Why what works for Uber may not work for medical apps

By MHN Staff
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Bradley_Merrill_ThompsonBy Bradley Merrill Thompson

Healthcare in America needs disrupting. The media has widely reported on the high cost of, and poor outcomes produced by, the US health care system. Fortunately, attracted by possible profit in a market that currently constitutes over 17 percent of GDP, quite a few startups are anxious to do the needed disrupting. Indeed, innovators from many places outside of healthcare are bringing a fresh perspective to the problems the healthcare system faces, developing very creative “mobile medical apps” that fall within FDA’s jurisdiction.

Unfortunately, though, even well-funded visionaries like a Google cofounder are finding themselves dismayed and frustrated by the high level of complex regulation in healthcare. The question is: what should those innovators do about it? More specifically, these tech entrepreneurs face a choice between: 1) complying with the regulations, or 2) getting to the market quickly to build a brand and a following, in the hopes that the regulatory issues will sort themselves out later.

An example of the second of those strategies -- outside of healthcare -- is the game plan Uber is currently following. While it isn’t clear exactly what Uber does to address compliance before entering a new market, the company does not seem to let regulations slow them down. In 2014, an Uber executive explained that the company had regulatory issues in all 128 cities in which it was then operating. The number of cities and countries where Uber is being banned or legally challenged is growing rapidly, and includes such places as Paris, Belgium, Brazil, China, and even San Francisco, its hometown. Indeed, there’s a Wikipedia page dedicated to simply tracking Uber’s legal woes. The blog sphere loves to comment on Uber’s confrontational stance, and failure to comply with a myriad of laws.

On the other hand, Uber now seems to be valued at more than $50 billion. Further, people, including me, love the business model and the technology. I use Uber everywhere I can. Uber and companies like it have clearly tapped into an unmet need, both providing an incredibly valuable service to customers at low cost as well as a wonderful opportunity for many people to make extra money. My Uber drivers have ranged from college kids earning extra money to people my age trying to put their kids through college. The argument I’m sure Uber would make is that the laws are outdated, and technology is moving faster than the regulations. And I believe there are policymakers who would agree.

The question I want to tackle here is: does the Uber strategy make sense for mobile medical apps entering the healthcare arena? My answer is an unequivocal no. I’ll offer five reasons.

1. The social contract.

I’ll be the first to say this is not some great insight of mine. In fact, I hope everybody already knows this. Our social contract says that, in exchange for being a part of society and getting all of the benefits of that, we all agree to abide by its laws.

I doubt I’ll persuade anyone who doesn’t already believe that to start believing it. Some people will react, well of course. Others will view the notion as quaint and out of touch with reality. But the best argument I can think of not to follow the Uber strategy is, in fact, basic morals.

Laws are there for reason, and in the case of healthcare that reason often includes protecting patients from harm. And, not to be too elementary, there is always a process for changing laws that become outdated. Companies are not somehow privileged to ignore that, treat people as lab rats, and simply dare regulators to come after them as a way of reforming the system. That’s not what we agreed to when we formed this country. That’s just organized crime. The fact that drug lords make a lot of money and produce a product that is very popular does not make their business justified.

2. The risk of losing everything

Uber seems to be taking this daring strategy in part because the transportation for hire laws are often local, not federal or even state. The thought process seems to be if Uber wins some and loses some, on the whole Uber will get the opportunity to operate somewhere. If Uber ends up with legally clear sailing in say 20, 30 or even 50 cities, the company may be able to make a business out of that, at least in the near term.

On the other hand, the regulations governing mobile medical apps are mostly federal. While there are some state laws, the principal regulator is the FDA, followed by the FTC. And frankly there are variety of nonregulatory federal agencies that have roles to play. If those federal agencies conclude that your mobile medical app is violating the law, you’ve lost the entire United States market.

3. Unnecessarily galvanizing the opposition

Everyone has an opinion about government regulators. Oftentimes, though, those opinions are formed around thinly substantiated facts that come from reading questionable media outlets. Those who are by nature cynical may, at an emotional level, believe gross generalizations like government regulators are lazy, risk-averse and behind the times.

But that sort of provincial thinking is proven wrong time and time again. Instead, government regulators often turn out to be highly-committed, well-trained, hard-working and forward-thinking professionals. If given a chance, they often seek the best solution for the public they are trying to help. If approached respectfully, they can become an ally in seeking the best possible policy.

But Uber’s approach wastes that opportunity. Instead of reaching out and working with regulators, Uber prefers to ignore them, or even worse, prefers being confrontational, daring the regulator to bring an enforcement action. Uber flaunts its popularity as though it is some sort of invisible shield that will protect the company from legal challenge. And Uber seems to callously ignore the legitimate concerns regulators have for rider safety and well-being.

It is true that regulators are not the only stakeholders, and that disruption inherently challenges the status quo in industry. And it is true that the established industry will often prefer things the way they are for economic reasons. But to assume that regulators will yield to those who support the status quo is to sell them short in a way that squanders a real chance to make progress in public policy.

Often the regulators stand in opposition to the industry they regulate. The relationship between FDA and the traditional medical device industry requires the agency to constantly impose new and often unwelcome burdens on the industry, as well as initiate outright enforcement. It is wrong to assume that somehow FDA will be reflexively sympathetic to the device industry in the face of new technological opportunities that help patients.

Mobile medical app developers, if they assume FDA will oppose new and novel mobile medical apps, are likely to produce a self-fulfilling prophecy. The one thing I can guarantee you is that FDA, like most agencies, does not like flagrant indifference to its rules. A little bit of relationship building at the outset, where the company shows the agency the respect it deserves, will almost always yield a productive collaboration.

4. Misreading the law

I’ve been doing this regulatory work for 30 years, and in that time I can honestly tell you that very rarely is a good idea illegal. If you think you have a good idea for an app and that app will plainly help patients, and if a friend tells you the app is illegal, find a new friend. There is almost always a way to bring new, beneficial technology to market. Usually, instead of illegality, the issue turns out to be that there are certain steps the company must take in order to come into compliance before bringing the product to market. And, creative people can look for creative ways to achieve that compliance.

Complying with specified requirements is a very different issue from facing a prohibition. Sometimes mobile medical apps must be made using a quality system to assure they work as intended. Sometimes the software has to be validated, and sometimes that validation needs to be reviewed by FDA. It is true that often software is so low risk that it doesn’t justify the cost associated with those steps, and that is a legitimate area for debate. Unfortunately, reasonable views – backed up by evidence – will often win that debate. The debate generally breaks down when the parties are simply hurling assertions at each other with no evidence.

The bottom line is: if it’s a good idea that will help patients, I can assure you the people at FDA will be very anxious to figure out a way to get it onto the market.

5. Uber’s strategy hasn’t even worked in the transportation industry yet

Now you might think I’m stupid, or unaware that Uber was recently valued at over $50 billion. But actually I’m just observing that business should be viewed as a marathon, not a sprint. By most accounts, Uber is losing money. More fundamentally, the legal challenges seem to be growing even faster than the business. Certainly, the jury is still out on whether Uber will ultimately prove successful. Right now, many investors are just gambling. It turns out, you can argue with success, if success is only short-term.

This might seem like an odd post for a lawyer to write. Plainly, my own self-interest is in companies trying the Uber approach in healthcare. The consequence of the Uber approach is full employment for lawyers. In three years, Uber has gone from zero to 70 in its law department, including 43 attorneys. And the vast majority of the work is being done by outside counsel and lobbyists. In fact, some speculate that much of the recent $1 billion in venture capital the company has attracted will be used for legal fees. As an attorney, I gotta love that.

So why would an attorney propose a way to enter an industry without hiring scads of lawyers? It’s the same reason doctors consistently recommend preventative care, even though acute care is far more profitable. We all want to recommend what’s in the best interest of our clients. And a strategy of flaunting and fighting is simply doomed to fail in the long run, at least when it comes to mobile medical apps.