The most formidable obstacle for any innovative start-up in the medical and health-care field, is not a rival start-up — it is the U.S. legal system.
The recent decision by the U.S. Supreme Court to review the constitutionality of President Obama's sweeping healthcare initiative in 2012 — during the peak of the election season — could have a chilling effect on healthcare innovation. If you’re an innovator, why accept the legal and regulatory risk of launching a breakthrough new health-care venture right now when you could just as easily launch a Web start-up with only a fraction of the risk?
The numbers don’t lie.
The latest figures from the National Venture Capital Association indicate that Silicon Valley venture capitalists are migrating out of healthcare and medical IT investments to focus on Internet-related deals that have a much higher likelihood of future success and broader market adoption. Meanwhile, venture capitalists are also shutting down funds with a health-care and medical investment focus.
They’re doing this despite the fact that some of the most exciting and innovative developments are happening in the health-care sector. Take, for example, the recent announcement by Stanford medical researchers that they have developed a computer artificial intelligence interface capable of diagnosing cancer in patients more effectively than human doctors. This is a stunning development in artifical intelligence (AI) that builds significantly on the AI promise of IBM’s Watson.
Then there’s mobile technology — the health market for which experts estimate could be worth anywhere from $1.9 billion to $4.6 billion. Wireless provider AT&T is getting into the health game with new bio-tracking clothing, and the latest entrant in the mobile wellness game is Jawbone, maker of hip tech gadgets like Bluetooth headphones and the Jambox. The company recently launched the Jawbone Up for mobile fitness tracking on the go. Jawbone — with high-profile Silicon Valley VC backing — is exactly the type of company that could change the way we think about healthcare. At some point, devices like the Jawbone Up might be able to integrate with patient records in real-time, giving doctors a 24/7 look at a patient’s condition.
It’s easy to see, however, how these two initiatives could get ensnared in a debate similart to the regulatory and legal debates currently taking place in Washington.
The advances in AI are revolutionary, but they could become a legal nightmare in the event of an inaccurate or harmful diagnosis. After all, computers can’t take the Hippocratic Oath. So, would you really trust it to diagnose your medical condition, or even serve as a second source? As for mobile health, many of these breakthroughs rely on the ability to store one’s private medical data in “the cloud,” which privacy advocates are staunchly against. Google, in fact, threw in the towel on Google Health earlier this year due to the problems of fighting through the maze of conflicting interests in the health-care industry. Imgaine how well a freshly-minted start-up would fare.
While new technology developments — from mobile health to medical AI — have the ability to reshape the healthcare landscape, they share a common regulatory and legal risk made all the more acute by the recent U.S. Supreme Court announcement. Health-care remains a hugely untapped market for innovation, but smart money venture capitalists are abandoning the sector and finding other uses for their funds. What do they know that the rest of us don’t?
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