How is Digital Health Entrepreneurship Different?

by Arlen Meyers

How is Digital Health Entrepreneurship Different?

Medical and health entrepreneurship, the pursuit of opportunity with scare resources with the goal of creating user defined value through the deployment of biomedical and clinical innovation, is growing quickly. After many years of either ignoring opportunities or being sidelined, physician entrepreneurs are finally throwing their hats in the ring. 

There are two basic categories of medical entrepreneurship-biomedical and clinical. There are significant differences in the innovation pathways for the two:

1. Intellectual property protection usually is of more importance in biomedical entrepreneurship.

2. Regulatory approval can be a long, expensive and risky process for drugs and devices.

3. Reimbursement and payment for biomedical innovations are often dependent on getting the appropriate codes and third party payments at high enough amounts to generate a profit.

4. Business models differ and are constantly changing.

5. The amount of capital necessary to get a drug or device to market is frequently higher than health innovation by several orders of magnitude.

6. The FDA may not have jurisdiction over many health innovations, for example a digital health app that is not deemed to be a medical device but rather something that provides information and education to users.

7. The customers vary depending on whether you are deploying a biomedical or health product.

8. Validating your business model using lean startup methodologies will vary and can be more challenging for biomedical innovators.

9. Biomedical entrepreneurship often requires a different skill set than health entrepreneurship.

10. Biomedical entrepreneurship is riskier.

Health or clinical entrepreneurs focus their activities on digital health, care delivery models, business or clinical processes, or policy. Furthermore, digital health can be further subdivided into segments:

  1. Remote sensing and wearables
  2. Telemedicine
  3. Data analytics and intelligence, predictive modeling
  4. Health and wellness behavior modification tools
  5. Bioinformatics tools (-omics)
  6. Medical social media
  7. Digitized health record platforms
  8. Patient -physician patient portals
  9. DIY diagnostics, compliance and treatments
  10. Decision support systems

Unlike bioimedical entrepreneurs who are trying to get drugs, devices, diagnostics,vaccines and biologics to patients, digipreneurs have to face the facts that:

1. There is a difference between an industry and a market. Those companies that provide products and services comprise the industry. The customers who use those products and are looking for ways to get a particular job done are the market. However, both the digital health industry and digital health users are a complex combination of providers, payers, industry partners in interface technology industries and patients, some of whom are customers or consumers while others are influencers.

2. Like all investors, digital health investors are looking for the highest rate of return with the least amount of risk. Given the foggy legal, regulatory and reimbursement atmosphere, it’s too early to tell which dogs will eat the food. There has already been high profile digital health failures, roll ups, IPOs and consolidation as the industry and markets continue to mature.

3. Most digital health technologies have not been clinically validated nor are they required to do so. However, other regulatory agencies, like the FTC or the Consumer Products Safety Commission, are wary about digital health product claims that are not supported by research.

4. The FDA continues to offer periodic guidance documents and regulations that contribute to a level of uncertainty when it comes to defining what is a medical device and what is not. That makes the hair stand up on the back of investor’s necks.

5. Given the multiple stakeholders in healthcare — payers, providers, patients, partners and others — it’s hard to target any one customer. Several need to see the value for any given product or service.

6. The industry is too new and there is too little research to know which customers/ patients/ stakeholders will adopt a product and why.

7. Scale trumps innovation. The single most important characteristic of those companies that have received substantial follow-on investments are those that have scaled their customer rate rapidly by at least 70 percent a year.

8. Doctors don’t have the information they need to know whether to prescribe or use a given digital health technology.

9. Most doctors don’t get paid to use digital health technologies, they disrupt workflow, and there are nagging behavioral and emotional barriers to adoption by both patients and their families and their doctors.

10. There are significant confidentiality, security and data privacy issues still lurking.

11. Patent protection is not as important in digital health as it is in biopharma or medtech. Things move much more quickly, the product life cycles are much shorter and time is of the essence when it comes to getting adaption and penetration in the patient/consumer or medical community.

12. Business models are evolving and change on a regular basis, sensitive to the protean tastes of Internet junkies.

13. Digital health clusters consist of many of the same parts as biomedical and clinical clusters. However, since digital health resides at the interface of information, communications and sick care, there are other elements such as cybersecurity, big data and analytics, blockchain and artificial intelligence as well as other metaclusters.

14. Investors in digital health are different from investors in biomedical technologies and industries

15. Drugs, devices and digital health are converging so, sometimes, there are significant overlaps in product development

Here is a guided tour of the Denver-Boulder startup tech cluster. What’s in your asset map?

For these and other reasons, non-sickcare entrepreneurs fail despite their previous track records of success in other consumer markets.

Here is the story about how many came together to create the Colorado digital health cluster.

Digital health is the new New Thing. Like all new things, it is surrounded by hype and hope. Whether digital health can bend the cost curve and help patients or is just another tech bubble remains to be seen. Digital health entrepreneurs need to do their due diligence with both eyes open and their wallets protected until they are convinced they can overcome the risks.

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Arlen MyersArlen Meyers, MD, MBA is the President and CEO of the Society of Physician Entrepreneurs at www.sopenet.org

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