10/07/2017 | BlogPost

Health Innovation’s Future Just Got a Lot Sweeter

Gerry Chillè | General Partner, Healthware Labs US


As an active participant in the Digital Health ecosystem, I must confess that the last five years have been a bit of a rollercoaster.

At first, the euphoria from the myriads of digital health startups being launched eventually gave way to resignation that maybe, just maybe, the industry's approach to adopting health innovation was turning out to be nothing more than a glorified PR exercise meant to give a youthful and aspirational face to an industry often maligned for its processes and business practices.

During this period, and in an attempt to foster "innovation", we have seen pharma execs holding pilgrimages to places like SXSW, Burning Man and other "happenings" that were supposed to spur new ways of thinking and problem solving. These then brought on countless "Hackathons" and other contests where the next big thing in healthcare never quite materialized to the extent of a viable product ripe for commercialization. In fairness to the many well intentioned contestants of these hackathons, a true viable product was never the end-goal, and a $30k prize will only get a startup so far in a world of multi-billion dollar drug development budgets...

However, during this same period of time there were also many quiet (and some "in your face") techy nerds toiling on new approaches to health, and not losing any sleep on little details such as profitability, market leadership, and patent extensions. These true disruptors were often motivated by nothing more than the frustrations of dealing with a health system and industry that had failed them personally when a health situation impacted them or a loved one.

Perhaps the industry's approach was wrong all along. Quite frankly it is one thing to have a group of well meaning pharma execs and marketing agency people sit around a campfire to "imagine" what a person with diabetes might need, rather than someone who is actually living with the disease day-in and day-out. The latter tend to wake up one morning and scream "THIS CRAP SUCKS AND I AM GOING TO DO SOMETHING ABOUT IT!" The adage "necessity is the mother of invention" could not be more apt here, and today's ubiquitous access to free software development tools for people motivated to make a difference has been an important equalizer and catalyst to help bring new ideas to fruition.

As it often happens with the development of new inventions, several people in different parts of the world simultaneously experienced their own version of the “this crap sucks” moment, and armed with ingenuity, blessed with ignorance of the healthcare industry, and motivated by their great desire to make a difference, they went out and launched startups like Vienna-Austria based mySugr, and NYC based OneDrop.
Both these companies have recently made great strides towards building solutions to help people manage their diabetes in ways that would be considered heretical (and legally difficult) by most pharmas. Asking users to provide their A1C data, log their activities daily, track what they are eating, and then sharing that personal information publicly with other users on the platform was unthinkable even a couple of years ago. Yet, by pushing the envelope unencumbered, these two startups and others like them have ushered in the new age of consumerization of healthcare and they deserve credit for it. Their mission to give people useful and intuitive tools with which to easily manage their disease, and simultaneously finding ways to monetize these services has begun making a measurable difference in the lives of the people using their solutions. Their approach has also shown the rest of the industry the true meaning of the mantra "Patient Centricity". Surprise everyone! Patient Centricity is not yet another patient education program delivered via an app.

mySugr and OneDrop have built their business models around providing services directly to consumers, and in licensing their platforms in risk-sharing agreements with insurance companies which offer it to their members as way to keep them healthier (and thus simultaneously lower the cost of diabetes related healthcare claims). Pharmas have also shown interest in their services as a way to support diabetes patients, but have had more difficulty in expressing a revenue rationale for a service that can potentially compete with their other business imperatives, such as the number of prescriptions that are filled or the need of Type2 diabetes patients to graduate to stronger drugs (or insulin).

Last week however something happened quietly but of momentous significance for the health innovation industry. The startup mySugr was fully acquired by Roche Pharmaceuticals, for reportedly $100 million, to become part of its diabetes franchise offering. While most of us working on digital health initiatives expected this type of acquisition by pharma to eventually happen, many of us were not counting on it to be on the horizon in the immediate future so it took us a bit by surprise. Said that, Roche’s move is very welcome on many levels, and signals a "salvo" to the rest of the healthcare industry in how they view and adopt innovation and digital health in their own businesses. Some of the most immediate implications are:

  • It is no longer an option for pharma to sit by the sidelines and see what the rest of the industry does. In fact many pharma and health insurance companies may already be late to the game if they have not yet launched internal digital health initiatives or have an innovation strategy in place.
  • Despite initial doubts to the contrary, the Roche acquisition tells us that a services-driven healthcare model that leverages digital therapeutics makes business sense and can achieve clinically relevant results that will eventually be reimbursed.
  • While Hackathons and pilot projects make for good PR, a business-needs driven approach to innovation should inform and drive the process. In order to succeed the industry needs to find partners able to help it adopt innovative solutions and accelerate them.
  • Looking to the outside in the startup ecosystem for innovative solutions is the one sure way to jump start the innovation clock and get the ball rolling. Sprouting great new ideas in a PR event, and waiting 5 years for them to show results might not be fast enough in the torrid pace of mergers and acquisitions that are sure to follow.
  • $30k contest prizes and minuscule internal innovation budgets are simply not enough to drive innovation and healtchare transformation across the enterprise and the industry at large! Pharma must begin to collectively and seriously invest in these nascent digital health endeavors the same way they would in the development of new drugs and cures. In parallel, payers (public and private) need to realign their reimbursement models to take these new solutions and their end-goals into account.

Roche’s acquisition of mySugr is a true wake-up call to the industry that the elusive day of digital health and digital therapeutics is finally upon us. In an industry that has historically navigated through tremendous innovative eras such as the development of vaccines and biologics, this new era simultaneously provides new challenges and immense opportunities. The time has arrived for healthcare companies to make strategic decisions and staking out leading positions in what is still a wide open and untapped frontier in healthcare. It will be exciting to keep following the developments as they happen, and even more so to be a part of them! (so join in the fun)

Drop us a note , or join us in person at Frontiers Health in Berlin November 16-17 - Europe's leading health innovation event.

Article originally posted on LinkedIn Pulse

Gerry Chillè

Gerry has spent his life breaking things apart, mixing the pieces up with other objects, and trying to build something new from them. As head of HealthwareLabs US, this dubious talent often yields delightful results for clients trying to solve old problems in new innovative ways.
Do you wanto to join our global Open Innovation network? Contact me