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Businesses Medicine The Almighty Buck United States

Silicon Valley Is Too Focused On Taking the Easy Path in Health Care (cnbc.com) 135

Silicon Valley investors are increasingly looking at health space, but they are mostly eyeing for opportunities on the fringes of the traditional health care system to avoid long and complicated regulatory cycles, an analysis on CNBC shows. As a result of this, these start-ups will not help low-income and chronically ill patients who need innovation most. From the article: Founders often talk about about how challenging it can be to break into the multi-trillion dollar medical sector. Health care startups face regulatory hurdles, long sales cycles and a high burden of proof -- and that means it can take more than a decade to make a return. As a result, many venture-backed entrepreneurs are looking instead at opportunities on the fringes of the health care system, such as cash-only health services that don't require insurance or tests and apps that aren't regulated by the U.S. Food and Drug Administration. For tech investors, these opportunities hold the chance of an outsized return in five years or less. That often valuations on par with consumer Internet start-ups. [...] Many entrepreneurs acknowledge this, but justify their approach by promising to focus on more at-risk groups once they've nailed the product.
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Silicon Valley Is Too Focused On Taking the Easy Path in Health Care

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  • Brilliant (Score:4, Insightful)

    by stephenmac7 ( 2700151 ) on Monday June 05, 2017 @10:28AM (#54551603)
    They've figured out that the regulations they're always pushing for make it near-impossible to compete with established companies and hurt innovation.
    • I'm aware that I accidentally submitted the same comment twice. Sorry about that -- wish Slashdot would let you delete your comments.
    • by Anonymous Coward

      Some regulations do - the patent system is an example. The system was actually designed to help innovation, however in its current form it harms innovation more.

      However, regulations in some actors are needed in order to protect you from greedy profiteers that would sell you about anything to make a quick profit. Healthcare is an example.

      • Re:Brilliant (Score:4, Insightful)

        by Archangel Michael ( 180766 ) on Monday June 05, 2017 @11:45AM (#54552067) Journal

        All regulations do. The fact that we don't document every regulation stifles innovation (And spurs innovation in other areas), we don't know exactly where the wash is.

        Every regulation takes from production, and transfers it to compliance.

        FYI, this is neither "good" nor "bad", it just is. Some regulations are needed, others just get in the way, duplicate other regulations, run counter to others etc. The fact that we rarely look at the consequences for regulations, and make adjustment, enhancements, and revoke so very few ineffective ones is my actual frustration in the whole process.

        • I call BS!

          Some regulations actually encourage innovation (carbon credits). Moreover, without truth in advertising / some burden of proof that what you are putting out there in healthcare actually works, it's easy for a large company (l'll choose Merck since they seem to have no problem publishing fake data to this end) to claim they've made a drug that cures a particular disease causing funding in that field to evaporate.

          Similarly, since there are no non-profit pharmaceutical manufacturers (due to the

        • In this case, I think the FDA would benefit from making it easier to start a clinical trial, i.e. speed up its evaluation process, allow to skip animal testing, etc. But in exchange for that, counseling for informed consent must be much more rigorous, namely telling them that they risk loss of life, limb, eyesight, or other bodily functions, and that they will have limited legal recourse if anything goes wrong.

          Terminally ill patients could be encouraged to sign up for phase 1 trials, and so long as nothing

    • Re:Brilliant (Score:5, Insightful)

      by cayenne8 ( 626475 ) on Monday June 05, 2017 @10:48AM (#54551753) Homepage Journal

      They've figured out that the regulations they're always pushing for make it near-impossible to compete with established companies and hurt innovation.

      Yep....

      I think the reply to them is pretty much, "Duh".....

      That's the way it is with overly onerous regulations...it ONLY helps the big guys that can afford to fund a full department dedicated to only the regulation and documentation side of the business.

      It is understandable in some respects, due to this being medicine...lives can be affected by errors, but the regulations aren't just targeted at direct patient interaction...but many other things.

      It does bring up, however, questions as to how some parts are SO over-regulated, yet direct patient contact items, like heart regulators, insulin and other drug pumps are able to be put out there, without even *basic* encryption, so as to protect patients from being literally hacked, and possibly killed.

      • Re:Brilliant (Score:5, Insightful)

        by interkin3tic ( 1469267 ) on Monday June 05, 2017 @11:34AM (#54552007)

        It is understandable in some respects, due to this being medicine...lives can be affected by errors, but the regulations aren't just targeted at direct patient interaction...but many other things.

        Just to be clear, interactions with the patient are only a tiny slice of what can kill a patient. Making sure a drug companies' formulation facilities are bacterial-free is pretty far removed from patient interactions.

        If you're making a test blood poisoning [wikipedia.org], that's never going to be put into a patient. You want to be sure the raw components are bacterial free though obviously or else the tests are going to be useless and doctors won't know if they're facing blood poisoning or something else. To make sure the raw components are bacterial free you want the facilities to be bacterial free. If you find bacteria, you need to shut down production while you sterilize everything. That's a huge cost.

        If you're trying to start selling a cheaper test and you get a report saying you need to shut down production for a week, any sane business is going to say "Hmm... that will kill us... is it REALLY necessary to shut down if we have three bacterial colonies on a single plate? Lets talk to the undergrad who reported the test, ask him if he really wants everyone to lose their jobs? 'Isn't it maybe possible you accidentally sneezed on the plate?'"

        Easy to justify: you know your facilities are clean, you spend a shit ton of money cleaning them. And that's just like the doors! That's not even the production vats! No way is the whole thing contaminated. Plus these aren't even going to go into people... You do testing of all the lots of blood tests, you'll know if they're compromised... And besides, any doctor worth his salt is going to be able to identify SEPSIS without a %100.00000000 accurate blood test, it's so common! Fire the kid and ship it.

        Regulations are necessary especially when it's not directly interacting with a patient. Yes they are huge barriers to efficiency, granted, but healthcare is simply not a place the free market works at any level. The end result is not sales, it's literally life or death. Society simply does not tolerate that. Investors who get into healthcare and deceive themselves into thinking it is a free market deserve to lose their money. Politicians and pundits who try to reform healthcare towards "free market" are deceiving themselves and or the public, and deserve to be thrown out of their jobs hard. If they try to exempt themselves from such "free market" solutions while subjecting everyone else to it, they deserve literal crucifixion even if they do claim it's just a reconciliation loophole they'll totally close later.

      • Capital costs exist in any industry. You need to own a mine to get into mining. You need to own land to farm. And you need to prove you're not selling rat poison in the pills. I don't see what the issue is.

        I mean, its possible that the regulations are overreaching. But it seems far more likely they are a reaction to something.

    • Re:Brilliant (Score:5, Interesting)

      by elrous0 ( 869638 ) on Monday June 05, 2017 @10:51AM (#54551771)

      While I might normally be inclined to agree with you, I have to point out that regulation in the healthcare industry is there for a very important reason. When you're dealing with human bodies and human lives, you need a very carefully regulated system to prevent someone's mistake from turning into a disaster that costs a lot of lives or causes a lot of harm.

      For example, those annoying regulations that require extensive clinical trials and testing of new drugs are there for a very good reasons. They're in place to prevent disasters like what happened in West Germany and the UK in the 1950's, when the drug Thalidomide [wikipedia.org] was okayed for sale without adequate testing.

      • Re:Brilliant (Score:5, Insightful)

        by MightyYar ( 622222 ) on Monday June 05, 2017 @11:29AM (#54551991)

        Regulations are good and necessary to a free market, but established players tend to get regulations which are not good or necessary for a free market tacked on. Governments get in on the action to try to extract money and craft perks for their special interests. Sometimes the unnecessary regulations are simply the result of well-meaning officials who think they are improving upon what a free market could deliver, but in reality have the effect of freezing the state of the art.

      • That may be true, but how many people die when the FDA fails to approve drugs on time [fee.org]? Why not just have incentives to avoid hurting people rather than telling them how to do it? If someone falsely advertises, they can be sued for fraud. If their drug has X side effect (maybe even death), they can be sued for all damages caused by their nondisclosure of said side effects. Federal regulation is not the most effective way to keep people safe. The problem is that we have an easy time imagining what would happe
    • Re:Brilliant (Score:5, Informative)

      by Kohath ( 38547 ) on Monday June 05, 2017 @11:03AM (#54551847)

      It's not so much regulations. Health care needs regulations. It's that US regulators are notoriously bad at it. My friends in the medical device business do most of their work in places like Germany and other Northern European countries because the regulators are strict, but they do their jobs predictably and in a timely manner. They shun the US because the regulators are sloppier and everything takes forever in the US.

      • So what happened when Vioxx was found to cause heart attacks? people said the regulators responsible should have been fired

        • by Kohath ( 38547 )

          Why are you complaining about a single drug approval from almost 20 years ago? Unless they reject every drug, they're going to make some errors by approving drugs they shouldn't approve sometimes. You want new drugs, it's never going to be risk free.

          And you are responding to a post where I say US regulators are bad at it. And your point is that ... they made a mistake once. Yes.

    • Yes, including innovation like snake oil and Thalidomide.

    • Changing Regulations are worse for innovation, than the number of existing ones. The problem is we got ACA, we can deal with this, then the Republicans want to dump it and replace it. So all the systems that have been made, tested and optimized for the old way, will need to be rethought, remade, and retested...
      As a Health Care IT Worker, I have a bunch of nice of haves that will actually lower cost and improve care that I have just started, if they are going to take such regulations away or change them.

    • by Shark ( 78448 )

      You shall not infringe on the sacred subscription model of big pharma lest you be regulated out of existence. Curing people is a sin against the holy drain of capital. A life that goes on without buying the divine treatment is a life lost and crime against the revenue-stream gods.

    • by HiThere ( 15173 )

      The problem with your comment is that you are assuming the two used of "they" refer to the same groups of people (though there *is* overlap).

    • by guises ( 2423402 )
      '"They" have figured out that the regulations "they're" always pushing for...' Who is "they"? That's a rhetorical question, this is obviously another smear on liberals. The great enemy.

      Setting aside the fact that "they" are not a monolithic entity, so "they" don't exist, there is another way to read the summary above: where it says that these startups don't pursue mainstream medical business opportunities because "it can take more than a decade to make a return" you could read that as an issue with the r
  • by starblazer ( 49187 ) on Monday June 05, 2017 @10:29AM (#54551613) Homepage
    I bet you three fiddy that Silicon Valley wants to tackle these problems, but its the INVESTORS that control the pocketbooks of Silicon Valley that don't want to take the risk on. The long game, pfffft, what's that? Humanity? Pffft!
    • Really. This story even isn't about 'health care'. It's about investment risks and opportunities. And as soon as the subject of 'valuations' comes up, you should run for the hills.

    • If the employees are good with going without a paycheck for a year or so while all the regulations are met then take a pay cut because they don't want to be accused of gouging their customers I'm sure investors would jump on board.
      • by Anonymous Coward

        These investors pump MILLIONS into these tech ventures, half of it wasted on real estate and furniture. They can not only afford to give them fair wages, they can also afford to wait for results.

    • There's an excellent chance we're going to move to single payer in the next 20 years. The big money isn't in care, it's in being a middle man that skims 10% off the top. A shift to single payer gets rid of most if not all of those middle men...
    • by Shatrat ( 855151 )

      I would take that bet. I've had the misfortune of supporting a major Silly Valley corp that was trying to 'innovate' an existing industry.There was an attitude that technology is magic and that they would be able to come in and in 18 months be better at that industry than companies which have existed for a century. The individual engineers and project managers are also not interested in anything that isn't 'disruptive', including hard work and studying their competitors. They didn't seem to grok the basic c

  • by mveloso ( 325617 ) on Monday June 05, 2017 @10:39AM (#54551695)

    Why sell to people with no money?

    • Re: (Score:1, Insightful)

      by i_ate_god ( 899684 )

      Because the US is a third world country.

      The modern countries on this planet provide health care instead of selling it.

      • The modern countries on this planet provide health care instead of selling it.

        Why would anyone want to get into medicine, with all the headaches it involves...if they didn't stand to make a buck....in fact, a few of them considering all the insurance/litigation that comes with it, and if a Dr...all the years of study coupled with huge student debt bills to pay off, and shorter working life that most other careers.

        You certainly don't go into that career for only altruistic reasons....you don't get the best

        • by Anonymous Coward

          >You certainly don't go into that career for only altruistic reasons....

          A lot of people most certainly do. Do you really want a doctor that is concerned about money more than taking care of you?

          > you don't get the best people that way.

          Doctors Without Borders, USAID, CDC, UNICEF all disagree with you.

      • by mveloso ( 325617 )

        "Modern countries" have their free healthcare paid for by high taxes and government redistribution. That's one way to do it, but not necessarily a better way.

        • by HuguesT ( 84078 )

          Nice FUD, sir.

          Demonstrably socializing medicine is the better way, evidence is here [nakedcapitalism.com].

          Best.

      • by Kohath ( 38547 )

        Because the US is a third world country.

        The modern countries on this planet provide health care instead of selling it.

        That's some complaining. What do you want to do about it?

        And before you say "single payer", understand that single payer will be a lot more expensive than the current system [bloomberg.com] because US health care workers get paid a lot and they probably won't just sit back and accept huge pay cuts. And they have enormous political clout in the US.

        Also, why should the US be like other countries when most people in the US want a more US-like system?

        • Single payer would be cheaper. Private insurance runs around a 20% admin overhead. Even if you do not believe the 1.5% admin rate quoted for medicare, I am pretty confident it is much less than private. And if single payer could get rid of the 7 figure hospital exec's which are not part of the insurance overhead, even better. So we would get rid of 2 non-participatory costs (insurance execs and hospital admins) who contribute zero to keeping people alive.

          • Come on now. If it weren't' for those executives healthcare would be even more expensive. They try and cut costs as much as possible to ensure that every department shows a profit. Even the guys in maintenance. /sarcasm

            I wish I weren't joking but my father (biomedical repair technician) has had the joy of dealing with several managers like this over the years. One questioned why they had so many different spools of hosing and suggested that they order just what they need. The problem is that they basically
          • by Kohath ( 38547 )

            So still super expensive then. Why should we switch to a system most people don't want to save a couple percent?

            ... 7 figure hospital exec's ...

            And added government worker pension costs will be many times that. Pensions don't provide patient care either.

        • by HuguesT ( 84078 )

          Nice try quoting bloomberg, like they are a perfectly neutral observer there. *Just* getting rid of the overhead of having multiple inefficient systems competing with each other in an anti-competitive market would be a bonus. Then there is the matter of the single payer being able to negotiate better medicine practices and prices. This is what nearly every country in this world does. The champion is Japan. Notice they have a lot of centenarians there.

          Also, why should the US be like other countries when most

        • Based on 2014 figures (the latest I found when I looked), US per capita health care is three thousand dollars more expensive than the next most expensive one (Switzerland). I think saving most of a trillion dollars a year does count as less expensive, and I think most people would want less expensive health care.

          Some people say we can't do what every other developed country in the world already does. I think those people are dishonest or spineless defeatists.

          • by Kohath ( 38547 )

            Based on 2014 figures (the latest I found when I looked), US per capita health care is three thousand dollars more expensive than the next most expensive one (Switzerland). I think saving most of a trillion dollars a year does count as less expensive, and I think most people would want less expensive health care.

            Some people say we can't do what every other developed country in the world already does. I think those people are dishonest or spineless defeatists.

            If you read the article, you will see that countries don't cut health care costs. They only have lower costs because they never got high to begin with. But going back in time isn't really an option.

            You can name-call anyone you want, as much as you want. Do you think that will get health care workers to say "yes" to large pay cuts? Do you think it will convince voters and politicians to listen to you instead of doctors and nurses?

            • What I am saying is that every other country in the world has much lower health care costs, and that many of them have better health care results. I'm also saying that the US can accomplish pretty much anything any other country can accomplish. I didn't think those things were all that controversial.

              That's a Bloomberg editorial, and I haven't been impressed with them in the past. It also says it would be difficult to get lower health care costs, which is reasonable. It ignores many of the costs that

              • by Kohath ( 38547 )

                No country has significantly reduced health care costs.

                Yes, if the US could go back in time 100 years, perhaps we could keep health care costs from rising like other countries have succeeded in doing. But going back in time is not an option.

                • If we were to streamline the health insurance industry, we'd save money on health care. If we had some sort of negotiation on drug prices like other countries do, we'd save money on health care. Doing these things would significantly reduce health care costs. It wouldn't get us anywhere near second place, but it would be significant savings.

                  • by Kohath ( 38547 )

                    Some money might be saved. There are probably some studies for how much. Drugs are less than 10% of the total health care cost, and if changes cause fewer therapeutic drugs to be developed you'd see other care costs rise as a result.

                    Realistically, it would be hard to make the case for big changes based on a one time cost saving of 5% or so. That's about 1 year of health care inflation. Maybe 2 years.

                    The main point is that there are no easy wins and no big wins. You can tell a story about much lower cos

                    • Health insurance administration is a big cost also.

                      I'm not saying that it would be easy, but we could arrive at approximate parity with the second-most-expensive by reducing the increase in health care costs, which can't go up faster than total wealth indefinitely.

                      I also really hate the idea that the US can't do something every other developed country does as a matter of course, so I'm going to look for ways to accomplish it.

      • Because the US is a third world country.

        Sorry, the US is still a first-world (NATO-aligned) country (although Trump might have changed that if the threat of the US dropping out hadn't caused the deadbeat members to start paying toward their share of the costs.)

        Of course if you're using the evolved meaning of "poor, economically peripheral" or "mass of underpaid or unemployed serfs under the domination of a Fearless Leader and/or an elite", the US is on the track to that, by replacing the lower class workers

        • > Of course if you're using the evolved meaning of "poor, economically peripheral" or "mass of underpaid or unemployed serfs under the domination of a Fearless Leader and/or an elite", the US is on the track to that, by replacing the lower class workers with cheap, illegal, immigrant labor and the middle class workers with H1-B effectively indentured servants.

          It was just an intentional insult.

          > Having it provided to the serfs by the rulers is a legacy of noblesse oblige, where the royalty of Europe (a

  • The current situtation in healthcare is stupid.

    I sent my genome to a server in eastern europe to get a detailed health report because the FDA won't let 23andme present all of the information. Doctors are actively fighting this democratization of information. Fuck them.

    AI and machine learning have done a better job at diagnosis than humans for decades, but aren't widely used. WHY?

    Fuck the system. I will get the images, and the data - or sensors that I own will - and they will be processed outside of the reac

    • by Anonymous Coward

      You've sent you genome to a country in Eastern Europe? That's really dumb. And I am an Eastern European.

    • by jeff4747 ( 256583 ) on Monday June 05, 2017 @11:16AM (#54551931)

      I sent my genome to a server in eastern europe to get a detailed health report because the FDA won't let 23andme present all of the information.

      That's largely because the information 23andme wants to present has not been proven to be true.

      So....fuck the system for trying to prevent 23andme from lying to you, so that you don't go on a medical vacation to treat a disease you don't actually have.

      Makes perfect sense.

      • by tepples ( 727027 )

        That's largely because the information 23andme wants to present has not been proven to be true.

        Which in turn is because nobody has suggested an efficient way to fund said proof.

        • Typically life science startups use, you know, VC money to pay for such proof. 23&me just couldn't be bothered.

          • by tepples ( 727027 )

            As I understand it, venture capitalists tend to be unwilling to fund clinical trials that don't result in a patent or other exclusive rights that keep free riders from unfairly benefiting from the VC's investment.

            • As I understand it, venture capitalists tend to be unwilling to fund clinical trials that don't result in a patent or other exclusive rights that keep free riders from unfairly benefiting from the VC's investment.

              Yep, that's how it works. And diagnostic companies manage to get funded and deal with this.

              There's a lot of art in the med field about how to structure things in a way that are protectable.

      • That's largely because the information 23andme wants to present has not been proven to be true.

        Details, details!
        We need more startups like Theranos to save our healthcare system.

  • by xxxJonBoyxxx ( 565205 ) on Monday June 05, 2017 @10:56AM (#54551801)
    Most of the "health" startups seem focused on weeding out the weak, as in "let X voluntarily track your activities and single you out for unaffordable health premiums if you aren't young/healthy/kid-free enough to meet our wearable device targets." So yes, if it seems that the chronically ill are being pushed off the map, well it's by design.
  • no, really (Score:4, Insightful)

    by paiute ( 550198 ) on Monday June 05, 2017 @11:06AM (#54551861)
    " promising to focus on more at-risk groups once they've nailed the product"

    I totally believe you, pal.
  • "Silicon Valley" is going to do things that are profitable. Expecting anything else is unrealistic, as nice as it would be.
  • Business wants easy way to make money. News at 11.

    They just need to admit to themselves that it's about the money. Once they nail their "low hanging fruit," they're going to diversify... by finding more low-hanging fruit.

  • we need to take the profit out of Health Care and maybe cut doctors school time down by 2-4 years do they really need 4 years per med?? and we don't need the 500K loans.

  • They aren't brain surgery. They aren't even primary care. All that model disruption business is about sweeping away old, inefficient systems that support simple and relatively discrete transactions: systems that sell me a book; give me a ride from A to B; or provide someone to mow my lawn for me. The entrepreneur in these scenarios focuses on achieving speed, scale and convenience rather than managing complex, ongoing and labor-intensive processes.

    Healthcare services may be inefficient and mind-numbingly

    • by jopsen ( 885607 )
      One could also imagine 24x7 on-demand doctors appointments with emergency room like capabilities... But with some Uber-like must make an appointment to get around regulation that you have to accept everybody in an emergency room... Hence, effectively creating an emergency room service that is unavailable if you don't have insurance or ability to pay your co-pay.... there by lowering the cost of running the emergency room.

      Note: I kind of hope such startup doesn't happen... But some of the Silicon Valley st
  • Investors require unreasonable short term profits.
    Established medical research firms and patent owners are the only ones able to navigate arduous regulation
    People's lives are in the balance

    Result: The only way for-profit medical research and treatment can happen is to charge unreasonable and predatory amounts of money for already approved medications, in order to fuel future research AND pacify the insane greed of wall street.

    Our system is not set up for innovation or disruption, it is set up for
  • I have appeared before the FDA, discussing a testing protocol for a drug we were designing...when I was the CEO of a Silicon Valley VC-backed pharma company. The article even quotes a partner from NEA which is a life science investor in addition to being a tech investor.

    Sure, some people try for easy wins...why not? Some people don't do their homework too -- and not just in the life sciences. And some people (looking at you, 23 & me), get the benefit of the FDA bending over backwards to try to allow

  • by swb ( 14022 ) on Monday June 05, 2017 @12:28PM (#54552535)

    ...doesn't cut it in the realm of health care.

    Silicon Valley may be noodling around the margins, but it's probably less because of the "onerous regulation" than the empty product they peddle not being able to live up to the regulations and cope with the existing complexity.

    They're not showing up to a business sector that has been moribund and antiquated for decades, they're showing up to a business sector that has been highly computerized for decades, so in some sense they're competing against their Silicon Valley neighbors, too.

    And too much of Silicon Valley "innovation" is just empty bullshit, an appy app, perpetually in beta, and lots of hype. Regulation means following rules, audits to make sure you're doing that and actually delivering something of substance.

  • If you want to distribute a new life-saving medical breakthrough it has to go through (on average) 20 years of trials.

    Which YOU pay for out of your pocket.

    IF it succeeds you get to use it for (on average) 5 years before it goes to your competitors. They get access FOR FREE.

    So WHY would anyone ever come up with a new break through?

    People are dying because the federal government via the FDA PUNISHES success and helping people.

    I hear the FDA is corrupt, but even if it isn't, disbanding it would
  • Single Payer Healthcare works.

    It's cheaper.

    It's Medicare For All.

    The vast majority of democracies with good GDP do it.

    We should too.

    And it's way way way cheaper.

    Did I mention the cheaper part?

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