably just as soon not have any technology disrupt that model.
- derleth 15y ago
  > existing drug companies have no real incentive to do serious innovation This is just massively ignorant. Who do you think funds drug research now? Not just the initial 'this substance looks kind of interesting', but 'we have to get this specific drug from the concept stage through FDA approval'.

startupcomment 15y ago

Are the factors that the author describes serving to concentrate innovation in large pharma and large device manufacturers?

aubergene 15y ago

"U.S. healthcare system the envy of the modern world." I greatly prefer the UK's NHS, the US system is an expensive nightmare.

hugh3 15y ago
Anyone who doesn't have extensive experience with both is poorly qualified to comment, I think. There are great things and lousy things about the US healthcare system. In terms of the people and the facilities, nothing is better. But the financial and administrative side of things can be a nightmare.
rilkeanheart 15y ago
Having launched web applications in both markets I can say with a high degree of confidence that both systems are far from perfect. However, I think the US system suffers the most because it is "stuck in the middle". It struggles to benefit from innovation because antiquated payment models often delay (if not outright discourage) it. E.g., use of e-mail is a NEW phenomemon for many US docs. So we don't get the benefit of truly free markets working quickly to highlight/exploit inefficiencies. On the flip side, we get the bloat but not the benefits of a single payer system- even though most care is paid for by the government. I think a single-payer system would be a local maximum but a truly free market would be the most optimal.

run4yourlives 15y ago

> "But today, this system is in collapse, jeopardizing the very foundation of what has made the U.S. healthcare system the envy of the modern world" I'm pretty sure there are no modern western nations that "envy" the US heathcare system as it stands. I know that in Canada it is viewed as something slightly more sinister than Satan himself. (To our own detriment, admittedly)

shithead 15y ago

Fifty years ago, a 'harmless' sedative was withdrawn from the market because babies were being born without arms or legs: http://en.wikipedia.org/wiki/Thalidomide http://en.wikipedia.org/wiki/Thalidomide Once bitten, twice shy.

healthtech 15y ago

Regulation is a killer, I've seen it in action. Just today I was running the numbers on a major SW development project for the health tech firm I work for and basically concluded our whole $40M R&D investment is going to have a massive negative NPV. Why? Because of delays due to regulation. Regulation required more developer time and resources, which definitely put a dent in our projects financials. But the real killer is that it delayed us getting to market by almost a half a year and the results of the slowdown and inefficiencies in development are causing us to roll out a lot more slowly. So I am too painfully aware of the effects of regulation on health technology.