Silicon Valley is famous for people and companies, who come up with ideas, products and services that disrupt well established industries. Uber and Airbnb are often cited as examples of this phenomenon in the transportation and hospitality industries. New information technology makes it possible for start-up companies backed by venture capital, to provide a service, that can quickly scale up to compete with large, established companies. This would have not been possible only a few decades ago. We have also seen smart people who are solving complex problems and gaining hero status as influencers.
In order to protect the public from harm and perform their duty, regulatory bodies (the institutions), like the FDA, have a duty to regulate the new players. Inevitably there will be challenges for both sides in this situation. The institutions have to understand the business model, technology and methodology of the disrupters, which may not be like anything they have encountered in the past. The old ‘rules’ may not be applicable to the disrupters. On the new entrants’ side, they may feel that the ‘rules’ are archaic and do not make sense. Usually the new entrants and influencers are from other industries and may not understand how healthcare industry works. They may also feel that since they are playing the role of disrupters, they have to be the trail blazers and create a new path by breaking the ‘rules’.
We have seen these tensions between the Influencers and the Institutions playing out over the last few years. Reality TV star Kim Kardashian got the makers of Diclegis into trouble with the FDA. This occurred when she endorsed this prescription medicine for morning sickness, on social media with a selfie, without the usual warnings that the FDA requires of consumer ads. The company 23andme faced a difficult time with the FDA in 2013, when they had to stop marketing their direct-to-consumer genetic testing service until they got FDA’s approval. And more recently, Theranos, a lab testing company had to close its operations in California, when CMS found deficiencies which put it out of compliance with CLIA. The CEO Elizabeth Holmes, was penalized for failing to comply.
When should start-ups start working on being compliant with these rules? I would say that, the sooner you start thinking about it, the better. No one would want to see the time, money and effort go to waste. So, what are the regulations that start-ups have to be aware of? Here is a sample (not a comprehensive list) of the regulatory bodies and their areas of administration:
Healthcare is a highly regulated field. As people are realizing that, changing healthcare business is a slow and painful process, due to its complexity and well-entrenched players. Regulation that is designed to protect the public from harm, can become a road block for fast moving companies. There will be many bumps in the road to commercialization and consumerization of new technologies and business models. Healthcare entrepreneur, be prepared for the long haul!