Tag Archives: Diagnostics For All

Google Meets Healthcare VC

The Boston Biotech Watch Take on Google’s Healthcare Investing Approach Based on an Interview with Google Ventures’ Krishna Yeshwant

by Steve Dickman, CEO, CBT Advisors

Now that most private-company biotech CEOs have given up on “IPO window reopens” and “VC bidding war,” three of the most galvanizing words for someone raising money these days are “Google might invest.” Fund-raising for the CEO of a young biotech is always a war of attrition and corporate VC funds are the current weapons of choice.

It is one thing for cash-strapped management teams to want Google’s shiny new healthcare venture arm to invest. But should Google Ventures invest? Would it be the right thing for Google and the right thing for the sector if they came into more deals? We recently spoke to Google Ventures’ Cambridge-based healthcare representative Krishna Yeshwant, M.D., and we did some reading up on Google, including plowing through Ken Auletta’s widely reviewed (and bombastically titled) book Googled: The End of the World As We Know It“. Now here’s our take not just on what Google Ventures is doing in healthcare but also what we think they should be doing.

(One caveat is that the bulk of investments that Google Ventures will do in the coming years will not be in the healthcare space. The fund ambitiously intends to invest $100M a year into startups and new ventures, and the vast majority of those dollars will flow into IT-related endeavors. Our focus is on the fund’s life sciences- and healthcare-related activities.)

Google Ventures would seem to fit right into the current dominance of corporate VCs within the universe of VC life sciences dealmaking. On the surface, it’s another cash-flush corporate fund wading into VC as part of a parent-company mandate to move up the food chain and generate insight as well as returns. (As if the “generate returns” part isn’t hard enough by itself!)

We think Google Ventures (GV) actually does not fit the typical corporate VC mold at all and, based on its provenance, we think it has the potential to do amazing work. More about our views in a moment. First, we’ll look at how GV sees itself in the context of the deals they’ve already done. Then we will pull back and imagine what GV could do that might let it rise above and make a true mark on the healthcare investing and on healthcare itself.

Krishna Yeshwant photos

Krishna Yeshwant, photos courtesy Google web site

Aside from cleantech, most deals lately in the life sciences and healthcare space are in therapeutics. By and large, GV does not do those. “We are probably not the investors to go after moving a molecule from Phase 2 to Phase 3,” GV’s Yeshwant said. “We are not ready to have a portfolio of molecules. [Furthermore,] it would be hard for us to invest in a single molecule.”

So what does GV do? So far, platforms, as embodied by GV’s first two healthcare deals: Adimab and iPierian. Although the former is on the East Coast and the latter on the West Coast, these companies have a few things in common. Both are funded by top-tier life science investors (Polaris, SV Life Sciences, Orbimed in Adimab; Highland Capital, Kleiner Perkins, MPM Capital in iPierian). Both are working on groundbreaking platforms and own enormous amounts of potentially valuable IP. Adimab works on antibody therapeutics; iPierian is a novel stem-cell-biology company with a big vision for overhauling the current clinical trials process by offering streamlined testing on ex vivo platforms derived from a patient’s own stem cells. There is more about Adimab’s and iPierian’s approaches in these linked news articles from Xconomy.

The companies differ in some key ways that give us some insight into GV’s parameters: Adimab is run by a charismatic and battle-tested CEO, Tillman Gerngross, who successfully sold his previous company GlycoFi to Merck in 2008 for $400M and thereby provided investors with a return of 9X or better. So in some sense, it’s a “bet on the jockey” play in the crowded space of antibody platforms. By contrast, iPierian is run by an experienced but not-quite-so-high-profile CEO, Michael Venuti, and in fact let go of its previous CEO, John Walker, the month before GV invested.

Tillman Gerngross, Dartmouth engineer extraordinaire

Tillman Gerngross, Dartmouth engineer extraordinaire

“We are clearly attracted to platforms,” said Yeshwant. “We can understand the science, we see the potential {for large exits} based on the early examples that a platform can produce. If there is room for the platform to go beyond what it is doing, we can REALLY get excited about it.”

Avoiding the corporate VC “bump”

In these cases, GV’s preference was not to invest in pure startups but to wait until some experienced investors took the early risk. In one or both of these cases, GV may have “paid up” in order to get into the syndicate. Lest that leave the wrong impression, Yeshwant hastens to explain: “Almost everyone at Google Ventures has started companies and looked at VCs from the other side of the table,” said Yeshwant. “I remember that: when a corporate VC comes in, you look at it as an opportunity to bump your share price. The way we are trying to place Google Ventures is really as an institutional investor. The track record we want to create here is not ‘here comes Google, let’s get a bump on our valuation.’ People LIKE to have us at the table. We are a VC firm that has [access to] a host of programmers and statisticians. We have former programmers on our team who can help our portfolio. Take our user interface experts, for example. This may not be relevant for therapeutics platforms but it might be very relevant for healthcare IT companies. That programmer’s role is to be dropped into some of those companies and create value.”

And yet neither diagnostics nor healthcare IT seem to be on GV’s radar screen yet. Yeshwant: “We are excited about the diagnostics field. We are watching it very closely. [But w]e have yet to find a great investment.” Most life science VCs who have looked at diagnostics would say the same thing – many more have looked than have actually done a deal.

When speaking of healthcare IT, Yeshwant reflects the melancholy wisdom of someone who knows the US healthcare system all too well. Yeshwant is in fact not only an experienced programmer and IT entrepreneur who has founded two companies that were sold to big IT players; he is also a current resident at Harvard Medical School working at Brigham & Women’s Hospital. “The healthcare market still does not really make sense [to us as venture investors]. Working in a hospital, we [as physicians] try our best to do what is right for the patient but the patient is only one of our customers. That distorts what [GV] as a service business [or investor in service businesses] can do. That setup does not let us get into this natural harmony of a company that can really serve the needs of the consumer and succeed because they did a good job by the consumer. As a medical doctor, I want to serve my patients, but it is very difficult to conceive of a great IT company [in this space]. There are so many needs IT can serve that would help patients. But what is the business model that does not involve so many confusing different stakeholders?”

Yeshwant has similar reservations about companies developing electronic medical records (EMRs) despite the inclusion of EMR subsidies in the stimulus and health care reform packages. “Despite a lot of money coming in from the government, it is not clear that the opportunity is really there yet,” he said. “Yes, that government money will drive M&A activity and there are ideas being thrown back and forth. We do not feel compelled yet by the companies we have seen.”

A common theme across all areas in which GV is considering is its very high bar for investing. Indeed, it has been nearly three months since our conversation with Yeshwant and GV has not announced a single new life sciences deal. Although it is inappropriate to draw conclusions from this absence of announcements (a flurry of new deals could be announced next week), the fund’s measured pace reflects the realities of being a VC in 2010 – when a lot fewer new-money deals are closing than in the years between, say, 2003 and 2007 – and the realities of being Google.

When we asked Yeshwant whether Google Ventures would prefer to start companies on its own rather than wait to be shown “doable deals” by the VCs in its network, Yeshwant cited the fund’s need to stay on the right side of its sole limited partner, Google itself: “Especially in healthcare, we are still looking for those [right] companies [for us]. We are looking for the entrepreneurs, the teams that will make those companies great. We are meeting a bunch of entrepreneurs and VC folks. If there is something we can put a good thesis around, then, yes we would be open to starting something, seeding a company and incubating it. We are still a bit early – we’d hate to hastily put something like that together and have it fall apart. That would sour Google proper. So for now we have to have a very high threshhold.”

Reluctance? What reluctance?

Googled book jacketWe think the threshhold does not have to be so high. This is where our recommendation comes in. From reading Ken Auletta’s book

Googled: The End of the World As We Know It, we were reminded of Google’s roots and its winding path to $23 billion in 2009 revenues. The company is an advertising behemoth with now 99% of those revenues coming from ad sales. And the ethos underlying Google’s birth is still true for its many new ventures:

  • We are engineers.
  • We are scientists.
  • We want to change the world.

Auletta’s book shows that Google is all about two mentalities: the engineer on one hand; the consumer-minded marketeer on the other. Sometimes – as when the founders built the first search engine – these are embodied in the same person. More often the roles are played by different people within the company’s leadership. The process works like this: the engineer comes up with an idea about what is technically doable and at the same time inherently elegant; the marketeer relentlessly orients it toward the “real user.” Born of a dynamic tension between these two forces, product after product has emerged from Google (think Google News, Google Earth, Gmail and Google Maps and) More recently, products and technologies have been acquired to take advantage of perceived opportunities (Android, YouTube).

Admittedly, it is hard to see how either mentality – better engineering, better consumer focus – will work in healthcare investing unless and until the healthcare system is reformed to be more responsive to incentives, more consumer-driven and especially more data-driven. The Google fund would seem to be able to apply its overwhelming leverage more efficiently in other fields – mobile computing, location-aware mobile apps, data storage and retrieval, even hardware – at least for now.

At the same time, the apparent hesitation by the GV team to do most healthcare deals and especially to start companies of its own – the “high bar” that Yeshwant was talking about in our interview – strikes us as inconsistent with the basic premise of the fund’s corporate parent. There seems to be a reluctance – if not an all-out refusal — to get too involved in truly risky deals that at the same time could be truly transformative. After all, in the letter that accompanied their 2004 IPO filing, the Google founders themselves wrote that they are looking to “make big investment bets” on technologies that have only a 10% chance of achieving a billion-dollar level of success. To paraphrase the loud, lascivious Sean Parker character in the hit movie “The Social Network,” “You guys think it’s all about making a million dollars?! It’s not. Think billion, baby!”


What we have heard from Yeshwant (echoed in this interview published by Wade Roush of Xconomy back in May, 2010) sounds not much different from what we hear from generic corporate VCs. What we’d love to see instead would look more like this:

  • More attention from the top: You want to change the world, Sergey & Larry? Pay attention to healthcare.
  • More experiments in combining bandwidth with healthcare. The Google project to “wire” a US city with ultrahighspeed broadband capability comes to mind. There have to be HC opportunities in that, perhaps in conjunction with an existing startup or a new one
  • Pioneering programs outside the developed world that, for relatively low initial investments can improve upon technologies initially developed here and roll them out in developing-country markets. Then, when the “boomerang” comes back (see our earlier post on “boomerang” technologies), Google will be thinking ahead about how to make money on these technologies in the developed world.
  • Start more companies! Forget the “high bar” and the “sour taste”. Instead, use your cachet and market power to start companies that might take a while to incubate but that can be truly transformative. This is already the approach of some top-tier US-based pharma company VC funds who have told us that they have grown impatient waiting for VC syndicates to form from the ever-shrinking pool of active VCs, so they’ve begun to dive in and fund the companies they want to see all by themselves.
  • Focus on diagnostics. Yes, Yeshwant said GV has not seen its favorite deal yet. But Yeshwant himself wrote an award-winning business plan for a company, Diagnostics for All, that could provide a valuable prototype. That company, which we highlighted in our blog post on “boomerang” technologies, is working on filter-paper-based diagnostic kits that can be manufactured for pennies. And Google founder Sergei Brin invested in personal genomics company 23andme.com, an investment now owned by Google itself.
  • See our “shopping list” below for specific opportunities

We hope GV does all of these things. Because of its potentially long time horizon and its amazing market power in search and advertising, GV has a huge advantage over traditional VC funds. The exit from most of these businesses will be traditional ones – IPO or, more likely, trade sale – but another potential exit could be the creation of a new business unit for Google.


But not as many as there used to be

Right now, with the convergence of high-powered data collection through genomics and better sensors; better analysis of that data using high-powered computing; and a reorientation of the healthcare system toward prevention, there is no limit to what an active and visionary investor could achieve. To us, the potential for improving actual human health by taking advantage of available data is endless – and Google’s own track record in improving data access makes it an ideal player.

Therefore we’d encourage Google Ventures as follows:

  • Think long-term, not near-term.
  • Think big, not small.
  • Focus more on strategic and societal benefit.
  • Reach for the stars.


  • Personalized medicine
  • Computer-aided medical devices
  • The “human-machine interface” in medical devices
  • Electronic medical records
  • Global health (investments in “boomerang” technologies would be perfect for GV – they will have the time & patience to wait for the boomerang to come back)
  • Analysis of “Big Data” e.g. from patients or payers that could rationalize the US healthcare system or piggyback on the move toward comparative effectiveness

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The Boomerang: Healthcare Innovation Goes Where it Must, To the Developing World

By Malorye Allison* and Steve Dickman, CEO, CBT Advisors

We always thought that innovation in biomedical science started in western countries and pretty much stayed there, where the money is. The role for developing countries, if they ever got their hands on new biomedical technologies at all, was as consumers, not innovators, and not exactly desirable consumers at that.

But lately we have noticed a countervailing trend. We call it “the boomerang”: technologies invented in the developed world that are designed (or re-designed) to work better, cheaper and more efficiently in developing countries. Once every extra penny has been shaved off the cost of goods; once the moving parts have been reduced to the bare minimum to stand up to harsh conditions or other demands; and once the innovations have been adopted by thousands if not millions of consumers, then, their owners figure out how to reintroduce them to the countries whence they originally came.

We are far from the first to observe that the United States is burdened with excess regulation, perverse incentives and entrenched interests barely affected by the recent insurance reform, which was mislabeled “health care reform” (HCR). At the same time, we observe burgeoning opportunity and a willingness on the part of both U.S.-based and developing-world inventors to focus on the less affluent but larger markets outside the United States and Europe. This is turning the markets of the developing world into hotbeds of innovation.

The limitations on implementing new healthcare technologies and delivery approaches in the United States are well known. We will give a couple of examples later on of how new technologies outside the boundaries of reimbursed care (think iPhone apps and Facebook) are leapfrogging the current U.S. healthcare system. But first we will look at some new technological and business innovations in healthcare that are getting their start or at least a big boost elsewhere.

Our thinking about this topic began with a visit to the recent World Health Care Congress (WHCC). This, backed up by an Economist article, convinced us that we are onto something. Some of the next radical or gentle upheavals in surgical techniques, medical devices and healthcare delivery may start in the labs of Minneapolis and Mountain View but then they will be tested and optimized in India, Mexico, Bangladesh and Africa. Eventually, if we are lucky, some of them will return.

At the World Health Care Congress in Washington in early April, we heard Harvard Business School professor and author Clayton Christensen give a fabulous set of talks. Christensen, whose 2009 manifesto The Innovator’s Prescription: A Disruptive Solution for Health Care, coauthored with Jerome Grossman, M.D. and Jason Hwang, M.D., was a sensation in healthcare circles, said that US health care “reform” legislation did nothing except to “cement the current unsustainable model.” He said that nothing innovative can really happen in the United States for another ten to twenty years (!). But what’s happening in India and Africa is stunning, he said. “When you have no other options, that’s the perfect model for innovation.”

Clayton Christensen

Clayton Christensen (photo courtesy http://www.claytonchristensen.com)

In another WHCC talk, Grameen Bank founder and Nobel laureate Muhammad Yunus pointed to a similar phenomenon. The new paradigm he cited: Build cheap practical versions of high tech tools and clinics that focus on a narrow range of badly needed treatments: think “surgery factories.” Here, the innovation focuses as much on the process of care delivery as it does on the care itself, reminiscent of the “business model innovation” cited by Christensen in The Innovator’s Prescription as one of the key needs of the U.S. healthcare system.

Muhammad Yunus

Nobel laureate Muhammad Yunus, founder of Grameen Bank

Consider eye surgery, ironically one of the profit centers for physicians even in countries like Canada which have “socialized medicine.” In India, for example, Aravind Eye Hospitals can offer $25 cataract surgery. Each doctor at Aravind does about 2000 surgeries a year. As The Economist put it in its startling April 15 survey of developing-world innovation “The World Turned Upside Down”, “Aravind [is] the world’s biggest eye-hospital chain [and] performs some 200,000 eye operations a year. It takes the assembly-line principle literally: four operating tables are laid side by side and two doctors operate on adjacent tables. When the first operation is done, the second patient is already in place.” The price is lower, but the process is still profitable. What a refreshing thought for those of us in countries like the United States, where each incremental innovation feels exponentially more expensive!

Then consider the upstream impact of such massive scale: costs must be lower, so technology must adapt. Krishna Reddy of Care Hospitals said at WHCC that his organization looks at every opportunity to lower costs. When designing a device for heart surgery, for example, they try to make only the part that will touch the heart disposable. In many cases, Aravind and Care have found ways to manufacture their own devices more cheaply than their first-world cousins.

LifeSpring Hospital

LifeSpring Hospital in India

Then look at childbirth. Elsewhere at WHCC, we heard about birthing centers created by LifeSpring in India that, according to The Economist, have reduced the cost of giving birth in a private hospital to $40 by looking after many more mothers. They charge $1.60 for a consultation with a physician and about $38 for an average delivery. They are teaching the people WHY there is value in paying for a delivery (versus mother and child possibly dying on a dirt floor out in the middle of nowhere). They market to husbands and mothers-in-law, and they paint the places cheery colors and make them comfortable and appealing. They are profitable and expanding, and the patients demand quality care for the price, which is of course well below the Western market price. Of course, we surmise that care is available so cheaply only via “paraskilling” e.g. deliveries by midwives or nurses, with physicians in the background if needed, which is not (yet) allowed to such a great extent in the developed world.

How about the business of healthcare? Take electronic medical records, for example, which received a chunk of government support in the US HCR package. India is rolling out a smartcard that can be printed up in any village and contains biometric information along with the patient’s health record. Standards are imposed from above: Local governments have to make sure these cards can be read anywhere if they want to get their share of government funding for the program. About fourteen million cards have been created already and the goal is to get one for each of the 300 million Indians who qualify for this plan, specifically – and only – those poor workers who tend to move a lot. Interestingly, Anil Swarup, Director General in the Indian Ministry of Labour & Employment, said in his talk at WHCC that it is important to charge something, not nothing, otherwise patients don’t think the service has any value and won’t use it. Furthermore, charging something, even very little, shows respect for the patients’ dignity. Swarup claimed that a large part of the project’s success was due to his complete naivete regarding health insurance. Certainly, no one anticipating the usual landmines would have attempted something as simple and yet far-reaching as he appears to be well on his way to achieving.

As more users are brought into the healthcare system, this drives up demand for “low-tech” services such as cheap, practical, point-of-care diagnostics. That theme came up again in a recent lecture by biotech financier and big-picture thinker Stephen Burrill held at MIT on April 14. “China passed its own health care reform in April, 2009,” Burrill said. “They want to provide healthcare for all 1.2 billion of their people.” Just think of the economies of scale! Innovation in low-tech areas such as healthcare delivery will be massively rewarded.

Consider three low-cost healthcare innovations from the developed world described at the World Health Care Congress:

  • Mobisante’s smartphone/ultrasound device: Mobisante has developed a smartphone that can serve as an ultrasound scanner. It stores information, sends images to hospitals for diagnosis, and employs a touch-screen interface

We’ll look at each of these one at a time along with a look at how two boomerangs have already begun to return.

Mobisante: the smartphone-based ultrasound
Mobisante is based in Redmond, WA, and run by Sailesh Chutani, a former Microsoft executive. It has developed a smartphone that can serve as an ultrasound scanner. It stores information, sends images to hospitals for diagnosis, and employs a touch-screen interface.  The first market for the device is the developing world, where its makers say seventy per cent of people cannot get access to ultrasound services. The device will cost approximately $5,000, which may still seem steep by developing nation standards, but will be attractive to public health departments and NGOs, since having access to ultrasound is to vital to many medical diagnoses. Chutani predicts the device will allow ultrasounds that cost less than $1 a patient.

Boomerang: In his talk at WHCC, Chutani said that their next market will be primary care physicians in the developed world.  While the device doesn’t replace high-end ultrasound equipment found in most U.S. hospital radiology departments, it is perfectly suitable for taking “a quick look” for example to confirm a pregnancy or determine that a baby is in the breech position.  Such devices could thus expand the range of services that primary care doctors do, taking business away from specialists.  This could be especially important for the twenty million (!) patients in America treated in community health centers. The needs of this community have traditionally not been the main focus, to say the least, of big-company health care technology developers but that seems to be changing as we shall see below when we come to General Electric.

Mobisante smartphone ultrasound

Mobisante’s ultrasound smartphone

Diagnostics For All’s paper diagnostics laboratory
For a former venture capitalist who used to attend an annual “lab-on-a-chip” conference that was all about silicon, glass and plastic, the appearance of a lab made of paper from Diagnostics For All (DFA) comes as a bit of a shock. It apparently impressed the jury of the WHCC poster competition, which awarded DFA the conference’s top prize. But there it is: a network of channels on a single tiny device routing blood, urine or other bodily fluids to tiny assay spots that give easy-to-detect color readouts. The product is based on the elegant microfluidics and materials science work of the serial biotech entrepreneur George Whitesides of Harvard University and the company’s board is studded with some of Boston’s biotech elite, e.g. former Vertex CEO Josh Boger. According to the non-profit’s web site, the nearly-all-paper chips are “designed for resource-poor settings”, are “less expensive to manufacture and deploy than alternatives” and are intended for populations that would otherwise have no access to the high-tech wonders of the modern diagnostics lab.

The DFA lab-on-a-stamp has not yet boomeranged back to the United States but one could imagine myriad developed-world applications beginning with self-monitoring for disease or for medication compliance.

Diagnostics for All lab-on-a-postage-stamp

Diagnostics For All paper “diagnostics lab”, offering high precision coupled with low cost and robustness required of deployment in “resource-poor settings”

Voxiva: Taking “mHealth” (“mobile health”) to the developing world – and back
Voxiva is one of these U.S.-based innovators that started out serving healthcare providers and patients in developing countries and has already made the leap back to the developed world. The company started in 2001 deploying mobile phones for public health with its disease-outbreak reporting system. Speaking at WHCC, William Warshauer, Voxiva’s Executive Vice President, pointed out that mobile phones are a game-changing technology in public health. By the end of 2010, 90% of people in the world will be living within reach of a cell phone signal. Voxiva anticipated this trend, and has built a range of platforms that use cell phones to address health needs. The company first established the HIV/AIDS health management system in Rwanda which helps that country manage drug stocks and avoid the type of shortages that once plagued them regularly. The power of wireless, Warshauer points out, is that you can not only pull information from multiple sites, you can also push it. The health care worker who is reporting the number of vaccines distributed can get a message back saying “your district is 15th in terms of vaccination rate.”

Boomerang: Recently, Voxiva launched its first service in the United States. Text4baby promotes safe motherhood among lower income women. The service is free to the users because mobile carriers have donated the messages. Women are asked for their due date and zip code and then get three messages a week.

These reports resonate with project work CBT Advisors did last year about how innovations in telemedicine were likely to find their way to the market. Our overpowering conclusion from that assessment was that iPhone apps, distance treatment by physicians and all manner of new services were being introduced both in the developed and developing worlds. But virtually none of it was being reimbursed! The innovation was finding its way to the end users with very little intermediation. And consumers outside of highly regulated countries like the United States were likely to derive earlier advantage from it.

Escaping the morass

While non-profits and for-profits avidly mine developing nations for future health solutions, what do companies here do? Plenty, obviously. But they are plagued by a morass of regulations, some well-meaning and efficient and some just stifling, imposed by a large number of federal and state agencies (HIPAA and FDA to name just two). We attended another conference in Cambridge, this one sponsored by Xconomy and held at the MIT Media Lab. See Xconomy’s report on the conference here.

What caught our attention was how many of the innovations featured at this star-studded conference were “workarounds” for some of the more outdated U.S. regulations. Two excellent examples of this are fax transmission of medical records and transmission of images only on CDs, not over the internet. Most physician offices still do it this way in order to comply with patient privacy regulations under so-called HIPAA rules. Thus the fax and CD have been “locked in.” Other transmission methods might be permitted under the regulations but compliance is so cumbersome that they have not yet been widely implemented.

Hamid Tabatabaie, CEO of Life Image, is focused on providing technology to cut costs for storage and sharing of images, and at the same time improving image quality. One billion medical images are expected to be taken annually in the United States by 2012, with waste that Tabatabaie estimates at $15 billion to $20 billion a year due to repeat imaging. Related to that is the lack of image management abilities in the form of networks for storage, retrieval and sharing of images.

At the Xconomy conference, Tabatabaie showed a slide of a skateboarder and an X-ray image. “We’re here to fix the problem that this guy’s buddies on Facebook saw his wipeout before his surgeon saw his X-ray,” Tabatabaie said. Typically, images are passed around the U.S. health care system on CDs. But many of these CDs never reach the right hands, or don’t work when they get there, which leads to repeat imaging. Life Image, a Massachusetts-based, venture-backed company is like a home page for images. Access to the images is tightly controlled, but once a physician is granted access, she needs only to click a mouse to see them. It has been adopted in nine northeastern U.S. hospital groups and now the company is expanding to Florida.

'His wipeout made it to Facebook before the X-rays made it to the surgeon.'

'His wipeout made it to Facebook before the X-rays made it to the surgeon'

So to put it bluntly, developing-worlders innovate to improve care; we innovate to overcome our own bureaucracy.

Innovation inching closer all the time
Going back to boomerangs: which technologies are likely to turn up soonest on U.S. shores? Some higher-cost technologies are here already. As Christensen pointed out in his talk at WHCC, Pfizer and General Electric (GE) are creating many of their innovative products for the developing world, where there is less regulation to get in the way, and then bringing them to the United States and Europe years later. Last year, GE CEO Jeffrey Immelt published an article in Harvard Business Review (“How GE is Disrupting Itself”), outlining why, in healthcare and other markets, GE is pursuing what he and his co-authors dubbed “reverse innovation”. He cited two products that have already boomeranged, a “$1,000 handheld electrocardiogram device and a portable, PC-based ultrasound machine that sells for as little as $15,000.” Both were “originally developed for markets in emerging economies (the ECG device for rural India and the ultrasound machine for rural China) and are now being sold in the United States, where [GE is] pioneering new uses for such machines. They are part of a $3 billion initiative of GE to introduce technologies in the United States that actually lower healthcare costs.

And some of even the more technology- and physician-intensive procedures – think heart surgery – that developing-world-based pioneers have taken on are moving closer to that key milestone. Witness this Nov. 25, 2009 Wall Street Journal piece.

It described the growing franchise of Dr. Devi Shetty, whose hospitals in India perform huge numbers of heart bypass operations (officially called coronary artery bypass graft or CABG) at a price point of $2,000, just a bit below the typical $50,000 to $100,000 charged by Western hospitals – with a lower mortality rate. Dr. Shetty is planning to build and run a new hospital in the Cayman Islands, an hour away from Miami by plane, offering surgeries at a middle-level price point.

Besides heart surgery, what other technologies will arrive soon? The intersection of smartphones and personal health monitoring is one sweet spot. Self-administered diagnostics (think home pregnancy and home HIV testing) and treatment compliance monitoring could be another.

Eventually, maybe even in less than twenty years, market forces are going to even things out. Pricing of healthcare is just so arbitrary and, at least in the United States, so unrelated to value. Yunus has said he hopes to build a health care system that provides quality care so cheaply “even Westerners will want to use it.”

Reading The Innovator’s Prescription again in the wake of healthcare “reform,” we are struck by the observation that there is virtually no reason for any health care provider in the United States to lower prices. Indeed, Harvard’s Christensen wrote, affordable innovation virtually always arises outside of standard systems including healthcare. And the Obama healthcare reform has more or less cemented into place the misplaced incentives. In the book, Christensen identified eight different categories of U.S. healthcare regulation that “now impede disruption and must be changed” (page xliii) i.e. that these regulations are preventing innovation from taking hold. But insurance reform did not affect even one of them! Maybe that’s why he sounded so frustrated in his talk. It’s as if every “must” in the book has been replaced with “won’t.”

So in the United States, we have well-meaning but strangling regulation. Elsewhere, there is rampant innovation. We think we know which will win. One way or another, the innovation we are noticing overseas will soon reach US consumers in ways that will be both remarkable and necessary.

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*Malorye Allison is a Boston-based freelance writer who writes and blogs regularly about innovations in healthcare.


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