Why Silicon Valley Is Running Scared From Health Care | Hacker News Reader

Why Silicon Valley Is Running Scared From Health Care

theatlantic.com

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.

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.

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.

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.

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.

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.

> 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'.

Who do you think funds drug research now?

The NIH, nonprofit fundraising organizations like The Jimmy Fund, small companies like Advanced Cell Technology, and Venture Capital to biotech startups. Finally-- existing large drug companies like Pfizer, Merck, Bristol-Meyers Squibb, and Novartis; who issue grants, own large research labs and acquire startups much like IBM, Oracle, and Microsoft.

But the last are heavily biased. Consider the study covered by this article: http://news.harvard.edu/gazette/?p=88990&utm_source=Silv...

That study won't result in technological innovation. That study will result in health insurance policies more likely to cover sleeping pills. Funded by Merck and Sanofi-Aventis, who sell sleeping pills.

> existing large drug companies like Pfizer, Merck, Bristol-Meyers Squibb, and Novartis

OK, you aren't as dumb as I thought you were. Some people claim that drug companies do no research, the public sector does all of it, and Big Pharma (a big 'I'm-a-moron' catchphrase if I've ever heard one) steals or suppresses everything it can get its hands on.

> But the last are heavily biased.

Every field has its publication bias. Frankly, results announcing new things and going new places are more interesting than results confirming what we know or saying that the new thing isn't as interesting as we'd hoped after all. What's worse is trying to get science news from non-specialized news sources, like CNN or Fox. You might as well ask an overexcited six-year-old what's in the dark closet.

Your sleeping pill study isn't even in the running for the thing most wrong with how we research and produce drugs in this country, let alone with how terribly, criminally negligent the FDA is in prosecuting the crazies who are bringing crap like reiki and homeopathy into hospitals and university programs (quackademic medicine).

I admit I exaggerated, the point I wanted to make in the post that got downvoted was that health insurance doesn't reduce the costs of healthcare. Health insurance is a way to share the costs, that's it. Real cost reduction comes from improved technologies, healthier environments, and healthier behavior.

I'm not saying there aren't other major issues with regards to the FDA and the expense and politics surrounding clinical trials, just that existing large companies are probably not going to innovate with substantially more success than a healthy startup and academic ecosystem.

Americans also have an atrocious diet and don't walk or ride bikes anywhere. There's only so much medicine can do if you eat and drive yourself into obesity, diabetes and heart disease.

At least before 9/11 and the increasing paranoia over foreigners, the US was actually one of the leading destinations for medical tourists, particularly wealthier ones.

Seems obvious then to say that medical spending is misdirected toward treatment from prevention. It's a tough sell, though, because Americans, to make a broad generalization, don't like to be told what to eat or how to live. What we miss is that Big Food, Big Pharma, Big Beauty, Big Auto, etc. tell us what to eat and how to live all the time, we just don't notice.

The US is still the leading destination for wealthy medical tourists. If you want the best medical treatment and money is no object, you'll almost certainly get better treatment in the US than in your home country.

I've read, anecdotally, that wealthy Arabs have started going to Switzerland rather than the US. If you're not of an unfashionable nationality or ethnicity, I wouldn't be surprised to hear that the US is the best option.

Americans also have poor black people stuck in urban ghettos, which hurts their statistics.

Until poor black students have a good chance of getting a good education (which is hard when all the middle-class students flee "black" schools, leaving schools full of low socio-economic status students, creating big negative peer effects - teachers can't teach if they spend all their time on crowd control, and students don't learn if they don't have positive role models), you I doubt you will get any respectable demographic statistics.

I could talk about how certain educational reforms would improve education at a low cost, but there's no reason to trust they would work. What would work is large federal grants, based on low SES student numbers, to attract the high SES students to not flee, and to improve outcomes for low SES students. Start at kindergarden (in a few randomly chosen regions), and then work up if it works.

I'd like to see US health statistics disaggregated by income. I still doubt they are great, though.

There was a program on one of the PBS channels recently, it might have been Frontline, where they explored the statistics, and showed that wealth and lifespan were correlated, and as the "wealth gap" has widened in recent decades, so has the "lifespan gap."

I was only half-watching, but as I recall the study attributed this not just to wealthy people's ability to pay for better health care, but also to a tendency for wealthy people to feel more "in control" of their lives. A poor person is likely to be more fatalistic. If he gets sick he will not feel that he has any control over the situation. He will have a lower tendency to seek treatment. A wealthy person is used to being in control of everything in his life. He will be more proactive about his health care, and seek treatment sooner if there's something wrong.

To your second point - it is entirely possible that people are traveling abroad to get medical care that was developed here but not yet approved for the general public. That doesn't contradict their original point. I think they more than just hint that the problem is regulatory. The fact that investing in medtech has a late exit time period speaks to the regulatory hurdles and they point that out in the article.

I wonder if it's almost as if in some cases Americans subsidize medical innovation for the rest of the world. We pay the price for the new tech and while our system for whatever reasons keeps prices high, when it's time to sell the tech to other countries the price ends up being lower and so ironically people are going to other countries to get American-made treatments.

It's not "as if" this were the case, this is the case. Most especially with drug discovery. In many cases the only people who pay to recoup the R&D costs of a new drug are Americans, while the rest of the world only pays the marginal costs of production.

P.S. For the drug companies this isn't a big problem because they still make back their development costs and there isn't much they can do when dealing with big state run health care systems. It's not fair but from a practical standpoint it still works. However, it does put the world's healthcare system at risk because people in the US are starting to think that drug companies are screwing them and they want the same deal the rest of the world has, they want to kill the goose that lays the golden egg. Since there's nowhere else for significant profits the obvious result would be a diminishing in drug discovery.

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).

You are making the implicit assumption that health care is a major driver of life expectancy. In reality, it isn't.

Consider a (virtual) country with the exact same [1] health care system as the US: Asian America, a land comprised entirely of Asian Americans. In this imaginary land, women have a life expectancy of 85.8, making Asian America #2 in the world for life expectancy (between Japan and Hong Kong), in spite of having the same health care system as the US.

That shouldn't be possible if health care is the primary driver of life expectancy.

http://minorityhealth.hhs.gov/templates/browse.aspx?lvl=2...

(I couldn't find the stats for men in 2 minutes of googling.)

[1] Actually, it's not exactly the same. Asian Americans are less likely to have health insurance.

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.

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.

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/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.

>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.

Perhaps countries that are popular destinations for medical tourists might want to fund incubators for medical tourism startups?

just wait until Cuba embargo and travel restrictions come down:

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.

Wasn't the issue they were knowingly advertising illegal goods, which happened to be what you wrote, but the important part was illegal?

we know our govt lacks moral authority when a perfectly legitimate health care product, that just happens to be cheaper, is consider "illegal". i mean it's not like they were advertising magical horse testicles as a cure for male pattern baldness, purely on the claims of one Mr. Xaio Bo Tong, of China, who unfortunately cannot be reached for further comment at this time, etc.

>Wasn't the issue they were knowingly advertising illegal goods, which happened to be what you wrote, but the important part was illegal?

i'm a little baffled by your statement. The same drug produced in another country - illegal to advertise/sell in the US. The same medical procedure performed in another country - do you think it is legal to advertise/sell it in the US? IANAL, lets suppose that it is technically legal right now. How fast the Congress can close that loophole once it starts threatening the health care industry profits - bear in mind that there is the same really great "public interest" reason here of protecting public from dangers and side effects of services by low quality, cheap, cost cutting foreign quacks non-licensed by US medical board.

Foreign generics are illegal to import in the US because they violate patents held by US companies. Advertising an illegal import is one thing, but it's unclear how legal it would be to advertise something like "Come visit India where you can get generic Singulair while you're here!"

That said, dentists in Mexico aren't necessarily violating any US laws by doing business there, and you can't import dental work either.

Exactly. It's illegal to import those drugs. It's not illegal to go to another country to get treated.

I'm not a lawyer, and this isn't legal advice, but I'd imagine the only way they could stop you is by passing a new law, and it would be very controversial to try. Existing legislation (and stuff that can be done within the existing framework) is less controversial - bureaucrats and politicians will just say "it's the law, and I may not personally agree with it, but that's just the way things work". You can't say that if you are introducing a new law.

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.

'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.

>'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)

> "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)

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

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.

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.

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?

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.

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.

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

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

Once bitten, twice shy.

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