How To Kill A Unicorn: The cautionary tale of Theranos

A unicorn in startup jargon is an early stage tech company with a $1 billion+ valuation. Theranos is (was?) a Silicon Valley startup and a unicorn, focused on disrupting the enormous market of diagnostic blood testing.

Valuations are funny things. They are critically important to startup CEOs and investors but ultimately, they are subjective shared opinions based on complex models of present and future events. Startup CEOs and venture capital investors try very hard to keep their company’s’ valuations ever-increasing. Negative news or events can start a cascading cycle resulting in the dreaded “down round” of investment and even ejection from the unicorn club.

Theranos was a unicon, but no longer
Killing the unicorn, British Library

Background

CEO Elizabeth Holmes founded Theranos in 2004. As a 19-year old college student, Holmes pitched an idea to her Stanford professor and was advised to start a company. Through family and personal connections, venture capital money poured in, Holmes dropped out of Stanford and Theranos began its mission to change health care.

Theranos CEO Elizabeth Holmes
Theranos CEO Elizabeth Holmes – Inc. cover photo Oct. 2015

“…it doesn’t work…”

Alas, “mistakes were made” and the company and its executive team found itself in hot water with the FDA and the subject of a number of unflattering stories in The Wall Street Journal and elsewhere. The Theranos head of R&D committed suicide and left a note saying “it [the technology] doesn’t work.” Also, the company president recently resigned and CEO Holmes is banned from owning or operating a lab for two years. In addition, Theranos’s commercial partners, Safeway and Walgreen’s, terminated their agreements with the company.

That’s about as bleak a series of events as you can imagine, right? Well as the infomercial goes, wait, there’s more…

Negative reactions continued over the year since the WSJ story broke. In May 2016, Theranos announced that it had voided two years of results from its Edison device. Patients filed a class action lawsuit alleging they were adversely affected by Theranos’s business practices (specifically, faulty blood tests). Recently, the company announced layoffs of 40% of its labor force and closure of testing labs around the country. In October, 2016 Holmes announced that Theranos would shift its strategy toward development and manufacture of small, robotic diagnostic test equipment – a very crowded market.

In June, 2016, Forbes assessed the valuation of Theranos as $800 million and revised the estimated net worth of CEO Holmes from $4.5 billion at the company’s peak valuation (she has a 50% stake in Theranos but it’s all common stock) to zero.

Theranos valuation history
Theranos valuation history (based on public estimates)

What killed the unicorn? There are a number of bad decisions made by Theranos management and its Board of Directors. Here are 10 of the worst that I identified.

Bad Decisions

  1. Stack the Board of Directors with old, politically connected white guys (Henry Kissinger, George Shultz, Bill Frist, Sam Nunn) with little or no startup, technology, or diagnostics savvy.
  2. Create a cult of personality around the CEO. Make sure she appears on popular magazine covers and is interviewed frequently on TV shows.
  3. Create a not-so-subtle emphasis on the similarities between your attractive, young CEO and Steve Jobs: both are college dropouts, both wear a uniform of black turtlenecks, both are “visionary” leaders, both are/were young billionaires (only on paper in the case of Elizabeth Holmes)..
  4. Keep the founder as CEO, no matter if she has zero prior business or medical industry experience. Do not bring in a strong executive team with relevant industry experience to complement the CEO’s energy, vision, and talent.
  5. Hype your technology but shroud its technical details in secrecy. Worse, secretly use competitor’s technology for the vast majority of the tests performed.
  6. Do not conduct randomized clinical studies to demonstrate efficacy vs. industry “gold standard” technologies. Definitely  do not publish in peer-reviewed journals.
  7. Sign agreements with major commercial partners (Walgreens, Safeway) and conduct major PR campaigns announcing the deals before the technology is mature and proven.
  8. Pay no attention to FDA, CLIA, and GLP requirements. Refuse to learn from what happened to other startups that defied or ignored the FDA (see 23andme).
  9. Aggressively promote your muddled, multi-pronged, “disruptive” business model.
  10. Deny and deflect all bad news. Accuse The Wall Street Journal of conducting a witch hunt.

Takeaways

  1. The medical device/diagnostics industry is not the technology industry. Patients’ health and lives are affected by poor management, decisions, and/or business practices. Consequently, medical technology companies are heavily regulated and conservative regarding innovation. 
  2. If you must have an inexperienced person at the helm of the startup, compensate with a seasoned, accomplished Board of Directors with relevant experience and networks.
  3. Aim to solve one problem at a time. Prioritize. Theranos touted its “Nanotainer” finger stick technology, Edison diagnostic technology, and plans to disrupt healthcare by bringing diagnostic testing directly to patients through grocery and drug stores. That’s a lot of moving parts.
  4. Expect swift and deadly reactions from entrenched competitors (including complaints to the FDA and leaks to the media). Your disruptive business model is their existential threat.
  5. As the saying goes, sunlight is a powerful disinfectant. The first step to success in the medical technology industry is a strong intellectual property portfolio and properly maintained trade secrets that create solutions to real healthcare problems. But that strategy must coexist with a culture of regulatory compliance, stringent adherence to quality standards, and sponsorship/disclosure of peer reviewed randomized clinical studies. It’s a business model that has worked for many successful companies in the industry.

Will Theranos pull out of its nose dive, emerge as a disruptive company in the ultra-competitive medical diagnostics market, and regain its unicorn status? Maybe, but given its track record and penchant for acting more like a Silicon Valley tech startup than a medical technology company, I would not bet on it.

Postscript 12.15.16 The shareholder lawsuits have begun.

References

  1. From $4.5 Billion To Nothing: Forbes Revises Estimated Net Worth Of Theranos Founder Elizabeth Holmes [Forbes]
  2. The wildly hyped $9 billion blood test company that no one really understands [The Washington Post]
  3. An Open Letter From Elizabeth Holmes [Theranos company website]
  4. Theranos Attacks Wall Street Journal (Again) in a Rebuttal You’ll Need a Medical Degree to Understand [recode]
  5. Expecting Data From Theranos, Lab Experts Get New Product [Bloomberg]
  6. At Theranos, Many Strategies and Snags [The Wall Street Journal]
  7. Why the Next Steve Jobs Will Be a Woman [Inc.]
  8. Theranos throws in the towel on clinical labs, officially pivots to devices [Ars Technica]
  9. How Playing the Long Game Made Elizabeth Holmes a Billionaire [Inc.]
  10. Theranos’ Scandal Exposes the Problem With Tech’s Hype Cycle [Wired]
  11. Will Shareholder Lawsuit Trigger Theranos To Return Capital To Shareholders? [Forbes]

  12. Theranos Just Got Slammed With Another Lawsuit [Fortune]

Eko Core, A Digital Upgrade For The Centuries-Old Stethoscope | TechCrunch

Eko Core Digital Stethoscope - product picture
Eko Core Digital Stethoscope

The Eko Core digital stethoscope is a “why didn’t I think of that?” invention.

In a few months, the stethoscope will celebrate its 200th birthday. A medical breakthrough in 1816, it’s still a part of nearly every doctor’s visit today and a symbol of medicine itself.…

Digital Stethoscope

Stripped to its essentials, the Eko Core digital stethoscope is a highly engineered Bluetooth microphone designed to fit medical stethoscopes. The device wirelessly transmits patients’ heart sounds (not EKG) to a smart phone or tablet app.

The Eko Core was invented and commercialized by a team of UC Berkeley engineering graduates (claimed to be the youngest team to secure FDA clearance for a Class II medical device).

What Eko Core did well

In developing and executing its strategy, the Eko Core team did a number of things right:

  • Targeted a huge existing market. Most doctors and many nurses carry and use stethoscopes every day.
  • Recognized and addressed a  nagging clinical problem: It can take years (even decades) to become adept at using a stethoscope to recognize heart sounds.
  • Improved the functionality of the stethoscope by enabling visualization and amplification. Benefit to the user is improved confidence in identification of heart sounds.
  • Made their device a simple, affordable ($199) add-on to the user’s existing stethoscope.
  • Employed a Bluetooth wireless connection to the user’s smart phone or tablet . Data  from the stethoscope is displayed in a custom app.
  • Enabled data sharing via “the cloud” so that users can share typical and atypical heart sounds and learn from each other.
  • Partnered with major EHR suppliers to enable the digital stethoscope data to be entered into the patient’s electronic medical record.
  • Identified the potential for use of the Eko Core to lower healthcare costs by reducing costly referrals to cardiologists for unusual heart sounds.

What Eko Core hasn’t done yet

  • Showed they can be financially successful over time. Medical device sales and marketing is expensive. Manufacturing under FDA, GMP, ISO, etc. regulations can increase costs. Maintaining healthy profit margins on low-priced medical devices can be a challenge.
  • Exhibited a competitive advantage over similar products, Thinklabs for example.
  • Fully protected their intellectual property, although the company did recently file a patent application.
  • Leveraged their technology beyond one-hit wonder status.

Takeaways

The number of medical stethoscope users in the developed world is on the order of several million. Growth rates are slow, with new graduates replacing retirees, etc.  That puts the potential market at around $500-600 million.

Not bad, but once you “pick the low-hanging fruit” and sell to the early adopters and early majority customers, selling more units gets progressively tougher and more costly. And given competition, it’s a race for market share to capture and keep customers.

I think this will be a fun and profitable business for a while. Longer term, I hope Eko Core has a big medical device company lined up as a distribution partner and has an encore product that leverages the same technology and customer base.

Source: The Eko Core Is A Digital Upgrade For The Centuries-Old Stethoscope | TechCrunch

Eko Devices website

Free Medical Device Launch Checklist – Protect Your Investment

free Medical Device Launch Checklist

So you (or your company) has developed a new medical device. You have invested millions of dollars and substantial time in engineering, obtained regulatory clearances, and set up manufacturing. It’s time to go to market, right? Turn it over to Marketing and Sales and wait for the orders to pour in. Are you sure that all relevant launch activities are being planned and accounted for? Perhaps you should protect your investment in your medical device product with this simple, easy to use, free Medical Device Launch Checklist.

Easy to use, downloadable PDF file: free Medical Device Launch Checklist

The Medical Device Launch Checklist from sanko::strategic consulting is free and easy to use. It contains 64 checkable launch items. Launch items include traditional marketing activities like pricing as well as easy to overlook issues such as expiration dating and localization. The Checklist gives you a brief description of the purpose of each item. It also shows you the department/corporate function with primary responsibility for the item. The file can be saved to monitor launch progress.

Anyone can use the Medical Device Launch Checklist. It is primarily intended for small and medium-size companies that may not have institutional systems and processes to control launch activities. It can also be used by anyone (Product Manager, Marketing Manager, Project Manager, startup CEO, et al) who wants to assure that nothing has been omitted from their launch plan.

You can use the Checklist to guide the development of a launch or marketing plan. The Checklist can also be used as a gateway document to assure that all activities are accounted for and either completed or in progress before authorizing product launch.

To obtain your personal copy of the free Medical Device Launch Checklist, click here and select the link for the free Medical Device Launch Checklist.

Think of it as cheap insurance to protect your multi-million dollar baby.

Image courtesy of arztsamui / FreeDigitalPhotos.net

Crowdfunding ROI: $813 per hour invested

https://www.kickstarter.com/download/kickstarter-badge-funded.png
image via kickstarter.com

We’ve all seen and heard about people and companies with novel ideas getting funded on sites like Kickstarter and Indiegogo. There are many anecdotes of ideas going viral and raising lots of cash. There are also plenty of ideas that either don’t get funded at all or fail to reach their target. A new study reports that in terms of crowdfunding ROI, you can expect to receive about $813 for every hour you invest in a successful crowdfunding project.

It would be helpful to look at crowdfunding at a high level and get some questions answered about this relatively new fundraising alternative. Forbes magazine recently reported on a new report about crowdfunding published by Capital Crowdfund Advisors (CCA). In August 2013, CCA interviewed several hundred organizations in North America, Europe and Africa that had completed successful crowdfunding campaigns.

Here are some of the most relevant questions asked by CCA and reported by Forbes:

  1. Does crowdfunding increase sales?
  2. Does crowdfunding create jobs?
  3. Does crowdfunding help attract follow-on investment?

First of all, yes, crowdfunding does have a positive effect on sales. The effect was modest when considering all three crowdfunding modes: rewards, debt, and equity. (Yes, you can now raise equity with crowdfunding. Be sure to speak to a savvy attorney first!) The sales increase for the equity crowdfunding mode was dramatic: an average of 341% increase in quarterly sales after the successful campaign.

Crowdfunding was shown to have only a small positive effect on job creation with 39% of those surveyed hiring an average of 2.2 new employees and an additional 48% planning to increase hiring by an unspecified amount.

As for helping to attract new investors, it appears that successful crowdfunding has positive effects: 28% of those surveyed completed rounds of traditional investment with angels or venture capitalists within three months of the conclusion of their campaigns and 43% more were in talks with institutional investors.

How much was raised in a typical crowdfunding project? From the Forbes article:

In this report’s sampling, the average raised across all methods was $107,810 (with a mean of $40,300, as some results were exceptionally large). For an equity raise, the average was even higher, producing the U.S. equivalent of $178,790. In the process, firms sold between 5% and 50% of their companies, with an average of 15%.

Kickstarter even publishes its latest stats on projects and funding. Projects on Kickstarter have raised $985 million to date for 133,565 projects from 5,648,063 individual backers. This is microfunding on a major scale.

Read more: New Report: The ROI Of Crowdfunding – Forbes.

Takeaways: Fundraising for early stage medical device companies continues to be challenging. Federal government grant money has been shrinking and more companies than ever are competing for the same pot of cash. Angel investors and venture capital firms have become more risk-averse as have the strategic investment activities of the large medical device companies. Crowdfunding, while no panacea, may be an another funding option for early stage medical device companies.

Keep in mind that you will probably not be able to launch your medical device using just the proceeds from a crowdfunding campaign. Medical device commercialization is costly. Crowdfunding proceeds should be earmarked for a specific purpose such as building an early prototype or conducting an important test In other words, reduce risk so you can attract follow-on investment from more conservative investors.

While Kickstarter specifically prohibits medical products, other crowdfunding websites are more open. Here is a very cool (and useful) road map from Inc. Magazine that identifies the ideal crowdfunding site for your Big Idea. Not mentioned by Inc. but nonetheless specific to medical devices and medical technology, Medstartr is another crowdfunding site to investigate and consider.

10 Principles of 3D Printing

3D printed bionic ear
image via American Chemical Society publications

Last week I attended an event, “From Trinkets to Body Parts: 3D Printing – Transforming Sci-Fi Fantasy Into Reality” sponsored by the Seattle MIT Enterprise Forum. The keynote speaker was Hod Lipson, PhD, Professor of Engineering at Cornell University. Prof. Lipson gave an informative and entertaining talk centered around his 10 principles of 3D printing.

There was also a panel of 3D printing industry experts and lots of Q&A with the large audience. It seems that there is much interest in 3D printing – a not-so-new technology whose time has come?

Prof. Lipson identified 10 key principles of 3D printing in his talk:

  1. Complexity is free
  2. Variety is free
  3. No assembly required
  4. Zero lead time
  5. Zero constraints
  6. Zero skill manufacturing
  7. Compact, portable manufacturing
  8. Less waste by-product
  9. Infinite shades of materials
  10. Precise repeatability

Here is my take on the 10 principles:

1. It’s as easy to 3D print a complicated piece as it is to 3D print a simple piece.
2. Every piece that you print can be different without increasing cost or cycle time.
3. The assembly process can be part of the printing process, e.g., a bicycle chain has been 3D printed.
4. Because there is no tooling and no setup, the only lead time is the time required to start the printer and send the digital file.
5. You can fabricate things using 3D printing that could not be made any other way.
6. Since there are no precision assembly tasks, printer operators do not require specialized skills.
7. 3D printers are relatively small, portable, and inexpensive compared to injection molding machines, milling machines, punch presses, and foundries.
8. The 3D printing process does not generate waste material. Neither does modern injection molding, but processes that remove material such as milling do generate considerable waste.
9. Not only can you combine colors in infinite shades, but you can combine materials to create unique mechanical properties.
10. Within the tolerance limits of the printer (0.1 mm for commercial grade printers), every piece printed is exactly like every other piece printed.

Prof. Lipson is also the author of a new book, Fabricated: the New World of 3D Printing.

There are drawbacks and limitations to 3D printing, of course. High volume production is better suited economically for injection molding. Surface finish can be rough, requiring secondary processing, although efforts are ongoing to improve surface finish and textures. Pieces may not have isotropic physical and mechanical properties.

Prof. Lipson identified an incredible range of materials that have been used as the raw material in 3D printing: plastic, of course, sand, concrete, various types of food, paper, steel and other metals, and even living cells.

Some products that have been 3D printed: a working gun, clothing, shoes, furniture, aircraft parts, artwork, food (might be what astronauts eat on their way to Mars and beyond), a working loudspeaker, batteries and electrical circuits, and body parts.

And here are some examples of 3D printing in healthcare and medical devices. Some are in research, some in active development, and others are commercially available:

  • Invisalign braces – custom made for each patient
  • Knee meniscus
  • Heart valve
  • Ear prosthetic
  • Organs – liver, kidney, heart

3D printing of human body parts and organs is also called “bioprinting” in this 2013 New York Times article, “At the Printer, Living Tissue”. The article is pessimistic about near term prospects for 3D printed organs, although it notes that there is much research and development being conducted. Others in technology think that breakthroughs are imminent: Functional 3D Printed Organs by 2014 > ENGINEERING.com. There is a startup bioprinting company, Organovo, developing an artificial liver. The liver in its first incarnation will be suitable for drug development and testing, not for human implantation. A research team at Princeton created a functional 3D printed ear, again, not suitable for implantation: Researchers create world’s first 3D-printed bionic organ | ExtremeTech.

Takeaways: 3D printing is becoming widely known and commercially acceptable. In the medical field, it can be used for rapid prototyping and even for fabrication of low volume production parts. As the “10 principles” indicate, you can save time and money in your medical device development projects by using 3D printing.

Smaller, faster, lighter, cheaper medical devices

http://3278as3udzze1hdk0f2th5nf18c1.wpengine.netdna-cdn.com/wp-content/uploads/2013/11/drop-theranos.jpg
image via singularityhub.com

Is it just me or does it seem that most interesting medical device innovations are coming from startups and not from established companies? Here are a few medical devices being developed that are smaller, faster, lighter, and cheaper than established technologies and products.

The point of care diagnostic system being developed by startup Theranos relies heavily on microfluidic and automation technologies. The technology, while impressive, is not revolutionary. Theranos is using readily accessible technology to develop a point-of-care diagnostic test device that can be operated by virtually anyone. The test uses a pinprick to collect a drop of blood to perform all of its tests. No need for a nurse or technician. The test is completely automated so there is no need for a diagnostic technician.

Time is saved because the sample is processed onsite instead of being transported to a central lab and there is negligible wait time compared with large diagnostic equipment. One of the biggest drawbacks to present diagnostic testing is the wait: patients are anxious and physicians often can’t administer medicine or therapy until and unless an initial diagnosis is confirmed.

Tribogenics is developing the next generation of x-ray imaging technology. From the company website:

Tribogenics technology enables portable, compact X-ray solutions for applications in industrial testing, medical diagnosis, security screening and other industries. By miniaturizing X-ray sources and eliminating the need for high voltage, we can create products and solutions unattainable using existing X-ray technology.

While I’m not sure how big the opportunity is for pocket-sized x-ray machines in medicine, there are plenty of industrial and commercial uses. Plus, the potential for portability, low cost, and simplicity may make the Tribogenics device well-suited for deployment in developing countries with little or no medical infrastructure.

The third technology I’m writing about isn’t a product but a concept. The Smartphone Physical is being termed “the physician’s bag of the 21st century.” In a recent TED Talk, Shiv Gaglani showed that a complete physical exam could be conducted with a smartphone and what are essentially smart attachments. For example, companies have developed or are developing ECG leads, a stethoscope, otoscope, ultrasound wand, and even a spiromoter. Gaglani and his colleagues are creating a database of connected devices and apps and hope to start a company to commercialize the Smartphone Physical.

One concern about the Smartphone Physical is a condition that is described by a new word, cyberchondria. Yes, it means hypochondria that is facilitated (or exacerbated) by the ready availability of digital and connected devices and apps. Don’t think it could happen? Ask any doctor about how many patients self-diagnose on the Internet before their office visit. Cyberchondria is real.

Takeaways: If you can take an existing medical device or technology and improve it by making it smaller, faster, lighter, and/or cheaper, you have the makings of a company. Your new device doesn’t have to be better than what it replaces but it would make it easier to sell if it had the same quality, accuracy, etc.

There are plenty of examples of medical devices that are big, bulky, slow and costly. Give customers two or more benefits based on eliminating or minimizing these undesirable features and you will create a market niche for your products.

Read more:

Small, Fast and Cheap, Theranos Is the Poster Child of Med Tech — and It’s in Walgreen’s | Singularity Hub.

http://www.theranos.com/

California Startup, Tribogenics, Develops Smart Phone Sized Portable X-ray Machines | Singularity Hub.

http://tribogenics.com/

Smartphone Physicals Are Taking Off With Explosion of Apps, Attachments | Singularity Hub.

http://www.smartphonephysical.com/

 

Too good to be true…or just hype?

http://www.getairo.com/img/airoband.png
image via getairo.com

In a development many were expecting, Canadian mobile health startup Airo Health backed off on its launch of the world’s first wearable device that could track caloric intake. The bold initial product announcement and aggressive commercialization timing led many to think it was too good to be true. Others dismissed the story as just hype.

 

In a story on techvibes.com, the company announced today that it was cancelling pre-orders and issuing refunds to prospective customers.

“Our early testing of AIRO shows tremendous promise, but through conversations with others in the industry, we have come to realize that it requires further testing and calibration through more extensive trials before it will be ready for general market availability,” wrote founder Abhilash Jayakumar in an email to backers this week. “The additional validation required will take us some time and, unfortunately, we no longer expect to be able to ship the first AIRO wristbands by Fall 2014 as initially indicated.”

From the Airo Health website:

NUTRITION

We all know the importance of eating right, but keeping track of what we eat takes too much effort. AIRO is able to automatically track both the calories you consume and the quality of your meals. With a built in spectrometer, AIRO uses different wavelengths of light to detect nutrients released into the bloodstream as they are broken down during and after your meals.

STRESS

AIRO helps you become proactive about stress. It measures heart rate variability, the aggregate response of your autonomic nervous system, derived from heart rate, to measure the smallest fluctuations in your stress levels. AIRO can not only warn you as your stress levels rise but can also provide recommendations as to how best to deal with it. Over time, AIRO gets smarter by learning what calms you and what doesn’t.

SLEEP

We spend a third of our lives sleeping but we know very little about it. AIRO tracks your circadian rhythm and can see distinct sleep cycles. It’ll wake you up at the optimum time and will let you know how much of your night’s sleep was restorative.

EXERCISE

It’s no secret that living an active lifestyle can lead to a long and healthy life. The best way to keep track of your daily activity is to monitor your heart rate; everything else is just a proxy. By tracking your heart rate, AIRO calculates the number of calories your body burns throughout the day.

I wrote about Airo Health and my healthy skepticism of its commercialization timing here. So did MedCityNews and mobilehealthnews.

Takeaways: Developing new medical technology is difficult, much more so than envisioning it. What works in the lab seldom works as well in humans. Unfortunately, it’s easy to get free PR for new and interesting technology without much proof. You can even generate orders without having a functional prototype.

It’s too soon to know if Airo Health actually has unique and innovative mobile health technology. It’s also too soon to know if the company has forever tarnished its reputation. I’m guessing they have “one more chance to make it right”. If they go away and perfect their technology and then try to promote it, the media will grab the story because of the company’s previous sins. If they fail again, I believe it will be virtually impossible to get press or investor attention.

Good luck, Airo.

Read more:

http://www.techvibes.com/blog/airo-health-cancels-preorders-2013-11-21

Startup unveils a wearable device it says can count calories — but it doesn’t actually exist yet – MedCity News.

Question marks, incredulity meet the announcement of Airo | mobihealthnews.

The Clever Bottle vs. the Smart Pill

http://www.clevercap.org/images/about_image.png
image via clevercaprx.com

Patients are terrible at taking prescription medications. A couple of startups have developed devices that aim to solve the problem, but with wildly different solutions: The Clever Bottle vs. the Smart Pill.

A recent study by WHO estimated that 50% of patients with chronic illnesses don’t take their drugs as prescribed. This behavior increases deaths and complications. Further, it costs about $100 billion per year in avoidable healthcare costs.

 

 

Medication compliance is a problem that has been around for thousands of years. In fact, a paper in The Mayo Clinic Proceedings included a quote from Hippocrates who lived and practiced medicine more than two thousand years ago:

Keep a watch…on the faults of the patients, which often make them lie about the taking of things prescribed. For through not taking disagreeable drinks, purgative or other, they sometimes die.

Hippocrates, Decorum

Ensuring that patients take their medications seems to be an unglamorous approach to a big and costly healthcare problem. It’s also a potentially lucrative market. While neither of the solutions would be considered simple or low tech by most people, they are direct in how they address the issue.

The Clever Cap pill bottle is something most of us might say, “hey, I thought of that!” The people at Compliance Meds Technologies in south Florida took the next step and developed their idea. The Clever Cap fits on standard pill bottles, dispenses only the prescribed amount of medication, keeps track of medications dispensed, and communicates wirelessly with mobile devices or with a special hub. The hub is a device made by Qualcomm in their attempt to cash in on the vast potential in mobile and digital health data.

CleverCap can also be reprogrammed and reused. The device is reported to work even without a wireless connection. It’s not clear what happens if the batteries die. What the CleverCap can’t do is know if the patient really swallowed the pills.

The Smart Pill, branded as the Ingestion Event Marker or IEM by its developer, Proteus Digital Health of Redwood City, California, aims to embed a microchip in each pill. The chip is activated and powered by stomach acid and apparently passes harmlessly through the digestive system and is eliminated. The chip communicates time and date ingested as well as physiological and behavioral patient data to a wrist patch worn by the patient.

Very high tech. Indeed, the company has partnerships with Novartis, Medtronic, St. Jude Medical, and Oracle among others. The company has raised a lot of money including $62.5 million in “the second closing of its F round.” Proteus has received FDA marketing clearance, a de novo 510(k) for its technology. It remains to be seen if drug manufacturers will need additional FDA clearance to use the technology with their pharmaceuticals.

The Smart Pill definitely knows if the patient swallowed the pills. The big question is whether patients want this much technology in their bodies vs. the less intrusive CleverCap. My guess is that there is probably room for both solutions in this potentially large emerging market.

Takeaways: There are unsolved problems and unmet needs everywhere in healthcare. We’ve all daydreamed about things like smart pills and clever caps. Keep an open mind and perhaps you will recognize a new opportunity.

Both of these technologies are potentially disruptive and they both make use of the latest information technology including cloud analytics and reporting. The CleverCap seems to have the quickest path to market but the Smart Pill has all sorts of other potential capabilities and that’s probably why the company is well-funded and flush with partners. Both strategies seem viable and there’s plenty of room in the market for their innovations and more.

Read more:

CleverCap Pill Bottle Connects to Wifi, Dispenses Only as Directed, Uploads To The Cloud | Singularity Hub.

The Pills Have Eyes: Microchipped Medicine Is Coming | Singularity Hub.

Medication Adherence: WHO Cares?.

What’s killing us and what’s holding us back

http://viz.healthmetricsandevaluation.org/gbd-compare/
Analyze the world’s health levels and trends in one interactive tool. Image via Institute for Health Metrics and Evaluation

Here are a couple of excellent online resources that delve into the details of what’s literally killing people around the world and how various countries, including the USA, are ranked for health, government, education, and business related factors in the global economy. The resources are windows into what’s killing us and what’s holding us back as people and as societies.

If you’re a startup CEO or product manager for a new medical device-based therapy or diagnostic, these resources will come in handy as you write and execute your business plan. If you are in public health or global health, the tools are great ways to visualize diseases, risk factors, causes of death and disability and much more. If you’re neither, they are still interesting and fun places to get informed and marvel at the incredible diversity in the world.

The first resource was created by Seattle’s own Institute for Health Metrics and Evaluation at the Univer­sity of Washington. The tool is called the Global Burden of Disease, or GBD Compare. It is a web-based interactive graphic based on a huge database of health statistics from all over the world.  You can use the visualization tool to see the incidence and impact of all sorts of illnesses and conditions.

For example, you can examine a vast number of causes of causes of disease or injury by country or region every five years from 1990 to 2010. You can also slice the data by sex and age bracket. As you make your selections, the graphics change in real time. It’s mesmerizing.

The second resource is a report from the World Economic Forum titled the Human Capital Report 2013. From the report’s preface:

Through the Human Capital Report, the World Economic Forum seeks to provide a holistic, long term  overview on how well countries are leveraging their human capital and establishing workforces that are prepared for the demands of competitive economies. By providing a comprehensive framework for benchmarking
human capital, the Report highlights countries that are role models in investing in the health, education and talent of their people and providing an environment where these investments translate into productivity for the economy. In addition, through extensive additional information on the 122 countries covered, the Report
seeks to provide a fuller picture of the context within which human capital is operating in any particular country.

The Human Capital report provides benchmark assessments on a number of items for 122 countries around the world in four broad categories: Health and Wellness, Education, Workforce and Employment, and Enabling Environment.

While the U.S. ranks a respectable 16 out of 122 overall on the Human Capital Index, there are areas of concern and opportunities for improvement. For example, in the Education category, our rank in math and science education was only 44 out of 122 but on the positive side, the U.S. was number 1 in education gender gap.

In the Health and Wellness category, we ranked 106/122 in stress and 112 in obesity rate but we ranked number 3 in % of children under age 5 with stunting or wasting. In fact, the U.S. ranked 43 overall in Health and wellness, not impressive for a country that spends more on healthcare as a percentage of GDP than any country on the planet.

In Workforce and Employment, the U. S. ranked 76/112 in unemployment rate and only 49/112 in labor force participation rate for ages 15-64 but were number 5 in both capacity to attract talent and capacity for innovation.

Finally in the Enabling Environment category, the U.S. ranked low, number 88, in mobile internet use (surprising!) but high, number 3, in business and university R&D collaboration as well as number 3 in something called the Doing Business Index.

Takeaways: There are growing numbers of online resources that can be used to bolster a business plan or presentation. There is an incredible array of data being generated on a continuous basis. The researchers that compile, analyze, and present this data are doing all of us a great favor as we have tools to pinpoint clinical conditions and compare our society with others around the world.

Read more:

Want to Save Lives? You Need a Map of What’s Doing Us In – Wired Science.

GBD Compare.

America, we’re not fat, loud and lazy. We’re fat, diseased and stressed.

The Human Capital Report 2013 – The World Economic Forum.

Ranking the best places for healthcare startups

http://www.cbinsights.com/blog/wp-content/uploads/2013/12/1Top50ExitsNew.png
image via CBinsights.com

Silicon Valley is Mecca for technology companies. When it comes to ranking the best places for healthcare startups, however, the global technology hub seems to be not as dominant.

A common method for ranking the best places for startups is to quantify the number of exits and aggregate valuation in a given time period. A recent report by CB Insights, an investor service focused on early stage companies and emerging industries, says that Massachusetts and not the Bay Area has been more successful in exits for VC-backed healthcare startups.

Healthcare startup categories included medical device, biotech, and pharmaceutical companies.

The analysis also shows that other regions are competitive as well. Southern California had the next highest number of exits in the same time period, 2012-present.

http://www.cbinsights.com/blog/wp-content/uploads/2013/12/5ValueCreationTableNewFinal.png

The CBinsights report looked at the startup exit data in another way that highlights differences between the regions more clearly. They defined another metric, “Value Creation”. Value Creation is the ratio of the average exit value of a company in the region to the average VC investment in a company in that region. So bigger is better.

As seen in the table, New York comes out on top in this ranking while Silicon Valley lags at little more than half of the New York number. My home state of Washington is even lower on the list. This ranking may reveal why certain regions seem to have an easier time attracting venture capital investment than others. One last and very interesting note: the Value Creation metrics for technology companies are much higher than for healthcare companies. It starts to become clear why there is a dearth of capital investment in the healthcare space. If you are a VC, would you put your money in healthcare or technology?

Takeaways: Although no single city or region in the U.S. dominates when it comes to a great location for healthcare startups, there are a few conclusions that can be drawn from the report.

The East Coast  – Massachusetts in particular but also the New York/New Jersey/Pennsylvania tri-state areas are very strong in healthcare startups. Obvious reasons include major population centers for access to a talented and experienced employee pool, large numbers of world-class research universities and medical centers, and close proximity to financial hubs.

Of course, other locations such as Minneapolis, the San Francisco Bay Area (including Silicon Valley), Southern California, and the Seattle Metro area have their drawing power as well. Some of the additional factors include lifestyle, proximity to the FDA and other government officials, and being part of an industry “cluster” (medical device in Minneapolis, biotech in the Bay Area for example).

Read more:

Silicon Valley doesn’t dominate when it comes to VC-backed healthcare exits.

Silicon Valley is Second to Massachusetts for Venture Capital-backed Healthcare Exits.

Jumper Cables for Your Brain

http://graphics8.nytimes.com/images/2013/11/03/magazine/03brain1/mag-03brain-t_CA0-articleLarge.jpgA novel therapy that improves mental performance in healthy people is being called “jumper cables for your brain.” The scientific name for the therapy is transcranial direct-current stimulation, tDCS for short.

A similar yet very different treatment, electroconvulsive therapy (ECT), formerly called electroshock therapy, doesn’t have a positive image in most peoples’ minds. Popular culture including movies and TV has convinced most of us that it’s used to treat crazy people, usually with extremely undesirable outcomes, and that the people giving the treatment are either mad scientists or evil government agents.

ECT does have a place in modern neuroscience, however. It is often the last resort therapy for patients with intractable depression and other conditions that do not respond to drug treatments.

tDCS uses very low voltage and very little current to achieve its effect, less than 1% of the enegy used in ECT. The tDCS devices being studied today use a 9 volt battery for power. tDCS researchers have been using currents in the range of 300 to 500 microamps. In contrast, ECT uses much more current, about 2000 times as much. According to an article in Wikipedia, “Typically, the electrical stimulus used in ECT is about 800 milliamps…”

 Researchers have identified a myriad of benefits for the novel therapy. From the article in The New York Times:

Scientific papers published in leading peer-reviewed journals since 2005 have shown that tDCS can improve the speed or accuracy with which people perform [a computerized] attention-switching task. Other studies have found it can improve everything from working memory to long-term memory, math calculations, reading ability, solving difficult problems, piano playing, complex verbal thought, planning, visual memory, the ability to categorize, the capacity for insight, post-stroke paralysis and aphasia, chronic pain and even depression. Effects have been shown to last for weeks or months.

“tDCS will not make you superhuman, but it may allow you to work at your maximum capacity,” said Felipe Fregni, the Brazilian physician and neurophysiologist who runs Harvard’s Laboratory of Neuromodulation at the Spaulding Rehabilitation Hospital. “It helps you achieve your personal best level of functioning. Let’s say you didn’t sleep well the night before. Or perhaps you’re depressed, or you suffered a stroke. It helps your brain reach its peak performance.”

No one is really sure why the therapy works although there are theories. The brain is essentially a very complex electrochemical computer. Applying a weak electrical field to neurons while performing a task seems to make the neurons fire easier and to remember the task for some time. Unfortunately, researchers have not yet identified the specific mechanism that is responsible for the improvements. As a result, research funding has been sparse because peer reviewers for funding agencies in the U.S. government remain skeptical.

A number of companies are pursuing commercialization of tDCS technology and are engaged with the U.S. FDA on the regulatory approval process. ECT devices are categorized as Class III or pre-market approval (PMA). It remains to be seen if the new, lower power devices also fall into the PMA category. A less restrictive FDA classification would mean a greater market potential and benefits to ordinary healthy people who are looking for a little mental advantage. I would definitely consider trying one of these devices in exchange for a few of those mental benefits!

Takeaways: There are many processes and body functions that are not fully understood or characterized. When researchers continue to investigate these promising areas despite a lack of funding, it might mean that there is an opportunity for collaboration and eventual commercialization.

Of course, something like tDCS, “brain enhancement technology” comes with risks. What might be the long term effect of the therapy on the brain? What about effects on children and adolescents?

Finally, it will be imperative to separate the new technology from the stigma of electroconvulsive therapy in order to appeal to healthy consumers.

Read more:

Jumper Cables for the Mind | New York Times Magazine

GLNT gets another patent to treat Parkinson’s for transcranial direct current stimulation during sleep.

Renal Denervation – the next big thing?

blood pressure checkIt seems like every big medical device company is working on a technology for renal denervation to treat high blood pressure.

Development and market availability of a therapy for hypertension (high blood pressure) is a big deal. Here are some facts about hypertension from the World Heart Federation:

  • Globally, nearly one billion people have high blood pressure (hypertension); of these, two-thirds are in developing countries.
  • Hypertension is one of the most important causes of premature death worldwide and the problem is growing; in 2025, an estimated 1.56 billion adults will be living with hypertension.
  • Hypertension is the leading cause of cardiovascular disease worldwide.
  • People with hypertension are more likely to develop complications of diabetes.

Some additional facts about hypertension in the USA from the Centers for Disease Control:

  • 67 million American adults (31%) have high blood pressure—that’s 1 in every 3 American adults.
  • 69% of people who have a first heart attack, 77% of people who have a first stroke, and 74% of people with chronic heart failure have high blood pressure. High blood pressure is also a major risk factor for kidney disease.
  • More than 348,000 American deaths in 2009 included high blood pressure as a primary or contributing cause.
  • High blood pressure costs the nation $47.5 billion annually in direct medical expenses and$3.5 billion each year in lost productivity.
  • About half (47%) of people with high blood pressure have their condition under control.

Hypertension is treated currently with drugs of course. According to a report from ADS Reports, the global market for antihypertensive drugs was $29.9 billion in 2010 and is projected to reach $33 billion in 2017. That’s a huge target for interventional therapy.

I wrote about Bellevue, WA-based Kona Medical a couple of weeks ago receiving a $10 million investment specifically earmarked for their market entry into China, obviously one of the biggest potential markets.

Kona recently announced interim results from two ongoing clinical trials. It reported an average systolic blood pressure reduction of 29 mmHg at 6 months in their first study and a three-month drop of 19.4 mmHg in the second study using a dosing pattern that reduced therapy time from 13 to three minutes.

Kona’s results are significant because its therapy is completely noninvasive. It uses high intensity focused ultrasound on the surface of the skin to deliver energy to ablate the renal nerves.

Other companies developing renal denervation technologies include St. Jude Medical, Boston Scientific, and Medtronic. Each has chosen a different energy modality to deliver the therapy.

MedCityNews reports that St. Jude is using a multi-electrode catheter to deliver electrical energy to the renal nerve sites. The company reported results from a clinical study: at 18 months, 77 percent of the 46 patients treated with St. Jude’s technology, the EnligHTN system, had responded to therapy. St. Jude’s system total ablation time is about four minutes, according to a company statement.

The Boston Scientific therapy uses bipolar (electrical) energy to deliver therapy. After 12 months, the company reported a “clinically-meaningful decrease in office systolic blood pressure” in 85 percent of the 139 patients treated. The Boston Scientific therapy requires a brief 30-second treatment time.

Medtronic seems to have a head start in the market. In early 2011, it finalized its purchase of Ardian, a Silicon Valley startup that was working on a novel therapy for hypertension since 2003. The Medtronic RDN system therapy uses radio frequency energy delivered via a catheter to the renal arteries/nerves. Medtronic’s Symplicity renal denervation system has a CE mark and is commercially available outside the U.S. Medtronic has a number of completed and ongoing clinical studies, all of which have resulted in conclusions that the therapy is safe and effective.

Takeaways: New markets are one area where startups can compete on a level playing field with huge, multinational companies. They can be more nimble, take more risks, and can pivot when things don’t go according to plan. In the case of renal denervation, Kona seems to have a decided advantage with its noninvasive technology and treatment. Of course, Medtronic has a years-long head start and we all know the “best” technology doesn’t always prevail, right?

Read more:

Two top medical device companies announce promising renal denervation tech results – MedCity News.

Kona notches solid results for novel renal denervation tech – FierceMedicalDevices.

 

 

How many calories were in that cheeseburger?

CheeseburgerA Canadian startup has developed technology that may disrupt the mobile health tracking market. Airo Health is commercializing a nutrition tracker that can passively detect and inform the wearer exactly how many calories were consumed in the user’s last meal.

The nutrition tracker uses a light emitter and detector in a wristband and fairly sophisticated software in a smartphone app to measure metabolites in the bloodstream. The metabolites are released during and after the user’s meal.

The Airo device also detects the user’s heartbeat and uses that information to assess activity and fitness levels. All of this analysis starts with sensors in a small, unobtrusive wristband.

According to the company co-founder, Abhilash Jayakumar, Airo received US$81,400 in seed funding from the Canadian federal government and the University of Waterloo. The company says it is planning a commercial launch in the fall of 2014 – that’s just a year or so away. Airo has not yet built production prototypes, so their launch date is most likely optimistic.

In an interview with MobiHealthNews, Jayakumar said the sensor bracelet is detecting accurate calorie intakes about 80% of the time. That’s an exciting development, but the lead times for consumer electronics make a full commercial launch in a year improbable at best.

The fledgling startup has done impressive work with very little funding. They are taking digital health and the “quantified self” movement to a new level. Competitors are no doubt already starting development of their own passive calorie tracking technology. What would really be disruptive is an app to make you not eat that cheeseburger in the first place!

Takeaways: Mobile health sensors and applications are getting progressively more sophisticated. It remains to be seen if there is a sizeable market for these devices and apps but they are capable of measuring things in real time that were previously available only in a doctor’s office by appointment. The commercial availability of a Star Trek-like Tricorder device may be only a few years away.

Most of the personal fitness devices are targeted at healthy people. There is a large opportunity as well in monitoring people with chronic diseases or those recovering from surgery.

Read more:

AIRO ups the ante with passive nutrition tracking

 

MedTech Startup Red Flags to Watch Out For and to Guard Against

Red flagIn an amusing series of articles and blog posts last week, biotech veterans and observers traded their favorite red flags that investors must watch for when considering biotech investment.

Most of these caveats also apply to medical device companies. On the flip side, startup CEOs should be forewarned and forearmed to not make the same mistakes when pitching and/or structuring their companies. They are on to you…

Here are a few of my favorite caveats:

[from Luke Timmerman at Xconomy]
  • Watch out for weak science or results that can’t be reproduced by third party researchers.
  • The company story is too complicated and can’t be reduced to an elevator pitch.
  • “There is no competition.”
  • No plan to demonstrate outcomes or show clinical and financial benefits to the healthcare system.
  • “Rent-a-luminaries” make up the Medical/Clinical/Scientific Advisory Boards.
[from David Sable, physician and venture capitalist]
  • CEO is clueless around investors
  • CEO is inflexible and won’t deviate from the rehearsed pitch
[from Christopher Henney, co-founder of Immunex, Icos, and Dendreon]
  • Too many VCs on the board
  • Family members in key management or board positions

I’m sure these three veterans have seen and/or interviewed dozens, if not hundreds of startup CEOs and their pitches.

Takeaways: Simple is best. Use a template to develop your pitch – they are easily found. Don’t deviate (at least not too much) from standard practices for startups in your industry segment and in your geographic area. It’s easier than ever to get a negative reputation. You may be able to get past one round with a sketchy pitch or objectionable governance. The stakes keep going up, however, and you risk everything by not being able to secure financing all the way to market launch. Do yourself and all of your stakeholders a huge favor and address the red flags before the investors see them.

Read more:

21 Red Flags to Watch for in a Biotech Company | Xconomy.

Six Red Flags to Watch Out For in a Biotech, From Dendreon Co-Founder Chris Henney | Xconomy.

A few more biotech red flags (h/t @ldtimmerman) – David Sable .

Hyping a digital health startup

http://graphics8.nytimes.com/images/2013/10/03/technology/bits03-healthtap/bits03-healthtap-tmagArticle.jpg
image via NY Times digital blog

HealthTap is a digital health app and website. It’s a useful way to get health and fitness information that is tailored to your interests. You can even get your specific questions answered by medical experts. I use it myself. In an effort to attract attention and even more users, however, HealthTap appears to have hyped or at least exaggerated its success.

HealthTap works by recruiting physicians (more than 50,000 participate) to answer questions posed by subscribers for free. The subscribers do not pay for the service. I’m not quite sure what their business model is, actually. The rationale for doctors to participate is that the physicians will be recognized (“thanked” in HealthTap parlance), their online reputation will be enhanced, and real life patients will come to them as a result.

After an interaction where a user asks a question and receives a response from a doctor, HealthTap asks the user to thank the doctor or HealthTap and prompts the user for more information. The extra information apparently includes responding with a click to a question like, “This answer saved my life.”

HealthTap keeps a record of all of the positive responses to the “saved my life” prompt and issued a press release when the tally got to 10,000. Nothing wrong with any of that, except there is no way to prove if the app/website/reply really did save a particular life.

As one physician commenter in the New York times article said, “after my third “This saved my life,” I investigated. It was for recommending antifungals for jock itch. Nice pat on the back, but lifesaving? Not!”

Although some of the the lifesaving claims may be legitimate, the touting of “10,000 lives saved so far” on HealthTap’s website seems vaguely desperate and hyped – not what I expect from a serious medical app.

HealthTap also provides a disclaimer on its website and app: “HealthTap does not provide medical advice, diagnosis or treatment.” The disclaimer is obviously there to avoid being treated as an FDA-regulated medical application. Of course, the FDA (and malpractice attorneys) will have the final say on that status. I don’t know how asking a specific medical question and having an answer provided by a physician avoids becoming medical advice.

HealthTap is competing with big players in the health information field. WebMD is the 800 pound gorilla and granddaddy of health information sites. I suppose the executives at HealthTap feel they have to be aggressive in order to create awareness and get users and doctors to take notice. Unfortunately, their real utility and service has been tainted by excessive marketing, in my opinion.

HealthTap appears to be a well-funded Silicon Valley startup. Its investors include luminaries like Eric Schmidt, Chairman of Google, Vinod Khosla, Esther Dyson, and more.

Postscript:  I removed the HealthTap app from my mobile phone because I thought the notifications it provided were too frequent and intrusive. I still receive an email every few days on the subjects I told HealthTap were important to me.

Takeaways: Yes, you need to be aggressive in marketing your startup. There is a lot of competition for mind share among similar startups all over the world, no matter how unique you believe your company/product/service to be.

No, you should not make up or exaggerate claims about your product. Perhaps it can be excused as puffery or marketing hype but healthcare companies are held to a higher standard than consumer products like beer or body wash.

Read more:

An App That Saved 10,000 Lives – NYTimes.com.

HealthTap.com

High tech medical device maker focuses on…China?

http://axialexchange.com/images/articles/Hypertension-Nutrition-Counseling.jpg
image via axialexchange.com

High blood pressure is a significant societal health problem all over the world. Kona Medical is trying to address the huge hypertension population with a noninvasive ultrasound device that might eliminate the need to take daily blood pressure medication. In a somewhat unorthodox move, the company is focusing initially on China.

 

Last year, Medtronic acquired Ardian, another startup that is focused on the same clinical condition. Ardian, based in the San Francisco Bay Area, was purchased for $800 million.

From axialexchange.com:

The statistics for hypertension are stunning. 30% of US adults have hypertension (high blood pressure). Another 30% of Americans are pre-hypertensive. Less than half of those people with hypertension have their condition under control.  A fifth don’t know they have it. The annual price tag for direct medical expenses related to high blood pressure is $131 billion. This is driven in part by the 55 million doctor visits that are prompted by high blood pressure. High blood pressure is present in most first heart attacks (69%), first strokes (77%), and in people with congestive heart failure (74%). High blood pressure was listed as a primary or contributing cause of death for about 348,000 Americans in 2008.

Recent medical research has shown that ablation (destruction) of the nerves around the renal arteries can reduce blood pressure in patients with hypertension. A number of medical device companies are racing to commercialize products based on their proprietary technologies in order to take a lead in this evolving market.

Ardian uses radio frequency ablation delivered via catheter to the area of the renal arteries. Kona is using focused external ultrasound to deliver the therapeutic energy – they are calling it “surround sound.” In a superficial assessment, it appears that Kona has the edge since their technology is completely noninvasive while the Ardian technology could at best be described as minimally invasive.

Of course, what should really matter is which technology works best with the fewest side effect, not how the therapy is delivered. The “best” technology doesn’t always prevail in the medical device industry, however. Sometimes first to market gets and keeps the largest share while in other situations the best marketing prevails.

Kona has previously raised $40 million in venture capital earlier this year and in 2012.

Kona’s latest announcement, to use a new investment of $10 million to launch their product in China, is somewhat confusing. Yes, there are vast numbers of people in China and untold numbers with hypertension. Most, however, probably do not have the type of health insurance that would pay for a high tech solution. In its press release, the company said that their therapy has the promise of being delivered in an outpatient setting. Outpatient hypertension therapy clinics – now that’s a disruptive concept!

China is not a traditional launch market for new medical devices. The company says that the latest investment, from a fund with deep ties to China, will be used exclusively to address the many clinical, regulatory, and intellectual property issues unique to China as a medical device market for Kona’s new therapy.

It will be interesting to see if Kona can successfully launch their product into the Chinese market while simultaneously commercializing for the traditional U.S. or E.U. markets without losing focus or depleting key resources.

Takeaways: Most companies commercializing novel medical devices pick a launch market and stick with it. There are any number of reasons to launch in the U.S. first. Other companies pick the European Union countries and some look to large, less regulated countries in South America.

While many development and commercialization tasks are the same no matter which initial market is selected, there are important differences. It’s usually best to choose the first, second, and perhaps third initial markets so that the launch components are not uniquely different and the company can use scarce resources for other commercialization tasks.

 Read more: Kona Medical raises $10M to reduce high blood pressure for people in China – GeekWire.

Kona Medical

Prosthetic Hands May Soon Gain the Sense of Touch

Someday in the not too distant future, amputees with prosthetic hands may gain the sense of touch.
image via discovery.com

This research being conducted at the University of Chicago could be a major advance in robotics and prosthetic technology. Amputees today have no way to “feel” their prosthesis except to watch it as it moves. Someday in the not too distant future, amputees with prosthetic hands may gain the sense of touch.

Using monkeys, the researchers first identified specific areas of the brain that corresponded with their fingers. Then the scientists connected electronic strain gages in the prosthetic hand to those specific areas in the brain. Using software, the scientists were able to successfully identify a “contact event” at the prosthetic hand from the monkey’s brain and to create a sense of pressure.

An important next step would be to control the prosthetic hand with the brain and to be able to apply force with feedback so the brain can sense what and with how much force the hand is touching.

The research work was partially funded by the U.S. government’s Defense Advanced Research Projects Agency (DARPA). DARPA is well-known for sponsoring high risk, long term research activity. The wars in Iraq and Afghanistan have resulted in large numbers of U.S. military amputees, creating an ongoing and increasing need for improved prosthetic technologies.

Takeaways: There are non-obvious sources of funding early technology development work. DARPA is a great example but there are plenty of others. In the government, NIH, CDC, and NSF have ongoing research grant programs. There are other military programs as well, for example, TATRC. Yes, there is competition for these grant dollars so you need to make a strong case for the technology and the problems it solves. There is also the possibility that the researchers have no intention of commercializing their technology. In that case, it is possible for a company to license and commercialize the technology on its own.

        Read more: How to Give Prosthetic Hands Touch Sense : Discovery News.

Teeny Tiny Pacemaker Fits Inside the Heart | IEEE Spectrum

http://spectrum.ieee.org/img/rsz_image_nanostim-euro_size_comparison-2-1381851816207.jpg
image via IEEE Spectrum

This leadless pacemaker is incredible technology. Not only did the company, Nanostim, reduce the size of the pacemaker by about 90% but it eliminated the often troublesome leads that are required in traditional pacemakers.

 

 

The stealthy company, based in the San Francisco Bay Area, was recently acquired by St. Jude Medical for $123-200 million (depending on milestones).

The new pacemaker has received European regulatory clearance but not FDA approval yet although it has received an FDA Investigational Device Exemption (IDE). A pivotal clinical trial is expected to begin soon in the U.S. while sales will begin in selected European countries very soon.

The device, about as big as a AAA battery, is implanted directly into the interior of the right ventricle of the heart. Electrodes on the exterior of the pacemaker provide electrical stimulation to the heart muscle. The device is implanted via a catheter inserted in the femoral artery. Removal occurs via the same route, only in reverse. Battery life is 9-13 years. The device has wireless communication capability so it can be programmed remotely.

Given the negative publicity and adverse events involving pacemaker lead fractures over the past years, leadless pacemakers appear to be an idea whose time has arrived. Of course, the idea has occurred to more than one inventor.

Here’s Medtronic’s take on the concept:

http://www.qmed.com/files/ck_images/large_Medtronic_leadless%20pacemaker.jpgMedtronic’s product concept is much smaller than a penny. Medtronic announced the device three years ago and said it would take 3-5 years before beginning human implants. They also said that the product concept included the ability to be programmed via a smartphone application.

 

image via qmed.com

 

 

Critics have pointed out that the Nanostim product and Medtronic device concept provide only single chamber pacing and are not rate-responsive – the most basic form of pacemaker.

It seems to me that the Nanostim device is classic disruptive technology. It provides a single function compared to the elaborate features of traditional pacemakers. It’s probably priced at a fraction of the price of complex pacemakers. As with other disruptive technologies, competitors ignore new entrants with low cost/performance at their peril. Given sufficient demand, I’m sure clinicians and engineers will figure out ways to make these “simple” devices perform all the functions of their bigger, older “brothers”.

On the positive side, no surgery is needed for implantation – a big plus with patients. And there are no potentially problematic leads to route. Other benefits from the patient’s standpoint are no activity restrictions, no surgical “pocket” for potential infections and no telltale bulge of the device under the collarbone. This could be one of those disruptive technologies where patient demand changes market dynamics.

The implantable pacemaker/defibrillator market is large, with 4 million active implants and 700,000 new implants occurring each year worldwide.

Takeaways: A leadless pacemaker is an obvious innovation to anyone who has worked in the cardiac stimulation field. Nanostim took the concept and ran with it while Medtronic took its time with what might be a technically superior solution.

While achieving lasting market share is more important than being first to market, Nanostim may be able to achieve both. Because they negotiated a strategic partnership with St. Jude Medical while the device was still in development, the company gained access to substantial resources, enhanced its credibility, and was able to reduce risk for investors by showing a clear path to exit. Nanostim also pursued the faster CE marking before FDA approval so that it could start selling the device sooner.

Read more:

Teeny Tiny Pacemaker Fits Inside the Heart – IEEE Spectrum.

News Release | Investor Relations | St. Jude Medical.

Weighing the Benefits of Medtronic’s Leadless Pacemaker | Qmed.

Medical Device Startup Fundraising: 5 keys for your pitch

Woman presentingIf you are leading a medical device startup, fundraising is your top priority. Here are five key points that you must address in every pitch that you make, no matter if it’s for a grant, seed investment from friends and family, angel investment, venture capital funding, or strategic partnerships with multinational medical device companies.

From the article:

  • Be clear on what your product is, right up front
  • Articulate the important problem you are solving
  • Define your customers
  • Spell out how you will create value with the $$ you are raising
  • Instill confidence in you and your team

Another way to look at the pitch is to think of it in terms of risk reduction. Most experienced investors talk about three main areas of risk in startup investing:

  • Technical Risk
  • Market Risk
  • Execution Risk

Investors will not move forward with an opportunity unless they believe that these key risks have been addressed and are below their personal threshold. Of course, you will never know that threshold so you must work to convince the investor that you have mitigated the three risks to the maximum extent possible.

Technical risk is all about the product or solution. Does your product solve the customer’s problem? Have you built a working prototype? Do you have an animal model? Have you performed animal testing? Are there important technical issues yet to be resolved? Do you have any intellectual property protection? Have you conducted a freedom to operate analysis? Does your product or solution depend on products or IP owned by other companies? Have you conducted beta testing? What’s your regulatory classification and plan? Are there more products in the pipeline?

Market risk is about the customer(s). Have you identified the problem? Is the problem a large one? Is the market opportunity big enough to justify the investment? Who are the customers? Why will they buy from you? What’s the competition (and don’t make the rookie mistake of saying that there is no competition)? Do you have evidence of demand? Do you have testimonials or at least interest from Key Opinion Leader customers? How do you plan to distribute and sell your product? How does your product or solution fit in today’s environment of managed care, healthcare reform, and evidence-based medicine? What’s your reimbursement strategy and plan?

Execution risk is about you and your team’s ability to convince investors that you can use their money to execute your plan. Does your team have the talent and experience to successfully commercialize your product? Do you have experienced and knowledgeable advisors, both business and clinical? Do you have a credible business model? What are your key milestones? What’s your exit strategy? Do you have a detailed pro forma income statement, especially for the period up to launch and for the two years after launch? Will you execute it exactly as conceived? Of course not, but you should be confident in your plan and your ability to execute. You should also have detailed contingency plans for the inevitable crisis when things go awry. 

Takeaways: Like many things, being successful at medical device fundraising requires being a great salesperson. Whether it’s a surgeon or an investor you’re selling to, put yourself in the place of that person. Be sure to address the five key points with details, evidence, and background information: product, problem, customer, milestones, team. Also keep in mind the risk tolerance of the investor. Your ability to communicate mitigation of technical risk, market risk, and execution risk will determine your success in fundraising.

Read more: Medical Device Startups: 5 essentials for your pitch deck | MassDevice.

Mobile Health: Red Hot Market Opportunity

http://images.businessweek.com/ss/10/08/0823_mhealth/image/01_intro.jpg
Image from Business Week

Call it mobile health, digital health, eHealth, or”Consumer Health Technology” as Forbes does. By any name the emerging market sector is expanding rapidly and attracting lots of attention, entrepreneurs, and investors.

As I’ve previously written, the time for mobile health has arrived. We carry in our pockets mobile devices with more computing power than the Apollo 11 astronauts had when they landed on the moon. The devices themselves are bristling with sensors and wireless radios. Typical smartphones have temperature sensors, accelerometers, gyros, GPS sensors, ambient light sensors, microphones, touch sensors, and high resolution still and video cameras. They can communicate via Bluetooth, NFC, WiFi, and a number of cellular communications protocols. On-board storage can hold thousands of books and dozens of movies. Connected cloud storage provides effectively infinite storage capacity.

Innovative engineers are responsible for an ongoing explosion of single and multi-purpose external, wearable sensors that communicate wirelessly with smartphones. Smartphone manufacturers are increasingly integrating fitness tracking capabilities into their devices. For example, Apple’s latest iPhone included the M7 chip that can track user activities while minimally affecting battery life.

Application developers are creating sophisticated fitness and health tracking software using the aforementioned technologies. Applications are increasingly passive rather than active, meaning the user does not need to enter data. The apps and sensors detect activities and are able to collect activity data in the background. Others are working to connect the consumer devices and sensors with electronic medical and health records “in the cloud” for a variety of purposes.

There are two main segments in mobile health, regulated and unregulated applications. In the near term, there is tremendous growth and potential in the unregulated space because it’s a quick way to get to market. The consumer markets are very large but price-sensitive.

Of course, your mobile health startup will not be alone when you get there. Big players are either already in the market or they are entering rapidly. Nike, Weight Watchers, Aetna, Garmin, Apple, Samsung, and others are already battling to be the mobile health brand of choice. There are new entrants as well. Jawbone, BodyMedia, FitLinxx, and Fitbit are relatively new companies with trendy, stylish wearable devices.

Huffington Post reported that Berg Insight said 8.3 million wearables were sold last year, up from only 3.1 million in 2011. By 2017, that number is set to reach 64 million. mobihealthnews projects 13 million fitness-related wearables will be purchased just for corporate wellness plans by 2018.

For FDA-regulated devices and applications, the initial market is smaller but the potential is just as great. Regulatory clearances and approvals provide some barriers to entry but will ultimately serve to give early market entrants a head start and not much more. These devices promise to do much more than fitness tracking. They have the potential to monitor chronic diseases and overall health, to provide alerts for significant health-related events, to collect data for clinician use, and to provide specific health-related guidance using user-specific data.

In addition to FDA scrutiny, another significant issue is compliance with HIPAA laws regarding patient privacy. With what amounts to 24×7 data collection and connectivity, there will be enormous amounts of user-specific data in devices and in cloud databases. Companies will have to address data security preemptively or risk losing user trust.

I believe the benefits to the user and to the healthcare system far outweigh the risks and costs associated with these devices and applications.

For healthy individuals, mobile health can provide real time feedback into activities, fitness levels, sleep patterns, even diet information like nutrient balance and calorie consumption.

For aging individuals or those with chronic diseases, mobile health can monitor vital signs, check disease-specific conditions, provide reminders to take medications or perform physical therapy exercises, and send updates and alerts to family members and physicians.

For physicians, mobile health can provide another way to communicate with patients and can also check compliance with recommendations and prescriptions.

For the healthcare system, mobile health can contribute to healthcare Big Data, making it easier for researchers, drug and device companies, and policy makers to track, measure, and assess the health and activities of large populations.

Takeaways: Mobile health is a once-in-a-lifetime opportunity for entrepreneurs. If you have an idea, now is the time to commercialize it. If you are a software developer, find hardware partners. Likewise, if you have developed a sensor, team up with app developers to make a complete package. If you have an unformed idea, try to shape it around mobile health. Investors have taken notice. Rock Health is soliciting applications for funding at a variety of levels.

Read more:

Thinking of Starting a Business? Check Out Consumer Health Technology | Inc.com.

13M wearables to be used in corporate wellness plans by 2018 | mobihealthnews.

How highly sensitive, wearable thermometers could change digital health | mobihealthnews.

What health startups think of Apple’s new motion tracking chip | mobihealthnews.

Moves comes to Android, not afraid of Apple’s M7 | mobihealthnews.

Healthcare Startups Can Save Lives — And Rake in Big Money | Wired Business | Wired.com.

Health care and health insurance reforms are happening…at Walmart!?

Walmart logoHere’s an refreshing departure from all of the federal government gloom and doom news. Four hospitals around the U.S. including Virginia Mason Medical Center in Seattle have negotiated deals with large retailers Walmart and Lowe’s to provide comprehensive surgical care for knee and hip replacements to 1.4 million of the companies’ employees.

The kicker? Zero out-of-pocket costs, co-payments, deductibles, etc. But wait, there’s more. The arrangement, completely voluntary for employees by the way, provides travel, lodging, and living expenses for the patient and a caregiver.

The announcement expands a deal struck by the hospitals with Walmart in 2012 for heart and spinal surgeries along with organ transplants. The world-renowned Cleveland Clinic has been conducting a similar program, offering fixed-price cardiac procedures for a number of major corporations including Boeing.

The programs are attractive to the hospitals and corporations for a number of reasons. The corporations are self-insured. Reducing variability and uncertainty in healthcare costs is vitally important to the businesses. The corporations are large enough to be able to offer large volumes of patients for the high volume procedures.

The hospitals, already leading in terms of low complications and readmission rates, can use the guaranteed volumes to standardize procedures and improve quality even further. In exchange, I’m sure the partners agreed on large discounts to standard prices for the expensive procedures. And the patients, although not required to participate, get the sweeteners of no out of pocket cost and free travel. Sounds like a win for everyone.

In a separate development, Walmart announced that it was converting 35,000 part-time employees back to full-time status. Although that is a tiny fraction of Walmart’s 1.4 million employees, the latest action will result in those workers qualifying for employee-provided healthcare. Late in 2012, Walmart moved many full-time employees to part-time status in an action that was criticized as offloading their healthcare expenses on to taxpayers. Critics complained the workers earned so little that they would qualify for Medicaid health insurance through the new provisions of Obamacare.

Takeaways: While hardly novel, the agreements between the corporations and the hospitals are important because they have the potential to rein in out of control and spiraling healthcare costs. The hospitals will also be able to show exactly how they achieved their cost controls and quality improvements, giving them a competitive advantage and setting a great example for the rest of the country.

If you are developing a new device or technology, this should be a wake-up call. A key to cost control will be standardization. These hospitals will be highly resistant to adopt new technologies or purchase new medical devices unless you can show proof of positive effects on procedure costs, outcomes, and quality.

If you are in the healthcare insurance business, this disintermediation may not be a significant threat in the short term but be assured that other large corporations are watching or perhaps even conducting their own negotiations with high quality, high volume providers. The trend may prove to be a disruptive innovation in the long term.

Read more:

Walmart, Lowe’s strike deal with Virginia Mason on hip, knee surgeries | Local News | The Seattle Times.

Wal-Mart Returning To Full-Time Workers-Obamacare Not Such A Job Killer After All? – Forbes.

Digital health: what’s the business model?

image via svtechtalk.com

Connecting patients with each other, with clinicians and other providers, with insurers, and with healthcare companies via mobile apps on tablets and smartphones and on the web seems like a great idea. The unanswered question is can you make money doing it?

Articles have been written about how the Internet has enabled patients with chronic diseases and their families to connect with others with the same condition. The patients share stories about symptoms, treatment successes and failures, and try to support each other in what can be emotionally draining circumstances. That ability to connect with a vast community all over the country, perhaps even the world, was virtually impossible before the advent of the World Wide Web.

Other companies are trying to connect healthcare providers with their patients. Some are offering to connect patients with providers for online visits for a fee, effectively commoditizing the doctor-patient relationship.

Google famously shut its attempt at a personal health record site, Google Health, last year. Google Health required a lot of effort to use as it didn’t automatically connect with consumers’ Electronic Medical Records. That shortcoming left a small market of people who were OK with manually entering all of their health data. And that wasn’t a big enough user base for Google.

Healthcare companies, especially those with a B2C business model, are desperate to maintain relationships with consumers.

Providing apps and cloud storage can be costly. It’s not clear who will pay for the digital services.

Doctors and other providers have been incentivized into adopting EMR technology. It’s unlikely that they will invest in additional information technology for their patients.

It seems that consumers and patients love the free stuff. A few may be willing to pay for some services but many have grown to expect that someone else will foot the bill. And most non-healthcare smartphone and tablet apps are either free or at most a few dollars. That sets a low ceiling for any new health-related apps. It’s a tough way to grow a sizable healthcare or medical device company.

People have grown accustomed to paying almost nothing for their healthcare. Sure, there are co-pays and deductibles that have increased significantly in recent years but those are a small fraction of the cost of care. It will be a challenge to change this expectation for health-related apps and services.

In-app ads are probably not the way to go. If the ads are for healthcare-related items like prescription drugs, the patients will lose trust in the service. If the ads are specifically targeted to the patient’s medical condition, the service will be accused of spying on the patient.

Perhaps healthcare companies will regard the cost of developing and providing apps as a marketing expense.

It’s an interesting dilemma. Free apps and services will draw large numbers of users. But monetizing the app via ads turns off many people. Charging for the services drastically reduces the potential market. Absorbing the expense internally places the app/service on the list of things to be cut when the company’s overall business stagnates or declines.

Takeaways: There is enormous interest in apps and services for mobile health. If you are developing products or services in this space, be sure you know how you are going to make money. It’s not a market if you can’t monetize it.

The traditional medical device business model doesn’t seem to apply here. If you procure funding, develop a product, then show economic or health benefits, who do you sell to?

Perhaps partnering with noncompeting companies interested in the same population is a creative way around the problem. If you can deliver large numbers of consumers/patients via a sponsored app to a partner like a big pharmaceutical company, you may be able to avoid some of the pitfalls and objections.

It’s prudent to put a lot of effort now into developing a viable business model. After all, when you start pitching to investors, one of the first questions asked will be, “how do you plan to make money?”

Read more:

Will Any Health App Ever Really Succeed? | MIT Technology Review

Patients share tips online for managing diseases | SFGate.

Improving Patient Engagement Equal Parts Technology, Empathy | Computerworld

Patients Eager To Access Data Including Medical Imaging Through Online Portals (infographic) | MDDI Medical Device and Diagnostic Industry News Products and Suppliers.

A Cautionary Tale: Biotech firm Atossa recalls its only product | The Seattle Times

Atossa Genetics is an early stage biotechnology company in Seattle developing breast cancer diagnostic tests and medical devices using molecular diagnostic technology. The publicly traded company ran afoul of FDA regulations earlier this year and last week announced a voluntary recall of its products, causing its stock to tank.

The company bills itself as “the breast health company (TM).” Atossa is small, with only ten full-time employees (at least five of whom are senior management executives) according to Yahoo Finance.

Here’s a timeline of company events:

  • November 8, 2012 Atossa Genetics, Inc. Announces Initial Public Offering (NASDAQ exchange, IPO value $4 million). That’s not a typo. It really was $4 million, 800,000 shares at $5 per share.
  • February 21, 2013 Atossa Genetics, Inc. received a Warning Letter from the FDA regarding its Mammary Aspirate Specimen Cytology Test (MASCT) System and MASCT System Collection Test. From the company’s press release:

“The FDA alleges in the Letter that following 510(k) clearance the Company changed the System in a manner that requires submission of an additional 510(k) notification to the FDA.”

  • March – September 2013 Atossa Genetics Inc. continues marketing its products, announcing numerous distribution and partnering agreements as well as supporting women’s health events.
  • September 18, 2013 The company’s stock closes up almost 21% in one day at $6.00 on volume of more than 8.4 million shares traded when it announces a distribution agreement with medical distributor McKesson.
  • October 4, 2013 Atossa Genetics Inc. initiated a voluntary recall to remove the ForeCYTE Breast Health Test and the Mammary Aspiration Specimen Cytology Test (MASCT) device from the market. This voluntary recall includes the MASCT System Kit and Patient Sample Kit.
  • October 7, 2013 Atossa Genetics Inc. stock opens at $5.32 and quickly drops to $2.66 (down 50%) on the news of the voluntary recall. The stock closed today at $2.45, an all-time low.
  • October 7-8, 2013 At least six law firms have announced initiation of shareholder lawsuits in the aftermath of the recall.

Apparently, the company and the FDA disagreed on whether a new 510(k) was required after the company changed the Instructions for Use (IFU) on its product. The company seems to have decided to continue marketing without submitting a new 510(k). What happened next is unclear but the “voluntary” recall ensued.

The company told The Seattle Times that it currently has “sufficient cash for the next 8-12 months of operations without raising additional capital,” though it cautioned that the cost of the recall and other associated expenses is not yet known. Sales revenues were about half a million dollars for the first half of 2013. Atossa reported a $2.2 million loss for the same period.

According to The Seattle Times, Atossa is continuing to develop other diagnostic tests but “will be reassessing the regulatory status of these products … in light of our recent experience,” said CEO Quay. Seems like a prudent action given their recent history…

Takeaways: Do not disregard the FDA. They have the power to shut down your company. If you have a fundamental disagreement with FDA, hire a regulatory consultant and attorney and take their advice.

Make sure you have people with experience in commercializing medical devices, especially regulatory affairs, on your executive team and board of directors.

Think carefully before deciding that an IPO is your best financing option. There are very large fees to be paid and the reporting requirements (Sarbanes-Oxley, etc.) are much more revealing – and onerous – than anything required if you remain private and use VCs or angel investors as your sources of capital.

As the article points out, there are plenty of attorneys waiting to represent disgruntled shareholders. Perhaps you can prevail against all of this adversity but think of the opportunity costs in lost time and cash spent on lawyers and regulatory revisions instead of product development or marketing.

Read more: Biotech firm Atossa recalls its only product | Business & Technology | The Seattle Times.

8 healthcare applications for Microsoft Kinect, 6 reasons not to pursue them

Microhttp://dri2.img.digitalrivercontent.net/Storefront/Company/msintl/images/English/en-INTL_Kinect_for_Windows_L6M-00001/en-INTL_L_Kinect_for_Windows_L6M-00001_mnco.jpgsoft’s Kinect is absolutely amazing technology. And Microsoft keeps improving it. Did you know that Kinect has multiple potential healthcare applications?

If you have an early teenage or “tween” kid, you probably have an Xbox gaming system. The Kinect sensor technology is perfect for all sorts of innovative interfaces for dance, exercise, and role-playing games.

The Kinect sensors and software have the ability to perform skeletal mapping on multiple people simultaneously, to detect 3D gestures and motions and facial and voice recognition. Kinect can even determine users’ heart rates! The device also has the ability to “see” in the dark with infrared camera technology.

The Microsoft Kinect is an amazing amalgam of sensor technology. I’m sure it has many useful and possibly disruptive applications in healthcare and other industries.

Here’s why you should not base your healthcare product or application on Microsoft’s Kinect:

  1. Single sourcing is risky for any startup business or new product development organization. You have no alternative way to duplicate  or replicate the Kinect functions if Kinect or its key functions are unavailable for any reason.
  2. Healthcare is not Microsoft’s core business – it could remove access at any time and/or de-emphasize it in any number of ways. In fact, Microsoft is in strategic transition right now and its long-time CEO, Steve Ballmer, announced recently that he will be retiring in 2014.
  3. You have no access to the device’s source code – access to that code might be necessary if you are developing an FDA Class II or Class III device.
  4. The Microsoft Kinect is based on a console or PC-centric world view. What about tablets and smartphones? Oh, and don’t expect to ever see an Android or iOS device with Kinect capability.
  5. Although Microsoft has made an SDK available for Kinect development on Windows operating systems, the installed base of 24 million Kinects is almost all in Xbox gaming systems. Microsoft is not interested in giving up valuable real estate on its premier gaming platform to comparatively low volume and low margin healthcare apps. If you develop a Kinect-dependent windows app, you will a). have to wait for an installed base to develop or b). take on the added risk of marketing Kinect hardware to create your own installed base.
  6. You will have little technical support from Microsoft simply because your business potential is small compared to their other ventures.

If those six reasons aren’t enough to give you pause, here are the healthcare market areas identified by MobiHealthNews that are particularly suited for Kinect-enabled applications.

  1. Fitness and Exergaming – games and exercises to get people off the couch and on their feet
  2. Physical Therapy  – conduct PT sessions, monitor recovery
  3. Surgery Support  – hands-free image manipulation
  4. Autism Screening and Therapy – not quite sure what the advantage is here. Perhaps some on the spectrum can’t relate as well to people?
  5. Virtual Visits and Virtual Nurses – automated nursing visits. I think this is a bad idea, as senior shut-ins crave human contact.
  6. Virtual Group Therapy – avatar-based online group talk sessions (I believe you can do this with Google Hangouts as well)
  7. Aging in Place and Fall Prevention – gait analysis and fall prediction
  8. Helping the Blind to Navigate and the Deaf to Communicate – using machine vision and text to speech

Takeaways: It’s incredibly risky to develop new technology that’s based on someone else’s proprietary technology. It’s even more risky if that proprietary technology is primarily focused on non-healthcare applications.

You should consider open source projects as an alternative. There are many open source projects all over the world. If it’s critically important to you, try organizing and starting an open source project to support your development work.

If you must use the proprietary technology, try to negotiate a development agreement that places key parts of the technology in escrow so it is still available to you in the event of a default to the agreement. This tactic doesn’t work with gigantic corporations like Microsoft but it may be effective with smaller partners.

Read more: Eight ways the Microsoft Kinect will change healthcare | mobihealthnews.

New Medical Devices May Be Extremely Effective at Preventing HIV Infections

One new medical device is an intravaginal polymer ring impregnated with an antiretroviral drug, tenofovir. If successfully commercialized, this new technology that combines a medical device with a drug could have a major positive effect in preventing HIV infections and reducing HIV transmission rates in developing countries.

As the article poignantly states,

It’s often said that the HIV/AIDS epidemic has a woman’s face. The proportion of women infected with HIV has been on the rise for a decade; in sub-Saharan Africa, women constitute 60 percent of people living with disease. While preventative drugs exist, they have often proven ineffective, especially in light of financial and cultural barriers in developing nations.

The device, called a TDF-IVR (tenofovir disoproxil fumarate intravaginal ring) can be worn for up to 30 days. It delivers a constant dose of tenofovir, lower than the typical dose of the same drug taken orally. Delivery methods such as oral dosage and vaginal gels have not proven to be effective for a variety of reasons including inconvenience and cost.

The ring also has the capability to be impregnated with other drugs such as contraceptives and other antivirals to prevent non-HIV sexually transmitted infections.

Recently completed primate studies showed that the TDF-IVR was 100% effective in preventing HIV transmission in female macaque monkeys. A Phase I human clinical study is being planned for November in New York to assess safety and side effects.

The device was developed at Northwestern University with support from the National Institute of Allergy and Infectious Diseases.

I’ve been working with a group of physicians and engineers at the University of Washington to develop a new medical device for adult male circumcision. Clinical studies sponsored by the World Health Organization demonstrated that circumcision can reduce a male’s risk of contracting HIV by as much as 75% – that’s about the same as a highly effective vaccine (which of course does not yet exist for HIV). Our device, called SimpleCirc, is designed to be used in low-resource settings by non-surgeon healthcare workers.

Perhaps the commercialization of these two technologies will begin to eradicate the scourge and epidemic of HIV/AIDS that is devastating sub-Saharan Africa.

Takeaways: When tackling an intractable problem, try different packaging or delivery concepts to address the issue. In the case of the drug-eluting ring, the drug was highly effective in other using other delivery techniques but cultural and logistical challenges limited overall effectiveness when delivered orally or as a single application gel.

In the case of the circumcision device, the design includes a kit with all materials and accessories to perform the procedure and the device itself is extremely simple, almost intuitive to use. In this way, the ability to perform circumcisions can be scaled up quickly and at low cost.

Read more: Study: New Medical Device Extremely Effective at Preventing Immunodeficiency Virus | News | McCormick School of Engineering | Northwestern University.

The world’s craziest toothbrush cleans your teeth in six seconds and is 3D printed | qz.com

Blizzident photo - world's craziest toothbrush
Blizzident photo – world’s craziest toothbrush

The Blizzident toothbrush may be the most innovative toothbrush ever developed. It is custom manufactured for each user and provides a complete teeth cleaning in 6 seconds. It even has the ability to floss between teeth and clean your tongue at the same time.

Blizzident took advantage of several technology trends in developing the Blizzident toothbrush. Mass customization, 3D scanning, and 3D printing enable the commercialization of a potentially disruptive product that would have been impossible or impractical to make only a few years ago.

Developed by an international team of dental experts, engineers, and computer scientists, the Blizzident toothbrush is commercially available today. Sold on the Blizzident website,   the device initial cost is $300. There is also a one-time expense of $75-200 for impressions and/or digitization of your teeth. According to Blizzident, the toothbrush will last twelve months. Replacements will cost $89 for refurbishment or $159 for an all-new device.

The Blizzident toothbrush can be fitted for kids, although a new scan is required each year because of the ongoing growth and changes in childrens’ teeth.

The toothbrush works by deploying hundreds of ultra-fine bristles that are angled to reach every nook and cranny of your teeth, including the all-important areas under the gumline. The user bites, chews, and grinds his/her teeth for six seconds, brushing all teeth and surfaces simultaneously. According to the company, that’s the equivalent of a three minute manual toothbrushing session. Clinical study results are promised but not yet available.

I have a dental checkup next week and I plan to ask my dentist what he thinks of this revolutionary technology. The somewhat steep price tag may discourage many people but it will probably decline over time. I’m sure there are sufficient numbers of people who are either gadget freaks or just really care about their teeth to make an initial market. It will be interesting to see how Blizzident’s awareness spreads. The story is compelling for both traditional media and for social media.

Takeaways: Who would have thought that the humble toothbrush could be improved upon “again”? A Seattle area company, Optiva, successfully innovated Sonicare, a “next generation” electric toothbrush back in the 1990s. Optiva was acquired by Philips Healthcare in 2000. In 2001, Sonicare was the best-selling electric toothbrush brand in the USA.

For startups, no idea should be considered too small to commercialize. Likewise, no existing product or technology should be thought of as too established to be improved upon. Mass customization is a compelling trend – people want things that uniquely fit them. 3D scanning and printing are powerful tools that make disruptive innovations and novel business models possible.

Read more: http://qz.com/129919/the-worlds-craziest-toothbrush-cleans-your-teeth-in-six-seconds-and-is-3d-printed/

http://www.blizzident.com/

Frazier Healthcare raises $377M venture fund, surpassing target | GeekWire

Wow, looks like a repeat of the 1990s! A new venture fund from Frazier Healthcare is seriously good news for the healthcare startup community. I hope it’s the beginning of a trend and that we’ll see a few more VCs make fund announcements.

For the past few years, VCs have been pretty much absent from the market. Angel investors were left as one of the few financing options for early stage medical device and biotech companies.

Perhaps we will see a return of past practices where angel investors concentrated on very early financing rounds and then VCs stepped in. Who knows? But I believe it’s on balance a positive development for the industry.

Takeaways: There is a lot of money out there “on the sidelines.” Frazier may be taking a leading role in revitalizing healthcare startup financing. At least it shows that a lot of wealthy individuals and fund managers believe in the future of healthcare as an investment opportunity. Startup CEOs, keep pitching!

Read more: Frazier Healthcare raises $377M venture fund, surpassing target – GeekWire.

Wireless sensors are the missing link in mobile health applications

Scanadu Scout sensorWireless sensors are an evolving missing link and a gigantic opportunity in mobile health application development and commercialization.

Markets for mobile health are developing rapidly. Personal fitness, quantified self, chronic disease monitoring, elder health monitoring, infant monitoring, acute symptom diagnosis, physical therapy, and telemedicine are a few of the segments in mobile health.

We have fast networks that cover almost all of our population in the U. S. and most developed countries. Smartphones are powerful mobile computers with vast amounts of onboard computing power and storage. If the smartphone’s capabilities are insufficient, developers can access cloud-based storage, databases, and distributed computing that can scale to address any size problem.

Because all of this technology has been developed for mass consumer markets (and because of Moore’s law), it is inexpensive – orders of magnitude less costly than a few years ago.

So we have cheap, powerful, ubiquitous computing and connectivity mostly being used for social connectivity and YouTube video watching. This powerful computer network is also increasingly being used to improve healthcare diagnosis and delivery.

Still being developed are wireless sensors to take advantage of all of that computing power. There are a number of companies pursuing commercialization of sensors and apps to enable all sorts of mobile health capabilities and functions.

Some of the sensor technologies are wearable in clothing or on the skin, some are implantable, and others are ingestible. All use low power wireless communications technology such as Bluetooth Low Energy for continuous or periodic monitoring. The first generation of sensors, like Holter monitors, recorded data for a time period and were sent to a lab for processing so a report could be generated for a physician. The new generation of sensors records continuously and sends the data in real time where a physician or even the patient can access data that has been processed by a smart application.

Physicians are beginning to be able to monitor their patients with chronic diseases in real time. Individuals active in the “quantified self” movement have more personal data than ever with which to monitor and analyze themselves. Physicians can prescribe personal diagnostics to collect data in order to make a more accurate diagnosis.

For example, Given Imaging of Israel has developed a capsule that has video recording and radio transmission capabilities. The capsule is swallowed by the patient. It then records and transmits its journey through the patient’s digestive tract. The video is reviewed by the physician to determine a preliminary diagnosis and the need for more invasive interventions like surgery.

For the Star Trek fan, Scanadu is developing a crude “tricorder”  – a disk of sensors that is placed on the forehead to measure temperature, heart and respiration rate, blood pressure, and more. The Scanadu Scout is intended for consumers, not physicians.

According to Medical Device and Diagnostics Industry, Pathfinder Software, a mobile and wireless application developer, has created a clever infographic showing various sensors and the body functions they are intended to monitor.

The sensors shown on the infographic are a mere subset of what’s currently available and in development. For example, a startup in my home city of Redmond, Washington, Heapsylon has developed sensors for “smart socks” that can measure a variety of parameters related to running gait to improve athletic performance and prevent injury.

Takeaways: There are opportunities for novel sensors to monitor and measure all sorts of body functions and parameters. There are opportunities to develop applications that gather, process and interpret sensor data for consumers and for healthcare professionals. There are opportunities to analyze aggregated sensor data to assess population health and trends. Finally, there are opportunities to develop and deploy solutions that bring low cost healthcare to underserved populations.

Read more: How Innovations Using Sensors Can Disrupt Healthcare (infographic) | MDDI Medical Device and Diagnostic Industry News Products and Suppliers.

Disruptive Innovation Opportunities Created By Obamacare

Rather than debate endlessly about whether the Affordable Care Act is good or bad, staff at the Clayton Christensen Institute for Disruptive Innovation has analyzed Obamacare for entrepreneurial opportunities created by disruptive innovations in the law.

Clayton Christensen is a Harvard Business School Professor and author of The Innovator’s Dilemma (and a few more books about innovation since that business best-seller).

According to the authors, these new provisions of Obamacare are disruptive innovations:

  • Individual Mandate – adds tens of millions of new individuals to the primary care healthcare system.
  • Employer Mandate – will drive demand for new, less costly models of health insurance.
  • Accountable Care Organizations (ACOs) – provides incentives to providers to keep patients healthy rather than just paying for treatment of illnesses.
  • Wellness Programs – requires health plans to offer new preventive and self-directed care options.
  • CMS Innovation Center – an entity created outside of Medicare and Medicaid with responsibility for developing novel payment and healthcare delivery models.

 The ACA is not perfect by any means. It is also not perfect in the estimation of the Christensen Institute. Here are a few provisions of the Affordable Care Act that are likely to inhibit disruptive innovation:

  • Essential Health Benefits – mandated levels of coverage that may exceed user needs and will make it difficult to introduce low-end disruptive plans.
  • Insurance Exchanges – online marketplaces that will enable comparison shopping, but only among qualified plans, excluding some new and potentially innovative options.
  • Cost-Sharing – government subsidies will drive consumers into Silver-level plans, limiting demand once again for Bronze-level or even lower (and less costly) plans.
  • Medical Loss Ratio – requiring insurers to justify all rate increases and to spend a minimum of 80% of premiums on healthcare creates barriers to entry for new and disruptive market entrants with low or no subscriber populations.
  • Medicaid Expansion – enrolling patients with minimal or zero previous healthcare coverage into Bronze or even Silver-level plans eliminates a market that could be served by disruptive new entrants with innovative healthcare models. Instead, these patients will be driven to traditional insurers.

As noted by many people, including President Obama, the ACA does not have the ability to transform healthcare on its own. Rather, it is intended to provide incentives and opportunities for innovation in order to make healthcare more efficient, more affordable, and more accessible. In the words of the President, “We want to bend the cost curve.” The opportunities to help in and profit from the bending are present for existing players and for new market entrants.

In the framework established by Prof. Christensen, it is the new entrant that is usually disruptive because the established competitors have little incentive to innovate or to change their business models. It is also impossible for the new entrants to gain market share using the existing business models so they are forced to develop and deploy disruptive innovations.

I don’t expect the full effects of Obamacare to be evident for years, although we should see small improvements (and to be sure, some startup problems) almost immediately. There will no doubt be modifications and delays to the regulations and to implementation. It is to be hoped that some of those changes will be favorable to more, rather than less, disruptive innovation.

Takeaways: With change comes opportunity. The ACA may not be hugely popular (especially among medical device companies paying the 2.3% excise tax). Obamacare is, however, somewhat disruptive and creates new opportunities for healthcare companies.

Read more: Seize the ACA:The Innovator’s Guide to the Affordable Care Act | Christensen Institute.

Fundraising advice for medical device startups – 7 tips for angel funding, 3 more for VC funding

Not that this advice is any guarantee of success in fundraising but it’s fun to read what an angel investor and a VC fund manager have to say about how startups approach them, position themselves, and make their pitches.

Both articles are from MedCity News and were written at AdvaMed 2013. The angel investor article is a brief interview with Allan May, the founder and chairman of Life Science Angels who spoke at the Angel Investment Forum. The VC advice comes from Paul Grand, managing director at Research Corporation Technologies Ventures, a life sciences firm focused primarily on medical devices.

For startups fundraising from angel investors,

  • Your intellectual property (IP) may be the most important indicator of valuation and whether you will be successful in your funding quest. Investors need to plan an exit before they invest. Because the most likely exit is via acquisition by a larger medical device company, and medical device companies hoard patents like misers, it’s in everyone’s interest to have the strongest possible IP portfolio.
  • Unless you have a successful startup track record, a stellar team, and potential for a very large exit in 3-5 years, avoid VCs and focus on angel investors. They are willing to invest in smaller, less perfect deals than VCs.
  • Whether you want it or not and whether you like it or not, expect your investors to take a personal interest in your startup and the way you run it. That means lots of phone and face time giving updates and answering questions…and listening to advice.
  • Because angel investor consolidation has become the norm in raising Series A and beyond, investors will know each other. They won’t invest with others they don’t like, trust, or respect. Same holds for your board members – choose them carefully as they are a direct reflection on you.
  • Mr. May also said “This isn’t about picking technologies, it’s about picking people.” My experience suggests that for most early stage entrepreneurs, your technology qualifies you for consideration while your reputation, track record, and interpersonal skills can usually disqualify you.
  • As for how much money you should raise, “The amount of money you should raise is the smallest amount of money that can have the biggest impact on your valuation in the shortest period of time.” That’s a cute way of saying it’s easier to raise the next round at an increased valuation…because you executed your plan and achieved your goals.
  • This last bit of advice is my favorite and probably the most practical in the interview:  Get someone who knows the angel investor to take the business plan to them. . . “Getting into the pile [of business plans] is not a success.”

From the VC fundraising perspective,

  • Be sure to research the VC firm and the partner before the pitch and adjust appropriately. Every VC is different. Do your homework online and through your network. If you are at the level of pitching to VCs, there should be no surprises.
  • Make sure your startup team has the right experience and is correctly sized. These days, you can run a virtual or lean company a long way toward commercialization without expensive full-time executives. There are plenty of freelancers, contractors, and consultants ready and eager to help…”at the beginning, you just need the founder and the engineers…”
  • If all you have is an idea and technical/clinical skill you should wait a bit before approaching VCs. You are unlikely to get a signed nondisclosure agreement, much less early stage financing from VCs if you make your pitch too early. There are incubators and seed investors who can help you become ready for VC investment. As discussed above, consider angel investment as an alternative to VC funding.

Takeaways: Medical device fundraising is hard but there are steps you can take to improve your chances of success. Make sure you know the expectations and criteria of the people and firms to whom you are pitching. Make sure your startup is a good fit with your prospective investors. Just like Goldilocks and the three bears, you must position the opportunity you’re presenting as not too small, not too big…not too early, not too late. 

Read more:

Need angel funding for your early-stage healthcare startup? 7 smart tips from investor Allan May – MedCity News.

Three big mistakes medical device companies make when pitching VCs – MedCity News.

How to Get Payors to Pay For Your Medical Device | MDDI Medical Device and Diagnostic Industry News

You and your medical device development team have created an exciting new widget. You’re gearing up for a costly product launch. How do you make sure health insurers will reimburse hospitals for purchasing your device?

It’s a very important question because hospitals will not purchase your device unless they are confident that they will receive reimbursement from the payor (insurance company).

If your widget is the same as existing products except it’s cheaper, congratulations. You’ve developed what could be considered a commodity product. You can take advantage of existing reimbursement codes (CPT and DRG) and explain the codes to the physicians and decision-makers at the hospital. You can sell your device on the basis that it saves money.

If you have created a really new widget that is unlike other devices, congratulations again. You’ve developed a differentiated product. Your reimbursement effort is just beginning.

If you haven’t done so yet, now would be a good time to engage with a reimbursement consultant. Perhaps your new widget can fit within existing reimbursement codes. If not, the path will be long and involved to get a new code – a topic worthy of its own post, perhaps even a chapter in a book.

In a discussion at AdvaMed 2013, Alan Muney, chief medical officer at Cigna, said Cigna asks three questions when considering coverage for a new device:

1. Has the new technology been proven by studies in peer-reviewed journals?
2. Has the new technology produced better outcomes than current technologies?
3. Does the new technology produce the same outcomes as current technologies but at a lower cost?

These seem like reasonable questions. Although Dr. Muney did not explicitly say so, I’m assuming that you need only answer “yes” to one of these questions in order to be considered for coverage for your device. The questions all have implications, however.

First, to have a study published in a peer-reviewed journal generally means you must conduct a randomized clinical study with enough statistical “power” to make a definitive conclusion. In this context, “proven” means that the new technology has equivalent or superior clinical efficacy to the existing “gold standard” technology. And you already know that clinical studies are expensive and take a long time to conduct.

Second, “outcomes” are more focused on patient health than on a comparison with other technologies. You will need to conduct a clinical study, but with different endpoints measuring different things. The study may last longer and involve more patients, all of which will cost more money and involve more risk to you, your company, and your investors.

The third question adds costs to the equation, not just the procurement costs of your device but the Big Picture costs: does your technology reduce or increase overall costs to the healthcare system? At this point, you may need to consult with a healthcare economist to determine what to measure and how to measure it. And proving cost claims usually involves conducting a big, expensive clinical study. Of course, if you prove better outcomes at reduced cost to the healthcare system, congratulations again. Your product should be adopted rapidly and your focus will shift to keeping up with demand.

Takeaways: Obtaining medical device reimbursement is complicated and risky. It increases costs and time to market for many medical devices. You can’t go to market without knowing how (or if) your device will be reimbursed by insurers. During your business planning process, you should have an idea as to which of the three questions raised by the Cigna CMO you can positively answer for your device. That response should also help inform the size, cost, and duration of the clinical study you will need to conduct. And that will be an important component of the capital you need to raise for commercialization,

Read more: Cigna CMO Explains How to Get Payors to Pony Up For Your Device | MDDI Medical Device and Diagnostic Industry News Products and Suppliers.

FDA finally publishes final guidance for mobile medical apps | mobihealthnews

This has to be welcome news to any company competing in the mobile health market segment. Although the guidance is not binding in typical FDA fashion, it does remove some uncertainty about what the FDA considers mobile software that should fall under Class II (510k) device regulations.

Apparently, lobbying elected officials has some benefit. The story reports that the FDA promised to issue the guidance “in the current fiscal year” in congressional hearings last summer. We are in the last week of the fiscal year and true to the FDA’s word, the guidance is finally issued, two years after the draft guidance was issued.

As one might expect in a “land grab” environment, the absence of regulatory guidance has not been a barrier to market for a number of companies. There have been 100 510(k) marketing clearances issued for mobile medical applications in the past ten years, 40 of which occurred since the draft guidance was issued.

Some companies might have bigger concerns in that they are actively marketing apps that fall under the regulated category but have not obtained 510(k) clearance. Two acne treatment apps were removed from the Apple and Android app stores by the FTC recently.

The guidance treats mobile apps in four broad categories:

  1. Class II apps:

a. Apps that “are intended to be used as an accessory to a regulated medical device – for example, an application that allows a health care professional to make a specific diagnosis by viewing a medical image from a picture archiving and communication system (PACS) on a smartphone or a mobile tablet.”

b. Apps that “transform a mobile platform into a regulated medical device – for example, an application that turns a smartphone into an electrocardiography (ECG) machine to detect abnormal heart rhythms or determine if a patient is experiencing a heart attack.”

2.  Mobile Apps for which FDA intends to exercise “enforcement discretion” (meaning that FDA does not intend to enforce requirements under the FD&C Act).

From the Guidance:

FDA intends to exercise enforcement discretion for mobile apps that:

• Help patients (i.e., users) self-manage their disease or conditions without providing specific treatment or treatment suggestions
• Provide patients with simple tools to organize and track their health information
• Provide easy access to information related to patients’ health conditions or treatments
• Help patients document, show, or communicate potential medical conditions to health care providers
• Automate simple tasks for health care providers
• Enable patients or providers to interact with Personal Health Record (PHR) or Electronic Health Record (EHR) systems.

3.  Apps that are not medical devices and thus are unregulated: Apps that provide a means of monitoring and reporting health parameters and activities but that make no claimed benefit. Examples:

a. Mobile apps that are intended to provide access to electronic “copies” (e.g., e-books, audio books) of medical textbooks or other reference materials with generic text search capabilities. These are not devices because these apps are intended to be used as reference materials and are not intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease by facilitating a health professional’s assessment of a specific patient, replacing the judgment of clinical personnel, or performing any clinical assessment.

b. Mobile apps that are intended for health care providers to use as educational tools for medical training or to reinforce training previously received. These may have more functionality than providing an electronic copy of text (e.g., videos, interactive diagrams), but are not devices because they are intended generally for user education and are not intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease by facilitating a health professional’s assessment of a specific patient, replacing the judgment of clinical personnel, or performing any clinical assessment.

c. Mobile apps that are intended for general patient education and facilitate patient access to commonly used reference information. These apps can be patient-specific (i.e., filters information to patient-specific characteristics), but are intended for increased patient awareness, education, and empowerment, and ultimately support patient-centered health care. These are not devices because they are intended generally for patient education, and are not intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease by aiding clinical decision-making (i.e., to facilitate a health professional’s assessment of a specific patient, replace the judgment of a health professional, or perform any clinical assessment).

d. Mobile apps that automate general office operations in a health care setting and are not intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease.

e. Mobile apps that are generic aids or general purpose products. These apps are not considered devices because they are not intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease.

Takeaways: While the FDA appears to move at a glacial pace in many instances, it eventually responds to market activity. Mobile health is a growing segment and should grow even faster in the coming years.

The trick to escaping regulation under the “enforcement discretion” provision is to avoid making diagnoses or recommendations for treatment. If your app/device interfaces with a class II device or provides diagnostic or therapeutic information or suggestions, you are going to need a 510(k).

 Read more:

FDA finally publishes final guidance for mobile medical apps | mobihealthnews.

Get the FDA Guidance here:

 http://www.fda.gov/downloads/MedicalDevices/DeviceRegulationandGuidance/GuidanceDocuments/UCM263366.pdf

Startups beware. A potential “death sentence” awaits the uninformed.

A fine example of unintended consequences, the JOBS act (Jumpstart Our Business Startups) was supposed to make it easier for startup companies to raise capital and to talk about their financing needs without getting into hot water with the SEC. The law was passed with bipartisan support, and was signed into law by President Obama on April 5, 2012.

As this GeekWire article points out, the new law has made it somewhat easier for startups to conduct IPOs. Unfortunately, that’s the last thing a startup does before it gets transformed into a public company.

The provisions of the JOBS act can actually jeopardize the fundraising activities of a startup during the critically important early stage, before significant capital has been raised and probably before the companies can afford expensive attorneys to advise them.

The main issue with the JOBS act from a startup perspective is that it has complicated rather than simplified the rules around “general solicitation,” the prohibition against publicly offering equity in the company in exchange for investment. The prohibition applies to participation in pitch events, very common forums where startup CEOs present their pitches to a crowd containing a mixture of people, including (it is hoped) a few angel investors.

At least one Internet-based angel investor “crowdsourcing” site, Poliwogg, is counting on the new law to attract novice angel investors to its online marketplace for healthcare company investment opportunities. It remains to be seen if the details of the regulations have a chilling effect on what could be an important resource for early stage startups and for prospective angel investors.

Dan Rosen, a prominent Seattle angel investor who was interviewed for the GeekWire article, pointed out that the “death sentence” can occur if a startup makes two mistakes regarding general solicitation. The penalty from the SEC is a one year prohibition against fundraising. That would sink most startups.

What’s next? A number of organizations are lobbying for changes to the law or at least a more lenient interpretation by the SEC. Given the polarized climate in Washington, D.C., it may take some time for this issue to be resolved.

Takeaways: Startup CEOs should educate themselves about the provisions of the JOBS act as it applies to them. As the saying goes, ignorance of the law is no excuse. I’ve been reading the blog of a Seattle attorney who has a special interest in this matter, William Carleton. You can reach his blog here: http://www.wac6.com/ It’s also wise to engage a corporate attorney who is experienced in startups and startup financing law. Yes it’s expensive but it may be the best insurance you can buy for your startup.

Read more: The messy side of the JOBS act, and the potential ‘death sentence’ for startups – GeekWire.

Powerful Free 3D CAD Software: DesignSpark Mechanical

I’ve bought a few things from Allied Electronics and, of course, got on their email list. It’s usually an interesting email but not very relevant to me. Today, however, I received an email from Allied about DesignSpark Mechanical. DesignSpark Mechanical is a fully featured 3D design and CAD software application for Windows PCs and it’s 100% free.

Model and software from DesignSpark Mechanical websiteYou do need to register and provide contact information but after that, you get a rather large download – 500+ MB for the 64 bit version – and the program runs with all features and no restrictions – WOW!

I’ve downloaded and used Google’s Sketchup software. The free version is very limited in features and they charge $590 for their fully featured Pro version.

From the DesignSpark Mechanical website:

DesignSpark Mechanical is packed with time-saving features to help you design more easily, quickly and creatively than ever before.

  • Produce highly detailed dimensioned worksheets
  • Remove bottlenecks by making amendments and additions to your design in seconds, rather than waiting for the CAD department to rework in history-based CAD tools
  • Combine your creation with off-the-shelf components from RS Components and the Allied Electronics 3D library
  • Create geometry easily with powerful and intuitive gesture-based modelling, no need to be a CAD expert
  • And best of all, it’s completely free! This is not a cut down version of an expensive product or software with a time-limited license.

The software is extremely easy to use, almost intuitive. There are lots of hints and tips included with the various commands and options. The web page for the software contains a number of tutorials, both text and video, for beginners who want to master the software.

One of the most powerful features is the ability to import components from both RS Components and  Allied Electronics. These are dimensionally accurate. The program automatically generates a bill of materials and even estimates the cost of the project.

Another very cool feature is the ability to save directly to a 3D printer format, in an STL file. You could make a design, send the STL file to your favorite 3D printer shop and have a physical prototype the next day!

I’m sure the software is not as powerful as commercial CAD packages. For example, rendering 3D models is not offered. But it looks like it can do the job of creating 3D designs…and it’s free.

Takeaways: 3D CAD software once cost tens of thousands of dollars, then thousands of dollars, then hundreds of dollars, and now it’s free. Not only free, but designed so well that anyone with a slight bit of mechanical ability can learn it and use it. The companies involved are clever to include their 3D libraries of components. It’s a good bet that if you design with them, you will specify them and buy their components. Not a bad competitive advantage for companies in a commodity business like electronic components.

For resource-poor medical device startups, this free software is a huge benefit. The ability to create accurate and convincing prototypes using 3D printing has never been easier or faster. Now you can add 3D design to those fast, inexpensive capabilities. With DesignSpark Mechanical, anyone can do rapid prototyping very inexpensively and produce high quality designs and models.

Read more/Download the software: DesignSpark Mechanical » DesignSpark.

3 things that will help hardware entrepreneurs build their startups | MedCity News

I’ve  suspected for some time that hardware, i.e., real life products, are tougher to successfully commercialize than software products.

hardware

For one thing, the cost of hardware product development is much higher. Assume that the hardware design cost is roughly equivalent to the development cost of a software product. For hardware, you then need prototype tooling, pilot tooling, and production tooling – all expensive. Real world testing and validation is time-consuming and also expensive. Animal and human clinical testing is complicated and risky. Then there are the costs of inventory and physical distribution as well as warranty and repair. Lastly, the profit margins are much lower than software!

“Starting a venture is hard — actually, if people knew how hard, they wouldn’t do it — but starting a hardware venture is three times as hard,” said angel investor and Txtr CEO Christophe Maire

The premise of this article is that there are a few things one can do to mitigate the risks inherent in hardware commercialization (these mitigations are not limited to medical technology):

  1. Launch the product online
  2. Simplify, simplify, simplify
  3. Combine hardware with a service

Starting with online sales and distribution limits your financial exposure by not having to stock a distribution channel/pipeline (assuming you can find distribution partners as a startup). You can also defer the substantial investment needed for a sales force. The upside is that you still have a global footprint. As demand and revenues grow, you can either bootstrap growth using early revenues or use the growth as evidence of demand to obtain angel or venture funding.

The big challenge with online distribution and sales is creating awareness and demand. Your online marketing skills will be put to the test. Of course, you could hire a freelancer or consultant for a short term project to “prime the pump” and get the product launched.

Creating online stores for physical products has never been easier or less costly. You can set up a store at Amazon.com for example. Amazon will take care of everything related to online sales, for a hefty percentage of the action, of course. You can even drop ship from your warehouse as the orders roll in. Companies like UPS and FedEx will physically store your inventory in strategic locations to minimize shipping time and customs delays to overseas markets.

Simplification is important, especially for a first product. You should select your most likely customer and develop a minimum viable product for that customer type. Extra features can be added later.

The prime objective is to get to market and scale up as quickly as possible. Since seed and angel funding is very difficult to obtain for early stage hardware startups, you will probably be doing a lot of bootstrapping and trying to save money everywhere possible.

Simplification can also be a competitive advantage. For every early customer you acquire, that’s one less customer for your competitors (unless you screw up the relationship with poor quality or unrealistic promises). Once you have established that early relationship, customers are more patient and more likely to wait for the enhancements you showed them on your product roadmap.

Finally, combining hardware with a service puts your startup into a different class altogether. You can create a recurring, high margin revenue stream in addition to ordinary product revenue.

There are obvious services like training, extra warranties, service and maintenance contracts, leases, short-term loaners/rentals and hardware upgrade/refresh cycles. There are new services being created every day like cloud-based storage of the data generated by your hardware. Many companies are developing mobile and desktop apps for remote viewing, control, or manipulation of their products and the data they generate. You may be able to offer data analysis or even offer access to anonymized, pooled data from all of your customers. That could be a strategic advantage for your customers!

Takeaways: Hardware commercialization is hard. Because we still live in a physical world, there will always be a need for tangible products. Because hardware development is expensive and risky, always try to limit your risk and exposure. Startups look a lot bigger online – use that to your advantage. Keep your first product simple. Ruthlessly eliminate any features or functions that are not necessary to get a sale. Lastly, look for alternate ways to generate revenue, especially recurring revenues through value-added services.

Read more: 3 things that will help hardware entrepreneurs build their startups | MedCity News.

Smart Spoon, New Apps Help People with Parkinson’s, Essential Tremors | Medgadget

Who would have expected the development of a Smart Spoon? The founders of Lift Labs, a San Francisco technology company, that’s who.

I like this device because it builds on existing technology – the same type of technology that enables cardiovascular surgeons to perform intricate bypass surgery on beating hearts.

The developers and engineers applied their technology to a completely different use, interpreting and negating the arm and hand tremors caused by Parkinson’s Disease and the neurological disorder Essential Tremor. Next, the developers identified a problematic function associated with the tremors: eating! They then used their Liftware Active Cancellation of Tremor technology to control a spoon with a built-in electromechanical actuator that cancels out the tremors, enabling the user to eat unassisted.

I expect this device to get a lot of attention from Parkinson’s and Essential Tremor patients and their families. The patients can eat unassisted (what adult wants to be spoon fed?) and maintain their dignity.

The company promises other attachments beyond the spoon. It will be interesting to see what they develop for an encore – a writing pen? A Smart Stylus to control a tablet or a smartphone? How about a Smart Mug? The company also has a free smartphone app using their Active Cancellation of Tremor technology to provide cadence guidance for walking to prevent shuffling.

Lift Labs has developed another (free) smartphone app, Lift Pulse 2.0, that collects user data from queries (stress level, medications, sleep, exercise) and couples that with tremor information imputed from the phone’s accelerometer. The results are displayed to the user and stored in a journal but also sent after anonymizing to a company database where it can be analyzed using Big Data.

Although these are not medical devices per se, they have the potential to provide enormous relief to many people suffering from the symptoms of these debilitating diseases.

Takeaways: Building on innovations from unrelated markets is a great way to achieve instant traction in a startup or on a product development project with a tight budget. Obviously, it pays to engage a patent attorney to determine if you have a non-infringing use. If the new market is sufficiently noncompetitive with the existing market you may be able to negotiate a reasonable royalty fee or rate. Finally, identify the segment and application with the largest unmet need and you just might be on the verge of a disruptive innovation. I’m sure the Parkinson’s sufferers being spoonfed or using sippy cups and the like would agree.

Read more: Smart Spoon, New Apps Help People with Parkinson’s, Essential Tremors | Medgadget

Lift Labs

Wow of the Week: A flu vaccination you could give yourself, with no shots involved | MedCity News

Very cool, and a great use of microfabrication technology. This microneedle array delivers its vaccine payload painlessly into the skin and the needles dissolve. Perhaps your healthcare insurer will mail your vaccine to you in the not too distant future.

The microneedle array (still in the animal research phase) could be an important tool for vaccine delivery in developing countries where vaccine doses must be transported to remote populations and refrigeration equipment is not readily available. And perhaps it will increase the participation in flu and other vaccine programs by people who have needle and/or pain phobias.

I’m aware of at least one other company commercializing a microneedle-based medical product. The startup company is Kitotech, based in Seattle, and they have developed a product called Kitostitch. The Kitostitch product is intended to replace steri-strips for primary wound closure. The value proposition is a little less clear in that case. In my experience, it’s tough to oust incumbent technology even if it’s mediocre, when there’s no nagging problem being solved.

Takeaways: There are plenty of unsolved medical problems, some big and some small, that can benefit from smart innovation. The technology of vaccine injection would seem to have been perfected or at least exhausted of innovation but these researchers created a completely new inoculation technology. Complacency is the enemy of innovation. Do not ever assume that a “better mousetrap” cannot be designed for a particular need. Most important is that you keep looking for unsolved problems and unmet needs.

Read more: Wow of the Week: A flu vaccination you could give yourself, with no shots involved | MedCity News.

Top 10 Pitfalls of a 510(k) Submission and How to Avoid Them | MDDI Medical Device and Diagnostic Industry

The FDA marketing clearance process (never “approval” for a class II or 510(k) device) can be maddeningly ambiguous, time-consuming, expensive, and risky if conducted incorrectly. There are, however, many companies that have a straightforward and relatively easy pre-market notification process. This article in MDDI lists a number of dos and don’ts to help you and your company end up in the latter category.

“Top Ten Pitfalls:”

  1. Misconceptions about 510(k)’s goals. 
  2. Not knowing the regulatory history of your product in the United States.
  3. Choosing the wrong comparison (predicate) device. 
  4. Choosing a predicate that is not available to test. 
  5. Choosing a predicate that is not available in the U.S.
  6. Not understanding (or being able to find) appropriate guidance.
  7. Not starting validation testing.
  8. Errors and inconsistencies in the 510(k). 
  9. Inattention to FDA’s instructions. 
  10. Missing and incomplete forms. 

My experience is that many people new to the 510(k) process misunderstand the FDA’s goals and role in the 510(k) process:

In the 510(k) review process, devices that meet eligibility requirements are “cleared” as opposed to being “approved” by FDA…The requirements and expectations for a properly completed 510(k) have evolved along with medical technology.

…the documentation must show that the device is “substantially equivalent” to a previously cleared (predicate) device. The device needs to have the same intended use and technical characteristics [as the predicate, but not necessarily the same technology]…The reviewers will also want to see data substantiating that the device’s performance, safety, and effectiveness are equivalent to the predicate.

Here are some of my own recommendations for avoiding FDA pitfalls:

  • Hire a regulatory professional, either a consultant or an FTE. Give special consideration to the regulatory professional’s experience and field of expertise. You want someone who has extensive experience with products in the same regulatory classification and preferably the same medical specialty as your products. If you can’t afford to have the regulatory person manage the entire 510(k) process, negotiate to have them help you with planning and to review all part of the submission as well as any communications with FDA.
  • Don’t second guess or micro-manage the regulatory professional. You should ask questions and have discussions, intense and challenging if necessary, about schedule, budget, indications, predicate device selection, test requirements and plan, clinical study requirements and plan, and so on. Once you have a recommendation, proceed. Trying to force an answer that is satisfactory to you will almost inevitably result in delays and increased expenses. If you find that you are spending a lot of time questioning your regulatory professional’s decisions, it’s probably not a good fit and you should find a new regulatory person.
  • Do not second guess the FDA and do not ignore their questions or recommendations. Also, do not assume that you can rely 100% on their answers to your questions. The FDA will always tell you that their guidance is not a legal opinion and is not binding. As the saying goes, “you pays your money and you takes your chance.”
  • On the other hand, don’t be afraid to ask questions of the FDA. This is particularly true if you fall into the “small manufacturer” category. You can get extra help free of charge from FDA staffers. Once again, however, do not rely exclusively on this guidance.
  • If you are concerned about risk, timing, and/or expense, consider launching your product in another market first. You can generate much-needed cash flow and perhaps even obtain clinical data for your 510(k) submission in places like the EU or a country in South America.

Takeaways: Regulatory submissions and clearances are among the most important milestones in commercializing a medical device. It would be foolish to leave this important function to amateurs or to ignore important recommendations and guidance.

If you are a medical device startup CEO, marketing manager, or product manager and especially if you are without much regulatory experience, be sure to budget for and recruit a highly regarded regulatory professional with experience and expertise in your market and your regulatory classification. The regulatory clearance process is complicated and can be daunting to novices but it can be successfully navigated by engaging experts and by learning and following the rules.

Read more: Top 10 Pitfalls of a 510(k) Submission and How to Avoid Them | MDDI Medical Device and Diagnostic Industry News Products and Suppliers.

What’s in a name? Naming and branding medical device products and companies

rose

We’ve all been there – needing a name for a new product or even more importantly, a new company. There are a number of schools of thought about naming. For example:

 

 

  • Name it for the doctor who invented/founded it. (covert endorsement or the medtech equivalent of vanity plates)
  • Just pick something generic and get it out there (Wile E. Coyote’s Acme Products company)
  • Smash two words together with a capital or two in the middle. (“CamelType”)
  • Make an implied promise with the name. (Intuitive Surgical, da Vinci)
  • Make up a serious sounding, semi-scientific name. Make sure it has a trendy consonant in it or is loosely based on some obscure Latin word. (the Immunex factor)
  • Let the engineers name it. (any number of unmemorable names)
  • Pay a naming/branding consultant a lot of money only to find out the .com URL is taken.
  • Convene a cross-functional branding brainstorming team to identify alternatives, then: a) have an all-employee company vote or (less likely to have long-term negative repercussions) b) let the CEO pick his/her favorite.
  • Use the code name of the development project. (more often than you would think)

It’s extra difficult in the medical device space, especially if you are in a “hot” segment like digital health. There are lots of other companies casting about in the same pool of potential names and with the same requirements that you have. And, ours being a Serious Industry, I doubt that we will see the medical device equivalent of “Cheezburger Network” in the near future.

Takeaways: Naming and branding is a lot like coming up with the perfect name for your first child. You put enormous thought and effort into finding the perfect name, perhaps even creating a unique name just for your offspring. You obsess over what message the name will send and how your child will be perceived, perhaps for the next century. Big stakes, I know.

The reality is that most kids make their names fit them. Most people use the name as an association to the child and the child’s personality rather than the other way around.

The same  holds true for product and company names (as long as you stay away from the really outlandish stuff). Pick a name without endless consideration of the implications. Then, spend your time and effort making the company and product fill the promise of the name to reinforce positive experiences with the brand by customers and other stakeholders. Soon, the actual meaning of the brand or product name will fade and be replaced by the (it is to be hoped) positive attitudes toward the product/brand.

It’s also helpful if, in addition to not being similar to another company or product in the same segment, the name or brand doesn’t require a lengthy explanation about what it means or how it came to be. Just think back to an acquaintance who insisted on telling you the derivation of the name of their son or daughter.

Here are a few examples about names of companies in digital health. I’m sure all of the people responsible for naming these companies had great intentions and thought their names would stand out. Unfortunately, at least one other person in another company had the same expectation and created a confusingly similar name:

Read more: The apparent shortage of digital health names | mobihealthnews.

Digital health needs more physician entrepreneurs | mobihealthnews

Are you aware of the Society of Physician Entrepreneurs (SOPE)? I was not. The CEO of SOPE, Dr. Arlen D. Meyers, a practicing ENT surgeon, says that doctors are not trained in business while in medical school or residency. That has certainly been my experience.

While many physicians have an entrepreneurial mindset, only a few I’ve met and worked with have business skills that would enable them to start and/or run a company. Some are just natural entrepreneurs although I think there are far more who believe they have business acumen but don’t have any or don’t have much business savvy. Those doctors are the toughest to work with as a medical device commercialization executive.

To address part of the problem, Dr. Meyers has created a certificate program in bioinnovation and entrepreneurship at the University of Colorado. The program is intended for postdoctoral students not interested in a career in academia.

Dr. Meyers also said, “most innovation in healthcare and medicine leaves out doctors and patients, particularly in the lucrative fields of drug and medical device development.” I’m not sure exactly what he’s driving at here. Most device companies, startups included, are happy to work with innovators or key opinion leader physicians to help create, develop, refine, and commercialize new products. They are well-compensated for commercial successes, much less so for market flops, of course. And patients are a necessary part of the process.

Medical device commercialization is not for amateurs and it’s not a part-time gig. Most physicians are incredibly busy people. It seems to me their natural role in a startup or on a new product development project in a larger company is to serve as a clinical/healthcare system resource, product endorser, and source of referrals. Of course, they are free to try their hand at business and create their own startups.

Dr. Meyers also points out that the burgeoning digital health segment is underrepresented by physicians. That may be because the technology, networking, and systems interoperability dimensions of digital health solutions and products tend to be far outside most physicians’ areas of expertise. However, there are multiple opportunities for doctors to innovate. For example, their detailed knowledge of the healthcare delivery system may have given them specific ideas about how to improve patient care delivery with apps. He also believes that non-face to face care using telehealth or digital health products and apps is going to be a substantial opportunity for entrepreneurs, whether physician or layman. Any of those ideas could be the basis of a digital health startup.

Takeaways: Medical device and digital health startups, even with their high failure rates, are attractive to at least some physicians – those with entrepreneurial mindsets. Startup founders and CEOs should identify and recruit like-minded doctors for their executive teams, boards of directors and advisory boards. If you are a digital health startup CEO with a tech/IT background, you can minimize the risk of making bad or just uninformed product decisions and enhance your commercial products by finding and engaging with an entrepreneurial physician.

Read more: Digital health needs more physician entrepreneurs | mobihealthnews.

Presence of sales reps influences coronary stent selection, price | MassDevice

As the saying goes, “that’s why they get paid the big bucks.” All kidding aside, a recent study published in the American Heart Journal confirms and quantifies what most industry insiders know intuitively: there is no substitute for a live salesperson at the point of use.

sales repMany cardiac catheterization (“cath”) labs either stock or make available more than one brand and more than one type of coronary stent. Since there are many different indications and technical features among the various offerings, it’s difficult for hospitals to standardize on just one brand. So instead of “converting” a physician or a hospital to permanent purchase of the company’s products, the sales rep gets to convert each case she or he attends.

Hospitals and physicians are aware of the influence a rep can have over the selection process. Many limit rep visit frequency in an attempt to be “fair.” Another factor is that some reps are technically and clinically more competent than others. They perform a genuinely valuable service for the physician by reviewing diagnostic information and making informed recommendations about the ideal product for the clinical situation.

On a darker note, some reps (and some companies reinforce these behaviors) have personal relationships with physicians, complicating the goal of unbiased product selection.

Some hospitals have even banned certain sales reps or even instituted blanket bans of every sales person from point of use contacts.

The study reported that the presence of a sales rep increased the per-case price of stenting by up to $230. One investigator also said that the company’s market share was increased by the rep’s presence, meaning that the physician used that rep’s company’s products over the equivalent competitive product. This choice occurred apparently because the rep was present and able to inform and/or persuade the cardiologist to use the rep’s products.

Some cocktail napkin math: say a typical rep makes $150k per year in cash compensation. That’s about $3,000 per week or $600 per day.  It doesn’t take many cases per day selling high margin stents to pay the rep’s salary and make a tidy profit for the company. And that’s why successful reps will do everything they can to spend the day in scrubs instead of a business suit.

Takeaways: While good sales reps are costly and rare, and a direct sales force is insanely expensive, you get what you pay for. Of course there are other options such as manufacturers’ reps, distributors, telesales, and partnering/sales force sharing. In all of those alternative approaches, you give up control and access compared with the direct sales rep model.

The key in marketing and selling high value, high price, high margin products is to recruit, hire, and maintain the highest quality sales force possible and to design an incentive compensation program that encourages desired behavior while dissuading undesirable behavior. Easier said than done, and probably merits the hiring of an experienced sales executive to create and manage the sale team.

Keep in mind that sales reps pay for themselves more directly than any other employee. Budget appropriately if you decide that a direct sales force is right for your venture. Plan for longer sales cycles and reduced market share if you decide that direct sales is a luxury your company or startup cannot afford.

Read more: Study: Presence of sales reps influences coronary stent selection, price | MassDevice.

mHealth, eHealth, Mobile Health, Connected Health: Not Fads, Not Going Away

Smartphones can be addictive. The convenience of obtaining information and maintaining social connections is a powerful benefit for just about everyone. Health-related smartphone apps have the potential to use that addictive property to inform and improve the health of smartphone owners.

Close to 60% of all adults in the U.S. use a smartphone. The proportion approaches 100% in well-educated, affluent, young-to-middle-aged, or urban/suburban demographic groups. Using “diffusion of innovation” terms, smartphone adoption has penetrated past the Early Majority and is deep into the Late Majority. That’s more than enough for a startup to base its technology platform on.

There are more than 40,000 smartphone apps focused on mobile health, growing each day. Many savvy entrepreneurs have identified mobile health as a Next Big Thing and are trying to stake out their territory during this “wild West” phase of the mobile health market.

According to an executive at Qualcomm, the exponential growth in mobile or connected health is being driven by two factors. The user experiences are getting better all the time and there is real opportunity for cost control at the provider level. App usage is growing even among clinicians: 34% of clinicians reports using apps to monitor data from medical devices now, up significantly from the 27% who reported doing so in 2012.

Of course, things like user interfaces and app features can make a huge difference in adoption and patient satisfaction. One recent study of diabetes patients showed that patients with passive monitoring and reporting apps on their smartphones to manage glucose levels had better adherence to their glucose management plans and also had better health outcomes than patients who used apps requiring manual intervention.

According to a Brookings Institution study, remote monitoring technologies could save $197 billion in the U.S. over the next 25 years. And adoption is spreading rapidly. For example, 45% of physicians report using mobile apps for data collection at the bedside compared to 30% in 2012. More than 70% of providers use mobile devices to access patient Electronic Medical Records (EMRs). Physicians are eager adopters of mobile devices with more than 66% reporting use of tablets in their professional practices.

Joseph Kvedar, MD in an article on The Health Care Blog, writes:

Mobile health offers us many transformational opportunities.  We can use smart phones as a data upload/home hub device.  We can use them as a device to engage the consumer around health content.  We can use them to display health-related information at  just the right moment in just the right context.  We can use the cameras to capture relevant health information (e.g., home test results).  We can use them to message you in the moment with contextually relevant, motivating messages.

Add to the list that we can harness the addictive properties of these devices to, perhaps, make health addictive.

Takeaways: The market opportunity for mobile health is here and now. Devices, sensors, networks, software, and connectivity have never been better, cheaper, or easier to access. Patients and providers have adopted mobile technologies in huge numbers. Yes, there is plenty of competition but there are rewards for any startup or company that can identify a market niche, develop a solution, and deploy a product that meets user expectations while maintaining a long term strategy of reducing costs and improving clinical outcomes.

Read more:

Why mHealth is not a fad but is here to stay (infographic) | MDDI Medical Device and Diagnostic Industry News Products and Suppliers.

Could Mobile Health Become Addictive? | The Health Care Blog.

The Perils of eHealth | MDDI Medical Device and Diagnostic Industry News Products and Suppliers.

A Twenty-Year Snapshot of the Health of the American People | JAMA

Fascinating glimpse into the state of our health in the U.S. and how it changed over a period of twenty years from 1990-2010.

This is a “glass half-full/glass half-empty” story. If you are in the healthcare industry, it seems that there is going to be a limitless supply of patients with chronic medical conditions for the foreseeable future. On the other hand, if you are a typical American or if you have some responsibility for public health, there is much to be concerned about. We’re spending more than ever and more than everyone else on healthcare. Although the overall health of our nation’s citizens is improving, it’s not improving as much as other wealthy countries (which are spending far, far less on healthcare).

A few examples from the abstract:

  • Ischemic heart disease, lung cancer, stroke, chronic obstructive pulmonary disease, and road injury were the most prevalent lethal conditions in terms of sheer numbers and were responsible for the most years of life lost (YLL) due to premature mortality.
  • Alzheimer’s disease, drug use disorders, chronic kidney disease, kidney cancer, and falls are increasing in incidence rates most rapidly on an age-adjusted basis.
  • Low back pain, major depressive disorder, other musculoskeletal disorders, neck pain, and anxiety disorders represented the conditions with the largest number of years lived with disability (YLD) in 2010.
  • While we are living longer, we’re living with disabilities. As the US population has aged, years lived with disability are growing faster than years of life lost overall.
  • Our lifestyle choices are disabling and killing us. Poor diet, tobacco smoking, high body mass index, high blood pressure, high fasting plasma glucose (pre-diabetes), physical inactivity, and alcohol use were the leading risk factors in disability and premature death combined.
  • Chronic disease and chronic disability now account for close to half of the US health burden.
  • We’re losing ground to our peer countries:

Among 34 OECD [Organisation for Economic Co-operation and Development] countries between 1990 and 2010, the US rank for the age-standardized death rate changed from 18th to 27th, for the age-standardized YLL rate from 23rd to 28th, for the age-standardized YLD rate from 5th to 6th, for life expectancy at birth from 20th to 27th, and for [healthy life expectancy] HALE from 14th to 26th.

No matter what you may think of Obamacare, single payer healthcare, or market-based solutions, these facts clearly show that we as a nation are not getting any “bang for our healthcare buck.” I don’t think that anyone believes we can spend our way out of this dilemma.

Takeaways: There is more data available than ever before to analyze health trends. There is an enormous interest in new technologies and methodologies that can improve a patient’s health without increasing costs. There are any number of clinical conditions upon which a startup could focus and have a significant effect on our healthcare system. Disease prevention and lifestyle modification look to be areas of focus and rapid growth. As you develop your latest medical device or as you plan your medtech startup, keep the big picture in mind. Show that your device or technology will not only work better than alternatives but that it will demonstrably improve patient health and save money.

Read more: JAMA Network | JAMA | The State of US Health, 1990-2010:  Burden of Diseases, Injuries, and Risk Factors.

How a cotton candy machine gave this NSF-funded, Indiana-based wound-healing startup its first big idea | MedCity News

If you’re interested in startups, here is a story about how one current medical device startup formed. There’s probably not a typical path for startups to follow but many do form to address one issue and ultimately become something very different.

The trendy term for this in Silicon Valley these days is “pivoting.” That’s when you fail at one thing and then figure out something else to do using your existing assets. It also goes by the phrase, “fail fast, fail cheap, and fail often.” Of course, if all you do is fail, you will never get anywhere! The methodology requires that you learn from each mistake and apply what was learned to the next project. You do need to show traction and progress before your investors and stakeholders run out of patience.

The startup in the article, Medtric, envisioned a fibrous wound dressing spun on site in a process similar to how cotton candy is formed. They failed, perhaps because they focused on a process instead of the problem. They learned from their mistake, however, and developed a nanotechnology-based dressing in their second attempt. That product along with a third seem to have tangible clinical benefits. It also helps that the products are simple and relatively inexpensive. Those attributes help attract investors. The company has received extensive grant funding and angel funding and is planning to commercialize its products in the next year.

Takeaways: Ideas for new products can come from anywhere, even cotton candy machines. What’s more important is to have a deep understanding of the problem you want to solve and the benefits your solution provides. Simplicity in explanation of your concept, plan, product, and technology makes it easier for investors and stakeholders to understand and buy into your story. Pivoting is an expected part of the innovation and commercialization process. It is always good to have a backup plan just in case your primary strategy fails.

Read more: How a cotton candy machine gave this NSF-funded, Indiana-based wound-healing startup its first big idea | MedCity News.

Medical Device Design Transfer to a Contract Manufacturer | MDDI Medical Device and Diagnostic Industry

It is increasingly possible to set up a medical device startup as a “virtual” company. With the ubiquity of high speed internet connections and inexpensive, even free, web conferencing applications along with cloud-based file sharing sites, savvy entrepreneurs focused on commercializing quickly and with minimum expense can use outsourced services, contractors and consultants for just about everything.

There are contract design houses, contract clinical research organizations, “rent-a-CFO” firms, freelance sites for graphic designers and all sorts of marketing experts, manufacturer’s representative sales organizations, outsourced customer service and support organizations, logistics companies to warehouse and distribute your products, websites that will display your product and process customer orders, and (the subject of this article) contract manufacturing organizations (CMO).

This article from MDDI explains in detail how to design in anticipation of using a contract manufacturing organization. The logic and elements should be easily understood by anyone with ISO9000 experience, as the process is to “plan the work and work the plan.” The first step is to create a Design Transfer Toolbox. In the toolbox are a number of specifications, documents, and plans. From the article:

  • User requirements specification (URS). What must the process do?
  • Sequence of events (SOE) chart. When will each assembly step occur?
  • Functional requirements specification (FRS). How will the process operate? How will the functionality be tested?
  • Design specification (DS). How will the configuration of the process with detailed drawings and databases be defined?
  • Trace matrix. How is each design requirement tested and verified? This directly relates each requirement to test functionality.
  • Process failure modes and effects analysis (pFMEA). How will the CMO prove it has built the right product in the right way? Input document is the product design failure mode and effects analysis (dFMEA).

It’s important to understand that this is a collaborative process between the medical device company and the CMO. The various specifications and processes must be detailed and agreed to by both parties before a contract is signed and work commences. The consequences of not following rigorous documentation and not having copious communications will be delays, quality problems, and regulatory infractions. On the other hand, investing time and effort before doing the design transfer can result in a high quality, cost-competitive manufacturing process and a successful long-term relationship between the medical device company and the CMO.

Takeaways: Not only are virtual medical device companies possible, there are high quality, reasonably priced companies and individuals operating as contractors, consultants, and freelancers that are eager for your business. If you are a medical device startup CEO with an urgent need to get to market, you should consider outsourcing areas outside of your core competencies. You will save money and time.

Read more: Elements of Effective Device Design Transfer to a Contract Manufacturer | MDDI Medical Device and Diagnostic Industry News

This startup wants to help you save on medical bills by taking control of your health | GeekWire

Health 2.0“, also known as digital health – focusing on improving people’s health through a constantly evolving mix of web or mobile device apps and educational software and websites, social media, personal health records, and various forms of connected sensors – is growing and attracting much attention, from entrepreneurs, investors, the media, and public health officials.

The basic idea is that people can take charge of and improve their own health – and reduce their healthcare expenses – if they have data about what’s going on with their bodies and some basic information about what to do about it. Sometimes the data is shared with a healthcare provider.

The organization Health 2.0 estimates that there are 2540 companies in the Health 2.0 segment as of June 2013. A majority of the companies, 1465, are consumer-focused while the next largest category, professional facing, has 643 participants. There are 203 companies involved with patient-provider communications and 229 companies working on data and analytics. I’m sure the overall count increases every day.

Why is Health 2.0 such a hot segment in healthcare? For one thing, the barriers to entry are lower than in other segments like medical devices or biotech. Many of the apps are unregulated or require a 510(k) marketing clearance at most. The cost to develop and deploy an app is a fraction of what it costs to commercialize a Class II medical device.

How do these companies plan to make money? That, as the (updated) saying goes, is the $64 million question. Many of the apps and web services are free. Some use the familiar freemium model where a basic version is provided free of charge and the fully-featured version is sold for a few dollars or so. What’s lacking is a recurring revenue model, or is it?

Just as Google and other companies with large user bases do, many Health 2.0 companies aggregate and sell the data generated by their apps. It’s appropriately anonymized but it’s probably worth much more in terms of lifetime revenue per user (LRPU) than the nominal charge paid by the consumer. Plenty of researchers and marketers in Big Pharma and insurance companies as well as government would love to have large data sets with behavioral data from a target population from one of their drugs, pipeline or on the market.

The company referenced in the article, Health123, was started by ex-Microsoft and Seattle tech veterans. They plan to approach employers with the prospect of reducing their health insurance expenses by improving employee health through deployment and use of their app. It’s another revenue model. It also raises serious privacy concerns as seen in a lively discussion in the article comments.

It’s tempting to think that your company could be the one to demonstrate positive outcomes. It seems to me that there is much anticipation regarding effective health apps that can improve public health and/or “bend the cost curve” as the healthcare policy wonks like to say. Looks like there are a couple of thousand startups that are in agreement.

Takeaways: Health 2.0 presents many opportunities for medical device and healthcare IT entrepreneurs. Even hardware companies can get in on the action via development and integration of all sorts of physiologic sensors. This could turn into a “land grab” where small and nimble startups do all of the innovation and are then snapped up for outlandish valuations by big medical device and healthcare IT companies who can’t afford to miss the market opportunity.

Read more: This startup wants to help you save on medical bills by taking control of your health – GeekWire.

Crowdfunding for Medical Devices

The notion of crowdfunding early stage medical device development is spreading. By now everyone is familiar with Kickstarter and the many examples of companies that have successfully raised funds by appealing to large numbers of “average Joe/Jill” supporters. There are more than a few copycats now that Kickstarter has been successful. Most, however, do not encourage or permit crowdfunding of medical devices.

http://blogs-images.forbes.com/85broads/files/2012/03/crowdfunding-photo.jpg
Image from Forbes.com

There is obviously a funding gap for many early stage medical device companies. Venture capitalists have abandoned the early market except for blue chip prospects. Angel investors have become extremely risk-averse in my opinion and have functionally replaced VCs (although not the big VC investments of 10-15 years ago). Between federal budget sequestration and increased competition, grants from NIH, CDC, NSF, and DoD have dried up and take too long to be a reliable source of funds for most startups.

As usual, savvy entrepreneurs to the rescue! Here are a few specialized sites that are crowdfunding medical device startups:

  • Medstartr “Patients, Doctors, and Companies Funding Healthcare Innovation.”
  • Poliwogg “Put Your Money Where Your Passion Is”
  • indiegogo “The world’s funding platform. Fund what matters to you.
  • b-a-medfounder “A uniquely positioned crowdfunding platform dedicated to medical device invention and innovation projects.”
  • healthfundr “Accelerate health innovation. Invest in the companies shaping the future of health.
  • microryza “FOLLOW & FUND SCIENTIFIC RESEARCH

Many of these sites and organizations are new and do not have a track record. Most are focused on investors who want to put in a small amount of capital. Perhaps they are angel investment neophytes who are just starting out or maybe they prefer to make lots of small investments. Who knows? Others seem to focus on “donors” who are essentially giving a gift to the company, again, for very personal reasons. In any event, all of the crowdfunding sites seem like resources to investigate for early stage startups looking for that first $100k or so of seed funding.

It will be interesting to see how these services develop. As many of you know, early stage investors can get diluted down to almost nothing in terms of equity very quickly. And although medical devices cost only a fraction of what a biotech drug might cost to develop, it still requires a minimum of a few million dollars in capital to get a Class II device to market. If that funding is stretched out over a few rounds, the early stage investors almost certainly won’t get much, if any, return on their investments.

It remains to be seen if a relatively obscure and small niche like medical device development can attract sufficiently large numbers of investors. It’s also a big unknown if the proliferation of crowdfunding sites prevents any of them from reaching a critical mass of investors.

There are caveats in using these services, of course. Just as investors perform due diligence on you and your startup, so must you conduct your own diligence on the crowdfunders. Keep in mind also that these are for-profit businesses, not charities. They will take a percentage of the funds you raise. One popular crowdfunding model takes a percentage if you raise your target amount and a larger percentage if you fail to achieve your fundraising goal. I suppose that’s intended to be an incentive for you to work hard to promote your offer.

There is also some uncertainty about how these sites screen for accredited investors and avoid the laws against general solicitation. I’m certainly not well-versed in these matters but I’ve been keeping up with recent new regulations issued by the SEC on a blog written by a Seattle attorney, William Carleton. Read it here: Counselor @ Law.

There is also an older, more established online funding presence at AngelList.

Takeaways: Crowdfunding is a relatively new funding option for medical device startup CEOs and CFOs to consider. Add this option to your fundraising toolbox. Keep in mind that these investors may be less financially sophisticated and less experienced than the typical angel investors you are accustomed to dealing with. Some of these investors may be making decisions based on emotion. I strongly recommend consulting an attorney before signing up with any of these services and at least getting a thorough review of the service’s terms and conditions.

Read more: Inventor launches crowdfunding hub for medical devices – FierceMedicalDevices.

How Doctors Think About New Technologies | The Health Care Blog

Valuable insights into the mind of a physician – written by Leslie Kernisan, MD, a physician! Let’s face it, most of the time when we’re talking with doctors, we’re trying to get feedback about our product or idea or we’re trying to sell our product or idea. That doesn’t leave a lot of time to ask about how doctors think about new technologies or what their decision-making processes/criteria are for new technologies.

Here are a couple of observations from the blog post:

  • Vague, disorganized, or poorly designed websites drive visitors away, especially busy physicians.
  • Doctors prefer to consume information offline as mentioned in this blog post.
  • Don’t expect a busy clinician to call or email for more information. The information you provide must be sufficient the first time around.

And here are her questions about the new technology:

  • Does it solve a clinical problem she is experiencing?
  • What evidence exists that the technology will solve a problem, improve outcomes, or improve patient health?
  • How does it compare to the gold standard in terms of method, outcomes, complications, etc.?
  • How exactly does it work – be general and specific here. The physician may want to know how your technology works but they must know how it works in the context of the other devices and systems they use daily.
  • How easy is it to use? What’s the learning curve? Can you show a video of the device in use? Can you provide sample screens of a software application including drop-down menus?
  • How easy would it be to try the technology? Does it require significant financial investment, integration, or time investment, i.e., training, learning curve cases. Who bears the risk if the trial is unsuccessful?
  • Is it cost-effective? Show some financial examples and compare with popular alternatives.
  • What are the benefits to the patient and to the physician? Don’t just focus on features.
  • Who is the “ideal” patient for your technology? What about fit for the patients at the extremes of complexity, both simple and hopelessly complicated? Will it work for them?

And here are some suggestions from the doctor about how to optimize your company/product website to make it easier to use and navigate and also to get the information to the user:

  • Create a page or section for clinicians. Don’t exclude the general public but use proper medical, scientific, and technical terminology and keep the marketing-speak to a minimum.
  • Consider having more than one “how it works” section. Some people like a general explanation while others prefer detail. Also, provide the information in multiple formats. Some prefer print, others pictures and diagrams, and others like to watch video.
  • Offer downloadable brochures in PDF format, again in different levels of complexity.
  • Provide evidence of efficacy. This is especially important for physicians considering the trial of a new technology. If it’s insufficient, they will let you know. If it’s inaccessible, however, you may never know why they refused your offer.
  • Be sure to compare your product against the gold standard or traditional clinical practice along whatever dimensions are important to users. Either think like the user or ask them what data they would like to see in order to make a decision.
  • Offer a free trial or some equivalent risk mitigation. Do not expect the doctor to bear all of the risk in evaluating your product. They won’t.
  • Identify your benefits and advantages vs. the competition. Don’t exaggerate – your product does not need to be better in every category to be considered for a trial.

Takeaways: If you are a startup CEO or medical device product manager, make sure the information you are providing is tailored to your target customer. Keep in mind that evaluation is part of the sales process. Your goal is to get to the next stage in the process, evaluation/trial. You do not need to win the sale at this point. Prematurely trying to close a sale often kills it. Finally, think in terms of the big picture when providing information for evaluation. Put yourself in the place of the doctor and/or patient and ask yourself what information you need to make a decision. Consider the other systems and processes that your device or technology must integrate with. And above all, be fair about allocating the risk when asking doctors for evaluations and trials.

Read more: How Doctors Think About New Technologies | The Health Care Blog.

Henry Ford, Innovation, and That “Faster Horse” Quote | Harvard Business Review

OK, so Henry Ford never actually said, “If I had asked people what they wanted, they would have said faster horses.” But he might have thought it, and he definitely managed that way.

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“Henry Ford’s genius lay not in inventing the assembly line, interchangeable parts, or the automobile (he didn’t invent any of them). Instead, his initial advantage came from his creation of a virtuous circle that underpinned his vision for the first durable mass-market automobile. He adapted the moving assembly line process for the manufacture of automobiles, which allowed him to manufacture, market and sell the Model T at a significantly lower price than his competition, enabling the creation of a new and rapidly growing market.

But in doing so, Henry Ford froze the design of the Model T. Freezing the design of the Model T catalyzed the speed of this virtuous circle, allowing him to better refine the moving assembly line process, which in turn allowed him to cut costs further, lower prices even further, and drive the growth of Ford Motor Company from 10,000 cars manufactured in 1908 to 472,350 cars in 1915 to 933,720 cars in 1920.”

Unfortunately for Ford, his company was out-disrupted by Alfred P. Sloan and General Motors, which introduced a dizzying array of innovations in the ensuing years, dooming Ford to decades of second place in the race for automotive market share.

I worked for a time in marketing at General Motors. We experienced the same frustration in focus groups. People are great at asking for incremental innovations and improvements, particularly if they are experiencing a problem and if they are asked, “what do you want?” But ask them what they want in personal transportation in ten years and you either get blank stares or Jetsons flying car suggestions.

It’s the same in medicine. Performing market research with actual healthcare professionals is necessary but not sufficient. They are immersed in the day-to-day drama of healing patients and dealing with monstrous bureaucracies. It doesn’t leave much time or energy for dreaming. You can find lots of small problems to solve by spending time with healthcare workers and asking lots of questions but you need a visionary founder or a visionary physician to imagine big innovations.

Medical device entrepreneurs have to walk a fine line. On one hand, they need to establish a solution for an unmet need and show that they can grow their market in a credible way. Unfortunately, that’s a bit too conservative an approach to satisfy most investors and stakeholders. On the other hand, they can “swing for the fences” and try to commercialize a disruptive idea. That strategy usually leads to feedback that they are taking too big a risk. Either way, funding is difficult and it may be tough to recruit employees and board members.

Sometimes it’s a matter of credibility. If this is your first startup or if you have a string of less-than-successful startups, maybe you can start by playing “small ball” – to use a baseball term. Get a few wins and show the world that you can plan and execute, then bring out your Big Idea. Of course, if you have a track record of success, you can probably successfully pitch investors and attract early employees without much difficulty.

For startup CEOs, it’s a good time to reflect on why you started the company. Was it to change the world or just to make a few bucks? Perhaps your strategy should reflect your passion.

Takeaways: Do perform market research, early and often as you work to establish your startup and idea. Don’t expect perfect market validation for your disruptive idea. Consider an incremental approach if you aren’t getting traction with customers, investors, or stakeholders. Establish relationships with the visionaries in your market segment.

Read more: Henry Ford, Innovation, and That “Faster Horse” Quote – Patrick Vlaskovits – Harvard Business Review.

You Can Now Find Out What Your Doctor Is Writing Down In That File | Fast Company

This is a follow-up in a way to yesterday’s post about interoperability in healthcare IT applications. It turns out that a team of researchers has developed and deployed software called Open Notes that allows patients to see their medical records and review their doctors’ visit notes. In a trial completed in 2012 of 14,000 patients at several leading medical centers, including Harborview in Seattle, study organizers reported that the results exceeded expectations:

Patients with OpenNotes reported better care, while doctors experienced little additional work. Of the patients with access to OpenNotes, almost all opened their records, more than 60% reported they took medications more regularly and 77% said they felt more in control of their care. By the end, every single doctor opted to continue with the program, along with 99% of the patients in the program.

This is the kind of innovation that costs almost nothing to implement and has the potential to have large positive effects on healthcare costs and patient health. Last month, the organization reported that the U.S. Veterans Administration (VA) joined as a full partner and is offering OpenNotes to its >1 million patients.

My knowledge of the VA is that they are heavily data and outcomes-oriented. I’m sure they will be doing analysis to determine the actual effect on costs and patient benefits. As they are a closed system and highly computerized, they have the ability to conduct relatively fast studies with high statistical significance.

The Open Notes projects is run by Tom Delbanco, MD and Jan Walker, RN, MBA. Both are on the faculty at Harvard Medical School and Beth Israel Deaconess Medical Center. They have been working on Open Notes since 2008 and have received funding from the Robert Wood Johnson Foundation, among others.

Now we need someone to take on the problem of corporate data silos in healthcare IT.

Takeaways: Even small ideas can have large effects. A side benefit is that small ideas are easier to explain. If you are having trouble finding angel or VC investors for your startup, consider “venture philanthropy.” There are many foundations that might consider a grant if it even tangentially helps achieve one of their goals. Not sure if you have a valid business model? This team charged ahead with grant funding and now has powerful evidence that they might have a solution to a very big healthcare problem.

Read more: You Can Now Find Out What Your Doctor Is Writing Down In That File | Co.Exist: World changing ideas and innovation.

Healthcare’s interoperability problem isn’t about technology | MedCity News

So the crux of this problem is that hospitals/institutions/clinicians think they “own” patient data. If we in America ever want to achieve the significant potential savings that could be realized through application of various forms of information technology to the healthcare system, the mindset will have to change. The patient owns his/her patient data.

Big Data, the catchphrase to indicate that every click on the Internet is captured, aggregated, and analyzed, is already in wide use by all sorts of consumer companies, large and small. It works – to reduce costs, to fine tune marketing messages, and to enable highly specific targeting of a company’s best prospects. It works because – except for “walled gardens” like Facebook – the data generated by Internet users is freely available for anyone to use.

There is no reason to think that Big Data won’t work equally well in healthcare. The problem is that healthcare data resides in an enormous number of well-insulated silos. Very few of the silos share anything, even sometimes within an institution.

Consider a patient with several doctors – a primary care physician, a cardiologist, and an endocrinologist. It’s very possible that the three doctors cannot access their patient’s records from their colleagues without special requests and permissions. Sure, they may get test results and written summaries of procedures but the minutiae where much actionable data is hidden is kept locked up in proprietary systems.

Consider a healthcare IT startup that needs (anonymized) patient data to validate its offering and to demonstrate its claimed benefits. It must cut deals with a number of providers to access the data. This takes time and costs money, two things not in abundance at most startups. And yet investors and customers demand proof of beneficial economic outcomes before investing or buying. A classic catch-22 situation.

Yet another example is a medical software startup (now defunct) where I once worked. They developed a terrific 3D image viewer that could run on low-end PCs, tablets, and laptops. At the time, 3D image viewing and manipulation was limited to high end workstations costing tens of thousands of dollars. The company had to negotiate deals with every hospital’s PACS administrator and vendor (there were many) and then write specific software to access the PACS servers. This was not a sustainable business model and the company went broke.

The CEO of HIMSS (Healthcare Information and Management Systems Society) acknowledges the problem. He doesn’t have a ready solution, however but he admits that part of the problem is the way our system reimburses providers for tests and procedures and not for health improvements. He does hint that Medicare will be changing its reimbursement structure over time and that private insurers are sure to follow.

Takeaways: The two buzzwords in this segment are interoperability and portability. It seems to me that an industry standard could be written enabling two-way access to any appropriately anonymized data. In addition, electronic medical records need standards so that users wanting to switch to a different vendor are not held hostage by high switching costs caused by the need to remap data fields, etc. In the modern day Gold Rush of companies looking to make fortunes in healthcare IT, perhaps there is another Levi’s looking to profit by selling shovels and overalls to the miners.

Read more: Healthcare’s interoperability problem isn’t about technology: A Q&A with HIMSS CEO | MedCity News.

Verizon gets its first FDA clearance for remote monitoring tool for chronic conditions | MedCity News

It’s big news when one of the world’s largest telecommunications companies obtains a 510(k) marketing clearance for a mobile health application. Verizon is developing a cloud-based Converged Health Management software application. The device collects data from in-home monitoring devices such as blood pressure monitors, pulse oximeters, etc. and is perhaps planned to feed into a patient’s electronic medical record. The application seems to be primarily intended for clinicians to access and monitor patient data but patients can view their own data as well.

Verizon partnered with a small Canadian company, IDEAL Life, which will provide the remote devices. Apparently, Verizon will provide the wireless network, application(s), and cloud storage.

Other telecom companies have pursued this mobile health market, which is projected to be worth close to $300 million by 2019. AT&T, Qualcomm, and Sprint have invested in the space. AT&T is partnered with Intuitive Health for their market entry.

All of these companies see the low-hanging fruit: managing chronic medical conditions can reduce costs and improve health while providing a hefty return on investment to any company that can establish a significant market presence. The strategic benefits to the telecommunications companies include locking customers to their networks and garnering high margin data traffic just as the consumer mobile telecom market is starting to commoditize.

Takeaways: Partnering with a gigantic multinational can be terrifying but if you can tolerate the risk, leveraging their massive assets can scale up your technology or solution quickly and with minimal investment on your part. Perhaps you can even avoid angel or venture investment. If you are a startup CEO or product manager developing mobile health technology, make sure you contact every obvious and non-obvious (Intel, Qualcomm) target partner. The telecom companies need medical device expertise and technology. They have the infrastructure and cash to build an end-to-end solution.

Read more: Verizon gets its first FDA clearance for remote monitoring tool for chronic conditions | MedCity News.

The Healthcare IT Applications of Google Glass | MedCity News

Once everyone gets over the hyped privacy invasion and “OMG, you look like Geordi La Forge from Star Trek!” reactions, I’m expecting Google Glass to be incredibly useful in vertical markets like healthcare and applications like accessing real-time patient data and information.

Image of Geordi La Forge from Wikipedia http://upload.wikimedia.org/wikipedia/en/thumb/0/04/GeordiLaForge.jpg/250px-GeordiLaForge.jpg

The author of this article, Dr. John D. Halamka, is Chief Information Officer of Beth Israel Deaconess Medical Center, Chairman of the New England Healthcare Exchange Network (NEHEN), Co-Chair of the HIT Standards Committee, a full Professor at Harvard Medical School, and a practicing Emergency Physician.

His ideas for Google Glass:

  1.  Nurses can use it to assure they are dispensing the right dose of the correct medication to patients. I’ve seen some clunky bar code products that are in active use. This would be a big improvement.
  2. Doctors can use it to document every patient encounter using real time audio and video. The patient could be sent a link to the recording to help reinforce the interaction!
  3. Emergency physicians could access a Patient Dashboard with real-time vital statistics, personal information from an EMR, and lab and imaging test results. The doctor need never look away from the patient. Dr. Halamka reports he is planning to pilot such an application at his hospital soon.
  4. Visual display of a decision support algorithm for nurses, physicians, and emergency workers. No need to rely on your faulty memory when you can ask Google what’s next.
  5. Display of alerts and reminders during the work day. OK, this is one we all do already with our smart phones but imagine a busy clinician who doesn’t have time or can’t break sterility to check his/her phone. All possible with Google Glass and voice commands.

Takeaways: There are plenty of problems remaining to be solved in healthcare. Many of them could be the nexus of a new startup. Often the clinicians just tolerate the problems because they don’t know what to do about them. Developing relationships with tech-savvy and tech-friendly clinicians has the potential to identify the problems and perhaps initiate a rewarding collaboration. Additionally, you can leverage the massive investment that Google (and soon, others) are making in this technology by developing vertical applications while they are still focused on consumer apps.

Read more:The Healthcare IT Applications of Google Glass | MedCity News.

Wireless Power For Medical Devices | MDDI Medical Device and Diagnostic Industry News

A breakthrough in wireless power delivery invented by physicists at MIT and being commercialized by their startup, Witricity, has the potential to dramatically change the medical device and healthcare industries.

The new technology, called highly resonant wireless power transfer, is more powerful and more efficient than current methods of wireless power delivery such as inductive coupling, used in devices like electric toothbrushes. The new technology can operate over “tens of centimeters” compared to a millimeter or two for the old and fussy inductive technology.

What does this mean? Think of electrically powered devices like ventricular assist devices, pacemakers, defibrillators, cochlear, and ophthalmic implants powered externally without wires or battery powered with easy and convenient recharging through the air. No need for skin contact or transdermal leads with high risk of infection (not to mention irritating to the patient and just not nice to look at).

As the article points out, implantable devices could be designed to be hermetically sealed with smooth surfaces, eliminating the potential for leaks in both directions. Cochlear implants could be powered via a wireless charger built into an eyeglass frame. And the ultimate modality for augmented reality (as well as dynamic vision correction), smart contact lenses or intraocular lenses, could be powered in the same manner. Take that, Google Glass!

The article goes on to identify other beneficial uses of wireless power delivery in the healthcare environment. Power surgical tools could lose their electrical cord as could carts of medical equipment, reducing clutter, trip hazard, and infection risk.

I’m sure the same technology will ultimately make its way to consumer products. I’m envisioning an airport lounge where a gaggle of road warriors is clustered around a wireless charging station instead of fighting for a scarce electrical outlet. There are no doubt lots of other applications in vertical markets. The company is savvy to start with medical devices where margins are large, patient demand could drive adoption, and the benefits are quantifiable.

Witricity is already working with Thoratec, makers of an implantable ventricular assist device. While the technology itself may not be disruptive, adding it as a feature to existing product categories is a game changer. Wireless power delivery has the potential to energize (no pun intended) patients and physicians to demand the feature in their products.

Takeaways: Medical device product managers and design engineers as well as startup CEOs should be constantly on the lookout for feature-level innovations that can be added to their products. It’s even better if an exclusive can be negotiated for some period of time. Of course the risk to cost, schedule, and reliability must always be considered but in a crowded market segment where differentiation is tough to come by, a feature like wireless power delivery can provide real competitive advantage.

Read more: Wireless Power For Medical Devices | MDDI Medical Device and Diagnostic Industry News Products and Suppliers.

The 4 types of buyers for your medical device (and you need a “yes” from all of them) | Medical Device Commercialization 101

Marketing and selling medical devices is complicated. They are highly regulated, competition is intense, and the stakes are high. There are a number of stakeholders and constituents who must say yes – or at least not say no – before you can sell your device.

If you are a startup CEO, medical device sales representative, product manager, or marketing manager, use this general list and description as a place to start to develop a plan. As you get more granular, i.e., at the hospital level, the buyer types and the purchasing process will become very specific. You need a plan to address the needs and overcome the objections of every one of the buyer types and often, more than one buyer in a given category. What I’ve learned in marketing medical devices is that only a few people can say yes to a medical device purchase but many can say no.

I’ve identified four categories of buyers. There are often multiple buyers within each category.

  1. User buyer
  2. Economic buyer
  3. Technical buyer
  4. Paying buyer

Let’s examine each category in more detail:

The user buyer is typically the physician or surgeon. A user buyer can also be a physician’s assistant, nurse, surgical technician or other healthcare professional – literally, anyone who might touch the product. The caveat here is to make sure you address all of the user buyers and satisfy their needs or at least neutralize their objections. I have seen large sales get derailed because a circulating nurse in the O.R. did not like a product’s packaging and was influential enough to use her veto power.

Physician user buyers may have less power than you think to influence a purchase. While they usually have some clout to request specific items for their likes/dislikes, economics and standardization are often invoked to deny requests from less influential doctors. And doctors, just like the rest of us, like to keep some influence in reserve for a time when they might really need it. Just another way of separating “must have” from “nice to have.”

The real challenge is in trying to convert an entire department or practice to a new product. Not only do you have to “sell” all of the user buyers but you have to convince a key decision-maker like a department head to use his/her authority to finalize the decision. This is an area where your marketing staff needs to craft highly specific comparison materials detailing the beneficial features, benefits, and advantages of your product/service. Your sales representative will need to use his/her relationships with all of these people and invest considerable time within the facility to keep the sale/conversion going.

You also need to carefully consider all user requirements before finalizing your product’s features and functions. The old cliche is that you sell the benefits, not the features, but this is an exception. If you omit or include the wrong feature, someone you will never meet may kill your product’s deployment at one or more sites. Market research is extremely important at this phase – well before product design commences.

The key is to identify a need among the user buyers, then establish a value for your product by emphasizing and quantifying your product’s unique benefits, and thus justify a premium price. Easier said than done.

The economic buyer can be a purchasing agent or executive, a department head with budgetary authority such as the O.R. Director (often a nurse) or head of the Emergency Department or ICU, an accountant or even the hospital’s CFO or CEO.

For capital items and capital leases and for purchases that affect a number of people, e.g., physicians, nurses, techs, a purchasing committee (may have a number of different names) often makes purchase decisions. It will be important to know who is on the committee and how to access the committee in order to supply information. At a tactical level, the sales representative or account manager for a given hospital or other site must map out the economic buyers. This requires real diplomacy and smooth interactions, as often the information is not given freely.

The trick with economic buyers is to spend as little time and effort with them as possible. The investment should be in creating demand from the user buyers and in giving the user buyers a business case to justify the purchase. You must avoid inadvertently having your product categorized as a commodity. In that case, your product will be viewed as interchangeable with other products and the (premature) negotiations over pricing will begin.

The technical buyer can be someone in the Biomedical Engineering Department if the facility is large enough to have that resource or it could be another technical person in a completely different area who performs biomedical engineering functions in his/her spare time. In rare cases, the technical buyer could be a healthcare professional such as a physician.

In any event, get your compliance engineer in touch with this person ASAP to determine if there are unusual or extraordinary requirements. Also make sure the biomedical engineer understands all of the features and functions of your device, including IEC 60601, UL, etc. If you have a software product or a physical product with software functions, you may need to get the blessing of the CIO, CTO, or other technology executive or one of their reports. Obviously, HIPAA compliance is a hot topic with everyone so it will be helpful to demonstrate compliance in advance.

The paying buyer is usually an insurance company or Medicare. For procedures that aren’t reimbursed such as elective plastic surgery, the paying buyer can be the patient or it can be the physician for minor products that are consumed or implanted as part of a procedure.

Making sure your device has the proper reimbursement codes is beyond the scope of this article but I strongly recommend engaging a reimbursement consultant and following their recommendations before completing your plan and long before planning your market launch. That step is critical for maximizing your revenue and proving to investors that you have a sound business model and know how you are going to make money.

Whether conducting primary market research to plan a launch and understand the purchasing process for your device or moving through the sales process at a target healthcare facility, always ask two questions to whomever you are selling: First, can you make the decision to purchase this product/service on your own? If the answer is no, ask who does have that authority and then target that person. If the answer is yes, then ask if the person has a budget with which to purchase the product/service. If the answer is no, they are no longer a serious prospect.

Takeaways: Use market research, competitive analysis, and field representative input to develop a plan to address all four of the medical device buyer types: user buyers, economic buyers, technical buyers, and payer buyers. Keep in mind that anyone could have veto power over your sale. Avoid commoditization of your product by emphasizing benefits over features and by relating benefits to value.

Four Signs That a Medtech Firm Needs To Reinvent Itself | MDDI Medical Device and Diagnostic Industry

As the cliche goes, hindsight is 20-20. I wish I had known these signs of internal rot at the start of my career but I’ve earned my scars from learning the very hard lessons about innovation, complacency, etc. along the way. And I’ve seen a surprising number of companies fail that were market leaders and darlings of Wall Street at one time.

The four signs as enumerated by Arundhati Parmar, Senior Editor at Medical Device and Diagnostics Industry, are:

  1. Lack of Product Differentiation
  2. Profit Model Under Pressure
  3. Market Disruptors On the Horizon
  4. Internal Infrastructure Deteriorating 

Let’s tackle these one at a time.

The medical device industry is all about innovation. Just as sharks must move to stay alive, so must medical device companies innovate to assure their survival. No one has claimed, as one former head of the U.S. Patent Office famously did in the 1800s, that there is nothing left to invent.

Medical technology is still rapidly evolving and having major positive effects on patient health. I have seen a radical shift, however, away from internal innovation in large companies during my medical device career. Nowadays it’s common for the large device companies to invest in and then acquire innovative startup medical device companies. For startups, it’s the only exit strategy that has worked since the IPO boom of the late 1990s. If you are in a major medical device company that has stopped innovating, ask yourself why you are still there when the real action is in the small companies and startups.

Declining margins are a fairly accurate indicator of a sick business. To maintain market share with noncompetitive products, the company resorts to massive discounting, creative financing, and sometimes illegal behavior such as loading the distribution channel with unsold product in order to meet quarterly goals. Often there are write-downs and write-offs of obsolete or unsaleable inventory. These tricks are usually hidden in the quarterly and annual financial reports that all publicly traded companies must file, but sometimes it almost takes a forensic accountant to sniff out the dirty laundry being hidden.

Disruptive innovations are by definition “hiding in plain sight.” Insiders at market leading device companies consider these insolent startups as jokes until it’s too late and the joke’s on them. Consider the classic example of the rapid shift to laparoscopic cholecystecomy in the early 1990s. Many of the traditional instrument companies stayed on the sidelines while first U.S. Surgical and later Ethicon Endosurgery made hundreds of millions of dollars with procedure-specific disposable instruments. In the present day, I marvel that Medtronic paid $800 million for Ardian prior to FDA approval but concede that the market for procedure-based treatment of hypertension is massive. But look out for Kona Medical, which may be about to disrupt the disrupter with a noninvasive ultrasound treatment vs. Ardian’s radio frequency catheter-based procedure. And who will acquire Kona???

Insiders can sense when the internal infrastructure of a company needs revitalization. Key people start to leave, there is more focus on cost–cutting and top-down management fad programs, and big-name management consultants show up to gather data and have lots of meetings with top executives. There is often a curious reluctance by management to make decisions to pursue new market opportunities, as if they are afraid to take risks. The absolute worst sign is when the company engages an investment bank to study “strategic options”. If you see these signs developing, have your resume and LinkedIn profile up to date and be on good terms with the management recruiters for your market segment because change is coming soon.

Takeaways: The warning signs of the impending decline of a medical device company are easily discerned by company insiders, often long before Wall Street analysts have a clue about what’s going wrong. If you are a large device company employee, keep your wits about you, don’t be lulled into complacency and be ready to jump ship before disaster strikes. If you are a startup CEO, make sure you understand the risk in being acquired for shares of large company stock. To use one last cliche, “cash is king.”

Read more: Four Signs That a Medtech Firm Needs To Reinvent Itself (slideshow) | MDDI Medical Device and Diagnostic Industry News Products and Suppliers.

Hello Doctor App Helps Patients Navigate Complex Medical Conditions | Forbes

The Hello Doctor app is very specifically targeted at patients with complex medical conditions (diabetes, cancer, heart disease, etc.) who must collect and manage their own medical records because they see multiple doctors. More often than not, the doctors either have their own EMR systems or are affiliated with different healthcare systems with EMR systems that don’t share easily.

I like that the company has narrowly defined its target market. That is where Google Health failed and Microsoft Health Vault has stumbled for several years – general purpose consumer-oriented personal records are too general.

The company has started with an iPad app but are promising Android and “other” versions soon. This is smart because of Apple’s emphasis on simplicity and limited options in user interfaces – helpful for the typically older patients with these types of conditions.

One great feature is that the app allows the patient to capture paper records with the iPad camera. The app then asks the patient for information so it can be properly categorized. This has the potential for major improvement by use of optical character recognition so that the hard copy data can be extracted and recorded.

One potential issue is that the app stores all of the patient data locally, on the iPad. If the device is lost, stolen, or broken, it appears that the patient’s medical records are gone as well. I realize that there are HIPAA compliance issues, but an automatic cloud-based backup would provide security and peace of mind.

The company claims not to be subject to HIPAA regulations although they say that they may be subject in the future as they add features. They don’t appear to fall under FDA regulations either. The app is at its basic level, a database for holding personal medical records.

It’s not clear to me how the company plans to make money. The app is free but it’s still in beta. Not sure if they plan to charge once it’s commercially released or if they plan to sell in-app ads. I hope they’re not going to try to charge physicians to access their system – that model has been tried and failed! They also imply that they plan to aggregate anonymous patient data in order to supply information about clinical trials and also to give users “tools to cope with their condition.” Pharmaceutical ads, perhaps?

Takeaways: As the old saying goes, “find a niche and fill it.” The problem Hello Doctor is addressing is an inconvenience more than a major issue in the vast world of healthcare. Keep in mind, however, that once patients have invested time and effort in collecting their medical records, they are unlikely to go away and are very likely to recommend the service to their friends and relatives. Stickiness is a good quality. Also, getting a beta product out into the market quickly and inexpensively allows you to conduct “live” market research and to tweak the product as necessary. You will also have great adoption data to impress prospective investors.

Read more: http://www.forbes.com/sites/johnnosta/2013/06/09/hello-doctor-helps-patients-navigate-complex-medical-conditions/

Never mind wearable technology, how about do-it-yourself implantables?

It’s a big, diverse, weird world out there when it comes to people experimenting on their own bodies. There are subcultures devoted to whole body tattoos and others seemingly dedicated to placing a fantastic array of metal pieces in or through just about every appendage imaginable (and probably a few that I haven’t imagined).

It looks like the latest development is to implant functional “things” inside the body. There’s even a name for it: recreational cybernetics. The article highlights a man who implanted a magnet into a finger. He stated that it gives him a new sense, for example, being able to detect his mobile phone ringing. I bet it’s also handy for picking up small screws and nails when doing home maintenance.

“Grinders, as they call themselves, represent a unique niche of the do-it-yourself (DIY) culture. These are people who experiment on their own bodies, creating their own implants—often for recreation, but also with a true spirit of academic experimentation. The message is clear: Implants are the future, and some people aren’t waiting around for FDA or the medical device industry.”

A few years ago, there was a trend where people had RFID tags embedded under their skin. The tag could be used to “open” an electronic lock using proximity. There were the predictable howls from conspiracy theorists and fundamentalists and the fad seemed to die out. And who can forget the “cyborgs” at various universities who pioneered wearable computers? One cyborg had metal bolts implanted into his skull so he could mount his head-worn display most securely.

I guess the advantages to self-modification are no need for biocompatibility testing, informed consent, IRB approval, HIPAA compliance, regulatory compliance, etc. And who knows? Perhaps there is a new medical device company waiting to be born out of these early experiments.

Read more: On the Grind: The World of Do-It-Yourself Implants | MDDI Medical Device and Diagnostic Industry News Products and Suppliers.

On a related note, there’s a developing niche in assistive devices for the disabled. Looks like The Six Million Dollar Man isn’t just a character in a cheesy ’70s TV action show anymore.

“Bionic prostheses, which use electronics to restore biological functions that have been lost or compromised, are among the most exciting medical devices. Thanks to bionics, babies born deaf can hear, people who have lost their sight can see, people living with paralysis can walk, lower-limb amputees can run, and upper-limb amputees can type on a keyboard. Bionic medical devices make occurrences once considered miracles happen every day.”

While not truly bionic (not electrically powered), Seattle’s own Cadence Biomedical and its Kickstart Walking System is an example of innovative technology benefiting patients who may have been dreading being confined to a wheelchair.

The article makes the point that it’s tough to succeed as a business in this segment. Patient populations are relatively small. VC investment is difficult to obtain (not that it’s easy anywhere these days…). Finally, obtaining reasonable reimbursement can be challenging and a long-term process.

One company found a way around the challenges through market diversification. They are marketing their bionic walking suit for lower limb paraplegics to the military as an exoskeleton to give infantry soldiers extra-human abilities. Another example of science fiction blurring into reality!

Takeaways: Pay attention to early trends where technology is used in innovative, perhaps unsettling ways. It could be the start of a new industry! Also, don’t be reluctant to find alternative uses, markets, or niches for your technology. The Prime Directive is for your startup to survive long enough to become a going concern.

Read more:Bionic Medical Devices: What’s Holding Them Back? | MDDI Medical Device and Diagnostic Industry News Products and Suppliers.

Sales reps not included: On e-commerce site, device firms discount routinely used implants | MedCity News

This story is another good example of how the Internet helps create a new business model and saves money. I call it the selective democratization of information along with decoupling products and services.

The basic premise is that commodity products, e.g., screws, anchors, etc. should not require much, if any, sales/technical support. And sales support can be very costly in medical devices. Think of a rep making mid-six figures and spending a half day in a hospital surgery suite.

For those customers that do want that support and are willing to pay for it, the device company charges list price. For everyone else, MedPassage provides a virtual market for a cut of the action. The device companies can also control which customers have access to the MedPassage marketplace. Device companies cannot see each others’ prices or transactions.

Everyone wins. The device companies sell more products, the hospitals save money, and MedPassage sells an innovative, profitable service.

Takeaway: If you are on the commercial side of a medical device business, don’t accept the status quo when it comes to distribution and sales. You can differentiate your offering with value-added or value-subtracted services.

Read more: Sales reps not included: On e-commerce site, device firms discount routinely used implants | MedCity News.

Large Device Firms Working More With Startups Than Before But Want Some Rights In Exchange | MDDI Medical Device and Diagnostic Industry News

This can be welcome news for medical device startups. We frequently read and hear and get advice about the importance of partnering. Given the difficulty in creating an IPO and becoming a publicly traded company for most medical device startups, the other option for an exit strategy has been acquisition by one of the large multinational device companies, e.g., Johnson & Johnson, Medtronic, Covidien, Abbott, et al.

“Some rights” essentially translates to being able to buy the startup at a future date once they invest in it.

“Corporates increasingly want some rights,” Nielsen said. “Historically the data shows that the ultimate buyer of a company may not be who the strategic investor had been.”

While in my experience it’s been relatively easy to create a “relationship” with a venture or business development exec or group in a large device company, it’s much tougher to get any sort of financial commitment. After all, they want to keep up with new developments and innovations in their markets. If they can get that for free, why not use that approach?

I’m not sure what’s changed recently. Perhaps there is more competition among the large device companies for the few good opportunities out there. Certainly there is less innovative development taking place at the large device companies, which appear to be using startups as a primary source of low risk R&D.

In any event, an option to be purchased can be a huge credibility advantage for a medical device startup in terms of attracting angel investors, clinical luminaries, and employees.

Read more: Large Device Firms Working More With Startups Than Before But Want Some Rights In Exchange | MDDI Medical Device and Diagnostic Industry News Products and Suppliers.

How Do You Design a Medical Gadget That Costs 95 Percent Less Than Before? | Wired Design | Wired.com

It’s relatively easy. Just put off compliance with regulatory requirements, adherence to a quality system, leave out nice-to-have product features, and omit the infrastructure for customer support, sales, training, etc.

I admire what this inventor is doing. He’s trying to meet an important need for an endoscope in developing countries. I don’t believe, however, that it can be considered the same product as commercially available endoscopes sold in the USA, EU, and other developed countries. In that respect, the Wired headline is misleading.

This innovation has the potential to have a large beneficial effect on public health in developing nations. It will be interesting to see if this design shift becomes “disruptive” technology and challenges the market in developed countries.

“Traditional endoscopes cost anywhere from $30,000-70,000, but by making different design choices and cutting out extraneous “nice-to-have” features, the price can be reduced dramatically. The EvoTech team found that off-the-shelf camera modules, only slightly better than the ones used in smartphones, could provide pictures crisp enough to meet clinical standards for just a couple hundred dollars. “The EvoCam is basically a webcam you put in your body.” says Zilversmit. Most endoscopes come with dedicated computers and complex image processing hardware. The EvoCam replaces all those expensive extras with software running on a standard laptop, using solar power if necessary, and soon hopes to have a version for tablet. Instead of sending a team of technicians to train doctors, EvoTech distributes training documents and video over the web.”

Read more: How Do You Design a Medical Gadget That Costs 95 Percent Less Than Before? | Wired Design | Wired.com.

How are hospitals responding to startup queries to use de-identified patient data? Cautiously | MedCity News

Access to large amounts of de-identified patient data has to be like oxygen to healthcare IT startups. They need the data to show that their software and algorithms function correctly and (a recurring theme) that they can credibly save money for their customers. This is critically important in attracting investors and scaling up to more customers.

Unfortunately for startups, the CEOs, CFOs, and CIOs of large hospitals and healthcare systems know exactly how valuable this patient data is. While they may have granted easy access to it once upon a time, those days are largely in the past. You will have to earn their trust and pay in some form to get access today and in the future.

If I were the CEO of one of these companies, I would do everything possible to get access to this data. Here are a few things that one should try in order to get to the precious data:

Partner with the hospital/healthcare system that owns the data. Easier said than done for a startup. Yes, you will need to make some sort of gain-sharing agreement. You will also need to indemnify the partner against legal and financial penalties resulting from your improper use of the data, e.g., HIPAA violations and any willful or inadvertent patent infringement. Essentially, you will need to guarantee the hospital that your startup will assume all of the downside (risk) and cut them in on the upside.

Partner with one of the hospital’s primary IT providers. They have far more influence and access to key decision-makers in the hospital. There is a veritable alphabet soup of systems out there, from EMR to HIS to RIS to PACS and beyond. None work perfectly and who knows? You may find the perfect corporate partner along the way.

Partner with a prominent and/or influential physician on the staff and preferably on the management team of the hospital. This could take the form of a consulting agreement, part-time employment, or membership on your medical advisory board. All of those should include a generous helping of stock options if permitted by the physician’s primary employer.

Offer to conduct an onsite beta trial with the data and aggressively identify all patient and economic benefits. Also offer substantial discounts for sale, installation, and support of your software.

If you live in a state or congressional district with a Democratic representative or senator, contact their offices and ask to speak to the aide responsible for healthcare liaison.  They are motivated to help anyone who has the slightest promise of showing that Big Data can help patients and save money, all key components in the promise of the Affordable Care Act (aka “Obamacare”). Their help and influence will be mostly indirect, however, and the most you could hope for is a phone call from the elected official to an executive at the hospital.

Conduct a PR campaign highlighting your company’s efforts to save money and improve patients’ lives. This works best if there are competing hospitals or healthcare systems in your area so you can play one entity against the other.

If nothing else works, expand your geographic scope and consider other metropolitan areas.

Read more: How are hospitals responding to startup queries to use de-identified patient data? Cautiously | MedCity News.

Here’s where the angel money is flowing in the U.S. | GeekWire

OK, fellow Seattle-area entrepreneurs, this is what we’ve been suspecting all along: it’s getting  tougher to raise angel money here.

According to an article just published by the Angel Resource Institute, angel group investing dropped in the six-state Northwest region, from an 8.3 percent share of the national total in 2012 to 6.4 percent during Q1 2013. Interestingly, the Seattle-based Alliance of Angels was named as one of the top six angel groups in the country in terms of number of deals. Unfortunately, the AoA does not typically invest in medical device companies although they recently made one notable exception with an investment in Mobisante, the smartphone-based ultrasound startup.

The Northwest’s 6.4% share of the country’s total angel investment in Q1 2013 is the lowest of the nine regions assessed in the report. Conversely, the Southwest is red hot for angel investment, rising from 11.9% to 18.1%. It even beat out perennially top-ranked California.

More useful information:

The Halo Report finds that the median premoney valuation for early-stage deals by angel groups stayed consistent at $2.5 million during the first quarter. It also found that the median amount invested was $680,000 per deal, which sets a five-quarter high and is up from $550,000 one year ago.

The hottest sectors are Internet, healthcare, and mobile technology, comprising 72% of the total deals and pulling down 64% of all angel investment dollars. Healthcare is second behind Internet in terms of share of deals and share of dollars.

81% of investments are made in angels’ home states. So much for the conventional wisdom that says to go elsewhere if you can’t find investors locally.

Not sure how to reconcile the angel stats with this recent article: The top 3 cities for startups: Austin, Seattle and Boulder – GeekWire. Of course, the reasons that startups may be attracted to a city or region may not correlate with the somewhat obscure reasons for angels to invest. Hmmm…so what exactly are those 10,000 Microsoft millionaires doing with their money?

According to a report from GoodApril, a San Francisco-based tax-planning service, the best places to start a company are Austin, Seattle and Boulder. GoodApril based its findings on median tech-employee earnings, personal income tax, property tax, the cost of housing and the cost of office space.

Read more: Here’s where the angel money is flowing in the U.S. – GeekWire.

Health IT startups, “physicians” shouldn’t be a target market. Get more specific. | MedCity News

This is good advice and good practice for all medical device companies, not just startups. Market segmentation is difficult but, properly done, leads to successful launches.

Here are a few other ways to categorize and target physicians beyond medical specialty:

Career status: Resident, senior resident/fellow, young attending, mid-career attending, late career attending, emeritus.
Decision-maker status: Department head, Chief of practice, second-in-command, member of purchasing committee or similar group, “worker bee.”
Case load: low, medium, high, unbelievable.
Geographic region: There are clear differences around the USA in medical practice as well as from country to country.
Corporate affiliations: You may or may not want to target physicians with strong ties to your competitors. And the ties can be VERY strong!
Primary type of practice: Hospital, research/academic/teaching, private practice, VA/military, standalone surgery centers. There is a lot of overlap in this category with physicians working in multiple settings so it can be a bit fuzzy.
Technology adopter status: Innovator, Early Adopter, Early Majority, Late Majority, Laggard
Influencer/Key Opinion Leader/Notoriety Status: Prolific article author, leads or participates in numerous clinical trials, frequent speaker at medical conferences, frequently interviewed and/or quoted in news and media.

You can purchase lists of physicians with some demographic data relatively inexpensively. You should then create a database and augment that data regularly with information you or your commercial team finds. Before you make final decisions about targeting, be sure to talk with actual prospects and test your model!

As for what happens after a company has decided its target specialties, Kim offers this advice: “If we could do it over again, we would have spent at least six months to one year working on site or near-site with a handful of actual customers.”

Read more: Health IT startups, “physicians” shouldn’t be a target market. Get more specific. | MedCity News.

Life Science Innovation Northwest Conference 2013 – medical device startup perspective

I attended LSINW last Wednesday and Thursday July 10-11 as a poster presenter. I’m serving as acting CEO for a University of Washington startup we’ve named SimpleCirc. The simple, safe, swift, and inexpensive adult male circumcision device is intended to address the HIV/AIDS epidemic in Africa (you can download our poster here: SimpleCirc LSINW 2013 Poster)

The LSINW poster submission and conference admission process is a bit of a bargain. Not all posters are accepted, but the ones selected are placed prominently in the main hallway of the conference. Most of the conference attendees walk through the poster exhibits several times per day. There are many opportunities for interaction. The presenters are given coaching and two full-conference admissions for $175. That compares to $350-$1500 per person for full price admission. Needless to say, we took full advantage of every opportunity.

Overall, LSINW is very professionally produced and run by WBBA, the Washington Biotechnology and Biomedical Association. Printed materials are high quality, the presentation venues have up-to-date AV equipment and adequate staffing, the various presentations and panels run like clockwork, and the food/refreshments are more than adequate in quantity and quality. The conference schedule is made available in a brochure, a digital PDF file, and in a tablet/smartphone app called Guidebook (more about that later).

There was a cocktail/networking event at the end of the first day but the organizers also scheduled an event honoring local women in life sciences AND had a rock band made up of (amateur?) musicians in the Seattle life sciences scene. There was too much going on for me. The noise level was high and it was difficult to hear in that space.

A Life Science conference necessarily has a wide variety of attendees: small, medium, and large medical device company executives, biotech execs, a few pharma people, consultants, service providers, grant-making officials, physicians, researchers, and academics, angel investors, VCs, media, etc., etc. Not every person had an interest in what we’re doing but it is always fun and interesting to look for a connection.

LSINW created several tracks for the two-day agenda: Biopharmaceutical, Medical Technology, Emerging, Health Information Technology, and Innovation. There truly was something for everyone and I often found myself torn between two compelling but simultaneous presentations.

The Opening Keynote speaker, John Crowley, CEO of Amicus Therapeutics, was unable to attend due to a family emergency but the conference organizers came up with a last-minute substitute, Charles Baltic, Managing Director of Needham & Co. He was an OK speaker but I’m sure he repurposed an existing presentation – very heavy on info about financings and IPOs.

The first day lunch keynote speaker was Steven Burrill, CEO of Burrill & Co. He updated his talk about the state and future of healthcare in the USA from last year but it was entertaining and extremely interesting. I’m impressed with his presentation abilities. He blows through ~150 slides in under an hour and apart from looking at a monitor to see what slide was being displayed, never looked at a note the entire time.

The panel discussions were good. Most of the moderators were well-prepared with stimulating questions and the panels – usually (but not always) executives with Seattle connections. Most of the discussions were non-controversial with panel members sticking to relatively “safe” positions. That is, until the last panel, “Blood from a Stone – Who is Left in Life Science Investing Today?” moderated by Luke Timmerman of Xconomy who did a fine job by staying out of the spotlight.

Sparks flew as three panelists more or less representing the Venture Capitalist side of funding sources sparred with Gregory Simon of Poliwogg, a relatively new crowdsourcing site for angel investors. For sheer entertainment value, this was the best panel of the conference. The perspective of the VCs seemed to be that “we are smarter than everyone else” and the “average investor” needs to be protected from the risk of losing their entire investment. Excuse me, but I don’t believe any VC fund offers money-back guarantees.

Gregory Simon was entertaining, if a bit of an iconoclast. He did make a number of good points and also noted that very recent changes by the SEC have enabled crowdsourcing of angel investments – details are still forthcoming but it is very exciting from my perspective. There are few opportunities in Seattle for early stage device companies to get seed or Series A funding. Once those have been exhausted, it’s off to California and overcoming the challenges of being unknown and from out of town in order to raise capital.

An added bonus was the participation of James McIntire, Washington State Treasurer, giving the perspective of a pension fund trustee, and Tracey Mumford from the Michael J. Fox Foundation representing the “venture philanthropy” segment. As an attendee remarked during the audience Q&A, democratization in venture investing is coming whether or not you want it or are prepared for it. He also served up the example of the meltdown in the investment banking industry over credit default swaps and mortgage derivatives to show that “the smartest guys in the room” are not infallible.

I’ve attended a number of LSINW conferences, starting in the days when they were held at the Bell Harbor Conference Center on Elliot Bay in Seattle. The Washington State Convention Center is the perfect place for this meeting, in my opinion – centrally located downtown, spacious, clean and accessible. No, there are not great views but that may be the only drawback.

I mentioned the Guidebook app earlier. It’s a nice compendium of the various events – and it auto-updates whenever there is a revision (like the keynote speaker change). You can even make a schedule for the entire event. BUT, you can’t upload the schedule to your Google Calendar or Outlook calendar. And you couldn’t sync the schedule in your phone to your tablet or vice-versa. Also, there was another event called Biopartnering where interested parties could arrange brief get-to-know-you meetings. Unfortunately, that function could not be integrated with the Guidebook schedule, meaning I had to juggle three different schedules over two different devices. Not for the technology-challenged!

As for my perspective as a startup CEO, I’m often left wanting…more from these events. Many of the panel discussions focus on biotech or later stage financing like VC or IPO. I would like to see a panel of startup medical device CEOs who recently completed an angel round to share their experiences, do’s and don’ts. I would also like to see a stronger presence from Angel groups like WINGS.

On the other hand, Seattle is a small town when it comes to life sciences. You can get to just about anyone with one or two requests for referral or introduction. The LSINW conference is a great way to do that in person every year. If you are a startup CEO or are thinking about a startup, I strongly recommend that you attend next year, June 19-20, 2014.

Medtech inventor claims Ethicon lawyer tricked him into divulging trade secrets | MassDevice

This is an excellent cautionary tale for anyone with an idea or invention who is thinking of approaching a corporation: Talk to an attorney first!!!

“In court documents Nicolo spelled out his prior disputes with Ethicon, noting that, in light of his previous experiences,” Dr. Nicolo adopted a heightened level of discretion and caution in approaching Ethicon and sharing any business proposals and technical developments with Ethicon.”

Nicolo said that he and another inventor jointly developed a proprietary surgical stapling system for intestinal reconstruction and resection, which was the subject of U.S. Patent issued in September 2000. While the patent was still pending in 1998, Nicolo met with representatives of Ethicon, including Federico Bilotti, to discuss the stapling technology, according to the complaint.

Just 7 months later Ethicon filed its own patent, naming Bilotti as its inventor, describing a surgical stapling instrument that included “hemorrhoidectomy device technology” that Nicolo claims was derived directly from his conversation with Ethicon.”

Now, who knows what really happened in this particular case? People file lawsuits all the time; it doesn’t mean that they are right and the other party is wrong.

For start-up novices or entrepreneurial inventors, it may seem like a good idea (and it may actually be a good idea) to talk with larger medical device companies. They have resources (= cash) and they need new products. However…I’ve heard similar stories from entrepreneurs, physicians, and inventors claiming that some big corporation stole their idea.

Here are some tips and other issues to consider. These are from my experience and perspective as an entrepreneur and medical device professional. As the saying goes, I am not a lawyer:

  1. If you must approach a big company, try to get them to sign an NDA (non-disclosure agreement, also known as a CDA, confidential disclosure agreement). You need a one-way NDA to document what you are disclosing to the company. Many times, the company will ask for a two-way NDA to cover anything they might disclose in the course of the discussion. Of course, many times the corporation will tell you that they will not sign an NDA as a matter of policy. In that case, you need to decide if the benefit of the discussion is worth the risk of compromising your intellectual property (IP).
  2. Read the NDA form very closely before signing it. If it’s your NDA form that is being used, review it carefully with your attorney beforehand. Also review any changes requested by the corporation’s attorneys. The NDA spells out very specifically what you have to do to be covered by the NDA. Usually, that means putting all disclosures in writing within a certain time period. This is especially important for anything that is disclosed orally during a meeting.
  3. Know in advance what you are willing to disclose in the discussion and do not waver. You can always ask for another meeting! Also know what you want. If you wait for the corporation to make a proposal, you will be negotiating from a weakened position. 
  4. Keep in mind that the other company probably has done investigation or perhaps even R&D into the topic you are discussing. They will not tell you any of this information. Also keep in mind that the corporation’s representatives are only interested in itself and themselves, not you. Corporate employees may whisper sweet nothings in your ear, but keep your wits about you and maintain a high level of skepticism.
  5. If you have intellectual property, protect it. At the very least, file a provisional patent application. These are relatively inexpensive and you have one year to file a formal patent application.
  6. If you have trade secrets, do not reveal them. You can show the results or output from application of the trade secret but trade secrets are by definition unprotected intellectual property. Think of the trade secret as a handful of precious gems. Once they are out of your possession, how do you prove they belong to you?
  7. Document everything. Keep notebooks, in a secure place (or the online equivalent, with reliable backups), detailing the invention, all inventors, dates, times, circumstances. Document every interaction you have with the corporation. Note names, titles, dates and times of meetings, all attendees, take notes, and publish meeting minutes.
  8.  Do not assume anything about your interaction with the corporation. Nothing is certain unless it is in written form – and even then, can be the subject of much legal wrangling if the parties disagree about something.
  9. Sure, you always have the option to file a lawsuit if things go awry, BUT the corporation has more and better lawyers and much, much more money. Consider this option your very last resort.
  10. It is possible for a small business to license or sell technology, IP, or a product to a larger company. Most of the risk falls on the little guy, unfortunately. As Ronald Reagan once said of his dealings with the USSR, “trust but verify.” I would modify that aphorism for this subject to “engage but document.”

Read more: Medtech inventor claims Ethicon lawyer tricked him into divulging trade secrets | MassDevice.

Five VC Firms That Invest in Early-Stage Device Startups (slideshow) | MDDI Medical Device and Diagnostic Industry News

Good to know that there are VCs still active in the medical technology startup space. Their portfolios are full of impressive companies, many of which have already exited. Of course, as a startup CEO, you give up quite a bit of control when you accept VC funding – perhaps even your job.

My preference would be to bootstrap and use seed/angel funding as long as possible. If you absolutely have to have VC money, get that valuation up first!

Read more: Five VC Firms That Invest in Early-Stage Device Startups (slideshow) | MDDI Medical Device and Diagnostic Industry News Products and Suppliers.

Is This 3-D Printed Cast the Future of Healing Broken Bones? | Wired Design | Wired.com

Innovation comes to the humdrum cast. What a great concept! I’ve worn plenty of plaster and fiberglass casts. The only good part is when they are removed. This story shows that ideation can be applied just about anywhere, a valuable lesson for the budding entrepreneur in many of us.

The concept, created in a school project,  is to use 3D scanning and printing to create a custom cast that is as strong as, if not stronger than ordinary casts and is open (so you can scratch it!), lightweight, and waterproof (no more garbage bags and tape – hooray!).

I suppose it could be printed in different colors and patterns as well.

I believe this is one invention where patient demand will overcome the usual resistance to new technology.

And young Jake Evill has to continue his studies to get a PhD or MD – we need a real-life Dr. Evill!

Cortex Cast
The Cortex Cast is a 3D-printed alternative to traditional plaster and fiberglass casts. Image: Jake Evill

“The young designer began by researching the structure of the bone. He found that the trabecular, the tiny lattice-shaped structures that form the inner tissue of a bone, to be the perfect inspiration. “It was this honeycomb structure that inspired the Cortex pattern because, as usual, nature has the best answers,” he said. “This natural shape embodied the qualities of being strong whilst light just like the bone it is protecting within.””

Read more: Is This 3-D Printed Cast the Future of Healing Broken Bones? | Wired Design | Wired.com.

Scanadu Builds a $149 Personal Tricorder for Non-Trekkies | Wired Design | Wired.com

It must be incredible fun to be a biomedical engineer these days. I would be like a kid in a candy store with all of the incredible tools and components that one can use to make just about anything.

“Scanadu is making fast progress in building one of the most mythical pieces of tech known to geekery. As an entrant in the Qualcomm Tricorder XPRIZE, the health-tracking device is designed to read your temperature, blood pressure, respiration, and other vital signs, just by holding it to your temple. Last week, the Scanadu Scout finally launched on Indiegogo, and already has raised nearly $700,000–seven times its stated goal, with two weeks left to go. [update – now at $1.3 million! TES]

The XPRIZE originally used the omni-informative tool as inspiration for a $10 million prize founded to make health analysis available to consumers at home. “Somebody will have to build the Tricorder one day,” says Walter De Brouwer, Scanadu’s co-founder.”

“We are in the biggest tsunami of personalization in the world but for medicine we are still waiting in line in an emergency room.” De Brouwer

Scanadu seems to have adopted the iRobot strategy that produced the Roomba and a number of line extensions including products for military and aerospace use: Use science fiction for ideas and adapt current technology to make something useful. Not a bad plan.

Read more: Scanadu Builds a $149 Personal Tricorder for Non-Trekkies | Wired Design |Wired.com.

They must be well-financed. The video embedded in the Wired article is very slick, even a bit too promotional (in my opinion).

As for the Star Trek connection, it probably won’t be long until another company markets a phaser for home use. Maybe that Taser company that’s always getting sued?

Smartphone diagnostic creating portable eye exam | MedCity News

Yet another smartphone medical device, this time a portable eye exam for use in developing countries. Very cool. There is enormous need and potential for inexpensive, portable diagnostics in the developing world.

I’m particularly impressed with how the current generation of entrepreneurs has decided to avoid costly custom technology solutions and instead leverage the multiple billions of dollars previously invested in IT. This device connects to the web and not only does the diagnosis but it shows the patient eyeglass stores.

Read more: Vinod Khosla-backed smartphone diagnostic creating portable eye exam raises $2M | MedCity News.

How Restyling the Mundane Medical Record Could Improve Health Care | Wired Design | Wired.com

This is an interesting study in design and healthcare IT but lacks a clear roadmap for successful implementation – something that businesses require but design competitions can ignore.

“The results of a contest sponsored by the White House shows how powerful a dose of design can be in treating what ails our medical system.

Electronic medical records (EMR) are extremely useful tools and can help improve patient care and reduce costs — if designed and used properly. Unfortunately, good design is hard to come by in this market. Health IT data standards, privacy laws, and impenetrable health systems complicate an already challenging design process and usually lead to lackluster products.”

As the article refers to it, the “mundane” electronic medical record is becoming increasingly important as more test results, physician notes, imaging results, and patient records exist only in digital format. And everyone probably remembers the financial incentives that the Affordable Care Act dangled in front of physicians to persuade them to adopt EMR technology.

One of the key questions is who is the customer for an EMR? That’s complicated…but that’s who gets the attention from the EMR vendors, because they pay the bill. Sometimes it’s the physician or practice who pays for the system, sometimes it’s a healthcare system like Providence or Group Health here in Seattle, and sometimes the patient can be the (non-paying) customer. After all, the data belongs to the patient, right? But from the perspective of the entity paying for the EMR, does patient satisfaction really matter? Just like many things in healthcare (and technology for that matter), the consumer is the product, not the customer.

Some of the biggest issues preventing widespread acceptance of EMRs and more enthusiastic innovation in the market segment, in my opinion, are interoperability among disparate systems, lack of standards, data portability, and switching costs for the EMR owner. EMR vendors have not historically made it easy and simple to transfer records among competing systems while there is a confusing absence of standard fields and features from vendor to vendor. Patients switching to a competing system because of relocation or changing insurance plans or new specialists or switching primary care providers often have a difficult time accessing old records in the new system. Finally, physicians who switch to new EMRs have reported having to pay high costs to import and remap their old EMR data into a new system, a cost that has been referred to as “ransom.”

The benefits to EMRs are many, as the article suggests: easier management of chronic diseases, improved communications, better patient compliance, fewer medical errors, reduced waste because of duplicate and uncessessary tests, and lower overall costs to the healthcare system. Benefits to the advanced EMR concepts discussed in this article are potentially even more valuable. Will we see them in the near future? As a consumer and occasional patient, I sincerely hope so. As an industry observer, “the doctor will be with you shortly.”

Read more: How Restyling the Mundane Medical Record Could Improve Health Care | Wired Design | Wired.com.

I’ll be discussing more about the different types of customers involved in medical device commercialization in the next post in my ongoing series, Commercialization 101.

Google Glass in healthcare

Google Glass has created lots of buzz recently, much of it negative. People seem to be reacting to the “Borg” look and a perceived invasion of privacy. I believe it’s Google’s way of inoculating our culture with what is a beta product, after all, and something they will continue to refine.

I worked for a company that developed and marketed a head-worn, head-up “augmented vision” display. We focused on mobile “knowledge workers,” including physicians and surgeons. There was much interest but the technology was not sufficiently refined (this was 10 years ago) and we could not meet user expectations.

I believe Google and others will perfect this aspect of wearable technology and that vertical markets like healthcare will be among the first to adopt. Wouldn’t you rather have your doctor looking at you than staring at a tablet during your visit, even if she is wearing a weird set of glasses? How about giving a surgeon and anesthesiologist the ability to monitor multiple readouts simultaneously, all without diverting their attention from the patient? There are many opportunities for new products, new applications, and new companies using this technology.

photo from http://www.forbes.com/sites/johnnosta/2013/06/21/google-glass-in-the-operating-room/
Rafael Grossmann, MD, FACS at Google Glass’s first surgical appearance (image from Forbes.com)

Lastly, there is a terrific video (in my opinion) from the Cleveland Clinic in the second link that gives a glimpse into what this technology may deliver someday. It’s quite moving and worth five minutes for anyone involved in any aspect of healthcare.

Read more: Inside The Operating Room With Google Glass – Forbes.

Read/see more: #ifIhadGlass: Google’s new gadget could turn Cleveland Clinic’s empathy video into reality | MedCity News.

 

The value of curmudgeons and why health systems and startups should engage them | MedCity News

We all tend to seek people who agree with our brilliant ideas. It’s human nature to avoid the naysayers and skeptics. There is a significant danger of group think if you apply this filter too energetically, however.

I’ve found that the best tactic for engaging physicians or nurses as advisory board members or informal advisors is to have a mix of ages and experience levels. Too often, the key opinion leaders are too busy to give practical advice – but they are needed for their names and tacit endorsements. And they will point out obvious blunders.

The younger physicians and residents are often extremely energetic and idealistic but can be naive about what it takes to bring about change in an often byzantine hospital or healthcare system. Sometimes they just don’t have enough practical experience to offer meaningful advice about adoption of a new technology, although they are extremely sharp about technology and the latest research.

It helps to engage one or two mid to late-career curmudgeons as the article suggests. These people have seen more than one battle and in many cases, more than one war, metaphorically speaking. If you can gain their trust, they will tell you the flaws in your go to market plan and what needs to change. Of course, it helps to develop a tougher hide before asking for feedback from “grizzled veterans” as you will quickly learn that your “brilliant ideas” are anything but!

“…anyone who wants to make changes from a hospital system to a scrappy startup would do well to bend the ear of a curmudgeon, be they a nurse, provider or health care professional affected by a proposed change or innovation they want to make. They may be surprised by the results.

Why? Because curmudgeons are more likely to express their opinion about whether a new system or initiative will or won’t work and why. If a new interface would interfere with workflows, for example, they will often be the first to speak up. They are frequently the toughest critics. You may not get showered with praise from them but if you engage them early on and make it clear their opinions are valued you may end up making your app, EHR, etc. much better than it might otherwise be.”

Read more: The value of curmudgeons and why health systems and startups should engage them | MedCity News.

What’s Your Value Proposition? Medical Device Commercialization 101

PurchaseFirst of all, do you know what I mean by value proposition? It’s a pretty straightforward concept. Essentially, it’s why people or companies buy from you. They give you money, you give them…something in return.

That’s where some people go astray. You must think like a customer and put yourself in the mind of your customer now. As the old cliche goes, guys at Home Depot aren’t really buying drills, they are buying the ability to put a hole in something. I’d also argue that they’re buying a few moments of peace and quiet in “guy land.”

So it’s more than just the laundry list of features you or your product manager or your product engineer say comprises your product or software or (heaven forbid) “solution.” To keep things simple, I’ll be referring to all of these categories as “products.”

Customers buy products because their perceived value of the product equals or exceeds the sum of the investment required to acquire it plus all of the risks associated with purchase and use of the products. This formula is highly individualized and probably not very useful except in the abstract.

We can break it down to simplify. First of all, value is the sum of all of the benefits a customer gets from buying and using your product. Those may include:

  • Solving a problem 
  • Preventing a problem 
  • Saving money 
  • Avoiding loss (not quite the same as saving money) 
  • Reputation/ego enhancement (think iPhone) 
  • Meeting a standard, requirement, or law 
  • Assurance of risk reduction – guarantee, warranty, trade-in value, etc.

Next, the investment required for acquisition might include:

  • Cash price
  • Lease, loan, or other financing terms
  • Opportunity cost of the money being spent
  • Installation cost
  • Training cost
  • Write-off cost of product being replaced
  • Cost to research the acquisition (can be substantial for capital purchases)
  • Ongoing support and maintenance costs

Finally, the risks of buying a product from you could include, among other things:

  • Incompatibility with existing systems or processes
  • Failure to perform to requirements (poor quality)
  • Failure to perform consistently (poor reliability)
  • Support (training, repair, maintenance, updates) not available or not to expectations

Now you can see all of the factors that make up a decision to purchase.

The value proposition is that the Purchase only occurs when Benefits are equal to or greater than the Costs plus the Risks of acquisition.

Your job then, as a startup CEO, Product Manager, or Business Unit Head, is to identify the benefits that your target customers need, then turn them into physical features, then price the product attractively while still making a fair profit, and also design programs and safeguards to mitigate the customer’s risk.

Seems simple? I don’t think so, either.

By the way, these concepts apply just as well to businesses as to individual consumers. After all, businesses are nothing but individuals working together.

Think of a medical practice considering the purchase of a new Electronic Medical Record system. They probably have an existing system with which they are not happy. Price is a factor but there are many, many other factors that will influence their decision.

Takeaways:

  1. Put yourself in the mind of your customer.
  2. Never forget that customers buy benefits.
  3. A purchase doesn’t occur until perceived value equals or exceeds perceived costs plus perceived risks.
  4. As the saying goes, perception is everything.

Next time, I’ll take a look at the different types of buyers involved in a medical device purchase.

 

 

Invisible Bike Helmet Inflates On Impact VIDEO – YouTube

OK, so this is not medical technology but it should prevent the need for physicians and hospitals. Also eliminates the dreaded “helmet head hair.” I would probably buy one when the price comes down. Nothing like cycling without a helmet – except for the fear of a concussion, of course!

Smart entrepreneurs – they started with a need and a market. Europeans famously do not wear helmets and they are just as vulnerable in crashes as the rest of us. They have plans for line and market extensions – horse riding, downhill skiing, hip protection for the elderly, and epilepsy seizure protection. Maybe the NFL should look into this…

Would be huge if they could get product placement during the Tour de France.

I would lose the Hövding name before expanding beyond Sweden – sounds like something from Ikea!

See the video: Hövding Invisible Bike Helmet Inflates On Impact VIDEO – YouTube.

Widespread Layoffs Leave MedTech Professionals Shaky on Job Security | MDDI Medical Device and Diagnostic Industry News Products and Suppliers

Is the notorious medical device excise tax to blame? How about Obamacare? A hangover from the Great Recession? Austerity in Europe? CEO needs a new yacht?

In any event, it’s alarming to note, in an industry as robust and historically profitable as medical devices, that 40% of medical device industry professionals polled are either out of work or in a panic about their job security.

“… the byproduct of these seemingly endless medical device industry layoffs may just be the emergence of a culture of fear and a host of new problems with which companies may now have to contend.

Job cuts are cutting deep, and medical device companies need to work on healing that gaping wound for the health of the industry.”

Heads up, startup execs. You may be looking at a pretty deep talent pool as you go to market.

Read more: Widespread Layoffs Leave MedTech Professionals Shaky on Job Security | MDDI Medical Device and Diagnostic Industry News Products and Suppliers.

2013 Washington State Biomedical Device Summit

I attended this meeting yesterday, June 17 at the Bothell Campus of the University of Washington. Bothell is a hub of the Biomedical Device Innovation Zone.

There was an interesting keynote talk by Mark Leahey, CEO of the Medical Device Manufacturing Association (MDMA). He reported that lobbying in Washington, D.C. to repeal the 2.3% medical device excise tax is intense. He also told the group that efforts to improve the FDA regulatory clearance process are proceeding and that the 510(k) pre-market notification process does not need to be replaced, merely refreshed.

One welcome development was an announcement by Matt Smith, Chair of the Biomedical Device Innovation Zone that a medical device company incubator is being established at Lake Washington Institute of Technology in Kirkland. The incubator will have rapid prototyping capability  – machine shop, 3D printer, etc. – as well as space for several onsite startups and a number of virtual startups. This is great news – there are a number of startup incubators in Seattle focusing on biotech and software but none until now that specifically welcome medical devices!

The most interesting part of the summit was a panel discussion chaired by Chris Rivera, CEO of the Washington Biomedical and Biotechnology Association (WBBA). The panelists were executives in local healthcare organizations. Three of the panelists are also physicians and a fourth is a pharmacist. The message for industry is that the future of the healthcare industry is going to be focused on cost reduction – “cost, cost, cost” according to one panelist.

I did not know that the medical device industry accounts for only 6% of all healthcare costs in the U.S. As one panelist put it, even if you gave away all devices at cost, it would not bend the healthcare system cost curve. The highest expenses are in labor. Devices that eliminate labor or that connect systems requiring manual intervention will be winners in the future. Entrepreneurs and established device companies launching new products must show immediate cost savings, as the CFOs and actuaries are jaded by past promises and will no longer accept assertions that cost reductions will occur over a long period. One reason is that the typical patient tenure in a health insurance plan is only two years. That makes it difficult for an insurer to realize savings on an investment in new technologies or procedures without up-front savings.

An audience member asked a question about the structural costs of practicing “defensive medicine” where clinicians order extra tests and procedures to guard against malpractice judgments. Interestingly, the three physicians on the panel all asserted that, while significant, defensive medicine is not the biggest problem in healthcare economics in the U. S. and further, that  it will be impossible to ever eliminate defensive medicine, primarily because of the trial attorneys lobby in “the other Washington.”

Another panelist stated that companies with new products and procedures must approach hospitals and offer ways to mitigate the risk the hospital is taking by adopting the new technology. This idea is getting attention around the industry. Not sure exactly how it would work and how that would affect financial statements and projections in startups and even established companies. Does the hospital expect some sort of make-good guarantee if the technology’s promises fail to materialize? On the flip-side, does it expect to participate in the company’s success if the technology is even more successful than anticipated? Another panelist suggested that clinical articles about new technologies always include a discussion of financial projections in addition to the usual clinical and technological discussions. “Cost, cost, cost” indeed…

Interventional radiologists wring hands over the medical device tax | MassDevice

I don’t agree that an across-the-board tax would be a major obstacle for medical device companies to acquire innovative and effective new interventional radiology technologies. Yes, the tax reduces gross margins but as the article implies, the Affordable Care Act (aka Obamacare) is bringing millions of uninsured people/prospective patients into the healthcare system. So gross dollars (aka the bottom line) should increase.

Besides, it’s still a level playing field as the tax applies to all companies participating in the U.S. healthcare market. Yes, a few marginal technologies “on the bubble” may not make it to market but the radiologists are free to start their own companies and prove the bean-counters wrong.

The issue of whether the medical device tax is good or bad policy is a separate matter and is not what I’m addressing here.

The use of the term “hand-wringing” in the headline seems to fit, in my opinion.

“The 2.3% medical device tax may prevent “entrepreneurial interventional radiologists” from bringing new technologies to market, according to a commentary published by the Journal of Vascular & Interventional Radiology.”

Read more: Interventional radiologists wring hands over the medical device tax | MassDevice.

A Smartphone Spectrometer Diagnoses Disease At A Fraction Of The Price | Co.Exist: World changing ideas and innovation

Another example of the astonishingly rapid convergence of mobile technology and medical applications.

“Here’s another example of the trend: a spectrometer that costs as little as $200. An iPhone cradle, phone and app, it has the same level of diagnostic accuracy as a $50,000 machine, according to Brian Cunningham, a professor at the University of Illinois, who developed it with his students (see video).”

“In the future, it’ll be possible for someone to monitor themselves without having to go to a hospital. For example, that might be monitoring their cardiac disease or cancer treatment. They could do a simple test at home every day, and all that information could be monitored by their physician without them having to go in.”

Those slabs in our pockets are so much more than phones.

Read more: A Smartphone Spectrometer Diagnoses Disease At A Fraction Of The Price | Co.Exist: World changing ideas and innovation.

The Market – Medical Device Commercialization 101

OK, so you know that you need a customer in order to have a business. In fact, you usually need lots of customers to have a successful business. In this post, I’ll discuss that vague abstraction known as the market.

market

A market is a group of entities, sometimes people, sometimes organizations, sometimes both. In its simplest form, some of the entities in the market sell things and other entities buy things. Or you could say that some entities have problems they are trying to solve and they buy solutions from other entities.

There are an infinite – or at least an uncountable – number of markets in our economy.Think of your own personal life. You participate in many different markets, for example, music (and that could include CDs, digital downloads, streaming, concerts, and lessons among other things), food (including fresh, frozen, farmers’ markets, food trucks, fast food, restaurant dining, snacks, beer, wine, soda, and bottled water, etc.), and transportation (cars, bicycles, pedicabs, trains, airlines, hot air balloons, buses, taxis, limos, and so on).

There are probably thousands or even tens of thousands of markets for medical devices. Hospitals and physicians purchase and prescribe many different products, services, and solutions to diagnose, treat, and maintain their patients.

Markets have competition. The entities selling solutions compete for buyers. Sometimes the competition is direct but it need not be. Innovative solutions and products often do not have direct competition, at least not initially. There is almost always, however, indirect competition or at least the status quo – what buyers are doing right now without the innovation. Never make the mistake of thinking or stating that your new widget or app “has no competition.” It diminishes your credibility and usually results in someone proving you wrong.

There are concentrated markets in which a handful of sellers control almost all sales. Think of the cable TV market in your town. If you are fortunate, there are two competitors. On the flip side, there are some highly competitive markets with many sellers. For example, consider the fairly new and still evolving market for “cloud” based archiving of your digital files. This is a highly competitive market with new entrants emerging almost daily with prices falling and offerings improving rapidly. It’s pretty obvious which type of market is better for buyers. Unless you have a significantly disruptive product and lots of financial resources, the competitive market is probably more attractive for you as a seller as well.

One more thing about markets – they are almost never homogeneous. There can be geographic differences among buyers as well as language, culture, economic (price stratification as well as terms of payment), demographics  (for example, gender, age, political leaning/affiliation, income level, socioeconomic status, technology adopter status, etc.), and many, many more. Any of these differences can be used to identify consumer market segments. There are other attributes in medical device markets such as hospital size, number of procedures performed per year, hospital market share, physician experience level, and so on.

Market segments are groups of buyers with at least one attribute in common so that your offering should have value or appeal to all members of the group, for example, “household decision-makers considering purchase or lease of an electric vehicle in the next three month”s or “family practice physicians in small to medium group practices interested in purchasing an electronic medical record system in 2013”. Further, the segment must be economically reachable via the same form of marketing communications or media promotion, e.g., direct mail, webinars, radio or TV advertising, or one of the various forms of Internet advertising.

Identifying your market is fairly easy. It’s almost always dictated by the indications for use of your product. Segmentation is tougher. There may be multiple segments for your offering. The challenge is selecting the segment(s) that are most competitive (and therefore open to new offerings) and reachable (so you don’t have to break the bank with marketing programs to reach the segment members).

The objective is to create awareness and interest in your solution/product, thereby generating sales leads. A portion of the leads will convert to actual sales, creating revenue to expand marketing and sales efforts and leading to profitability.

As part of your launch plan, you should talk to market participants in person, at conferences, and in surveys. Identify as many segmentation attributes as you can.

Takeaways:

  1. Try to select a competitive market unless you are launching something truly disruptive.
  2. Identify as many segments as possible.
  3. Pick segments based on their attractiveness for your business and your ability to reach segment members economically with marketing programs.

Next time, I’ll talk about identifying the different types of buyers in your segments. It’s much more complicated in B2B (business-to-business) markets like medical devices than in B2C (business-to-consumer) markets.

 

The one thing that makes a company last forever | qz.com

According to Stanford Graduate School of Business professor Charles O’Reilly, long-lasting companies have a quality he calls “organizational ambidexterity” – the balancing of exploration and exploitation.

Escher hands drawing

“All companies hit rough patches from time to time. But only a few manage to survive decade after decade—some of them in a form that bears no resemblance to the original organization. Nokia began in 1865 as a riverside paper mill along the Tammerkoski Rapids in southwestern Finland. In the late 1880s, Johnson & Johnson got its start by manufacturing the first commercial sterile surgical dressings and first-aid kits. And in 1924, the founder of Toyota came out with his company’s first invention—an automatic loom.”

“You can’t just choose between exploiting your current opportunities and exploring new ones; you have to do both. And the companies that last for decades are able to do so time and time again.”

“The researchers looked specifically at what type of corporate culture was associated with growth in revenue and net income, and found that more adaptive cultures, or ones that emphasized speed and experimentation, did much better. “A culture that says, ‘We don’t have all the answers; we’ve got to try these experiments’—that’s the type of culture that promotes ambidexterity.””

This seems to be a remedy to The Innovator’s Dilemma which asserts that big companies fail because of their own inertia, giving way to aggressive if imperfect new entrants.

Being ambidextrous also calls for strong management that can articulate a vision and lead everyone to support the vision as well as aligning the company’s various businesses with the vision. Interestingly, Prof. O’Reilly maintains that large corporations have an advantage over startups because the large entities have resources to spare. Essentially, they can cover several bets while a startup is typically dedicated to a single direction in what is usually a “bet the company” move.

A couple of excellent examples in American business: GE and IBM. It remains to be seen if the likes of Microsoft and Apple are also ambidextrous.

Read more: http://qz.com/90969/companies-that-succeed-have-this-in-common/

This Electronic Temporary Tattoo Will Soon Be Tracking Your Health | Wired Design | Wired.com

This is a fascinating development in the evolution of body sensors that are continuously updating and collecting all sorts of physiological data. As simple and non-threatening as a temporary tattoo, they appear to have the potential to be relatively inexpensive at scale and are applicable for critical care use as well as consumer health monitoring and even gaming.

It’s unclear if the power source and connectivity are part of the sensor. If not, I’m sure that someday soon those too will be integrated.

This would be fun to commercialize. Just think of all of the novel applications and benefits something like this could provide.

“FitBit too bulky? Why not glue a sensor array to your skin?

The quantified self goes nanoscale with a stick-on silicon electrode network that could not only change the way we measure health metrics, but could enable a new form of user interface. And the researchers behind it aim to have the device available in the next few weeks through a spinoff company, MC10.”

photo of Electronic Sensor/Temporary Tattoo
Electronic Sensor/Temporary Tattoo one week after application

Read more: This Electronic Temporary Tattoo Will Soon Be Tracking Your Health | Wired Design | Wired.com.

Mobisante Grabs $4.2M for Mobile Ultrasound Tools | Xconomy

Congratulations, Mobisante! This is great news considering the challenging climate for early stage medical device companies seeking equity investment.

It’s also a classic example of The Innovator’s Dilemma (classic book about innovation by Harvard professor Clayton Christensen). Among others, Acuson, ATL, Philips, and Siemens were pioneers in medical ultrasound. They perfected the high end, clinic and hospital-based ultrasound machines we’ve all seen and/or experienced.

SonoSite disrupted the market in the late 1990s with a laptop-size portable ultrasound unit that was suitable for emergency use in and out of hospitals. It proved to be wildly popular.

Mobisante is now disrupting the market with solutions based on smartphones and tablets, extending the applicability and portability of ultrasound even farther.

Mobisante Grabs $4.2M for Mobile Ultrasound Tools | Xconomy.