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The New Playbook in Digital Health

Scott Munro

Curator, Health Startup Digest

The digital health industry continues to get record funding year over year — recently topping $3.9 billion year-to-date in 2016. While investors and entrepreneurs are finding cause for celebration, others have a healthy dose of skepticism.

In an annual address to the American Medical Association last month, CEO Dr. James Madara called out digital health as the “digital snake oil of the early 21st century.”

Dr. Madara is not alone in his skepticism around digital health. Although funding continues to pour into the industry, clinical buyers increasingly shy away from these technologies. Why?

Digital health has an identity problem: Some technology companies are masquerading as healthcare companies with potentially dire consequences. The most recent high-profile example of this is, of course, Theranos. The company has no end of bad news, including a CEO who is now banned from operating a lab for two years.

The list of tech companies running afoul in healthcare is lengthy. From 23andMe to Pathway Genomics to many wearables, the industry is littered with companies that developed and marketed promises they couldn’t keep.

To a large extent, this problem was unintentional. Technology companies have operated with success by “faking it” since the dot com era: Sales and marketing teams sell the dream instead of the reality, and cross their fingers that engineering can catch up in time for the next release. The mentality works for a variety of standard tech industries — consumer electronics, social media platforms and enterprise storage to name a few — but it can be catastrophic in healthcare.

The often-lamented and cumbersome regulations of the life sciences and healthcare industries are there for good reason: People’s lives and well-being are at stake.

We often think of life sciences as untrustworthy and crooked, but the industry does have the rigor to make reasonable assurances that what companies are selling to physicians (and ultimately, consumers) is effective. The fact that mHealth and digital health companies have not approached research and development with the same amount of rigor and regulation means their products often seem to lack efficacy.

The result is an industry where only “16 percent [of physicians] use [digital health] in their work with patients,” according to a survey from ResearchNow. A separate QuantiaMD study from 2014 dove into the reasons why physicians weren’t using digital interventions and found that “42 percent won’t prescribe apps because there is no regulatory oversight of them,” and “21 percent won’t prescribe apps because there’s no longitudinal data on apps’ effectiveness.” So much for disruption.

What does this mean for tech companies looking to differentiate themselves in healthcare — an industry that, while in desperate need of innovation, still needs you to play by the rules, too?

Digital health startups simply can’t use the same old tech playbook, or they will be marked as fraudulent and ignored. Instead, digital health companies need to understand that an approach more akin to the life sciences playbook is required to succeed. This means longitudinal data that demonstrates both clinical efficacy and economic efficiency.

The good news is there is already a framework for how digital health companies can conduct studies to graduate from “snake oil” to serious solutions. For example, Omada Health was one of the pioneers in providing clinical trials as “the first digital health company to publish two-year, peer-reviewed outcomes” for its diabetes management platform.

Since then, other companies have followed suit. AI Cure, an artificial intelligence platform for improving drug adherence, has not one, but three separate clinical trials running concurrently to demonstrate the effectiveness of its tool in use cases from schizophrenia to opioid addiction.

One might think that clinical efficacy is enough to separate from the pack, but as we move towards shared risk models that put more economic burdens on providers, it’s critical to prove economic benefits as well. This isn’t just a requirement to differentiate, it’s a requirement to gain reimbursement codes from the nation’s payers and ultimately adoption among providers — a process that many digital health companies are ill-prepared for.

More traditional device companies like Intersect ENT understand the importance of economic data. As Lisa Earnhardt, CEO of Intersect ENT, said in an interview for MedTech Talk,

“Those companies that really focus on creating clinical and economic value, and are driving outcomes across the continuum of care, have been and will continue to be successful.”

Earnhardt is highlighting the new normal of proving economic value for medical device companies. However, this is also —whether tech entrepreneurs like it or not — the new reality for the digital therapeutics.

Ultimately, Dr. Madara was not saying that all digital health companies are de facto useless. He does see the potential (and need) for technology and understands that a “more promising digital future can be envisioned” for the industry.

In order to fulfill this promising future, the impetus is on entrepreneurs creating these new digital tools to prove their clinical efficacy, prove their economic efficiency, and ultimately, prove that they are far from snake oil.

Scott Munro

Curator, Health Startup Digest

Scott is the curator for the Health Startup Digest where he manages a weekly news update on the intersection of health care and technology for more than 5,000 subscribers globally. Previously, he…