The specter of D.C. overregulation haunts health entrepreneurs

A lack of clarity from government is stifling innovation in the health IT sector.

As we reported yesterday, the U.S Food and Drug Administration (FDA) is under pressure to decide how to regulate thousands of new mobile medical applications. Congress has been in session for three days to hear from the experts in the health IT sector on topics like taxation, regulation, and consumer privacy.

Silicon Valley’s health IT investors and entrepreneurs currently operate under a set of FDA guidelines issued in 2011. At that time, the FDA stressed that it had not yet issued an “overarching software policy,” and it asked for the public’s input.

Two years later, developers and investors are still “waiting on the sidelines” for an official decision, said Ben Chodor, the CEO of health app store Happtique, who called me after testifying in House Energy and Commerce committee yesterday.

This delay may prove to be a hindrance for entrepreneurs. “Investors are clearly following the debate in D.C. about regulating mobile health apps, especially those that use attachments to transform a mobile phone into a medical device,” said Missy Krasner, the executive in residence at Morgenthaler Ventures.

For years, the FDA has had the final say on whether new medical devices are safe for clinical use. However, it is poorly equipped to react to the explosion of new mobile health applications.

A potential concern is that the FDA will step up its enforcement of health applications targeted at consumers.

“These laws were created before this new medical technology was imaginable and before it was understood, and this may hamper innovation,” said Lauren Fifield, a health policy adviser at Practice Fusion, a San Francisco based startup. “The gap between DC and Silicon Valley is 3,000 miles, but it feels like 20 years in terms of understanding.”

Practice Fusion, an electronic health record (EHR) startup, is one of the fastest-growing players in the health IT space. It recently made its first major acquisition in the form of 100Plus, a medical apps maker, and is keeping a watchful eye on Congress. Fitfield’s said the FDA may make a short-sighted decision that could lead to unnecessary oversight in the health IT space.

What’s particularly problematic for the FDA is that some of these medical apps operate in a “gray area.” Would a device marketed to diabetic patients that connects a smartphone to a glucose meter need to be regulated? “To put it bluntly, that is the area that no one gets,” said Chodor.

Malay Gandhi, the chief strategy officer for health accelerator Rock Health [one class is pictured, above], is working on a guide to benefit its startups that operate under existing device regulations, and their best interpretation of draft guidance issued by the FDA in 2011.

“What is unclear how many of these companies—representing almost 40,000 apps—would fall under selective enforcement by the FDA,” he said.

Gandhi advised that the FDA provide a specific set of examples for apps that would need to be regulated. One example that congress is considering is a urine analysis app (it’s not clear whether the stick or the app is doing the diagnosis), which the FDA may need to approve before it launches in the App Store.

Most concerning of all is that while the FDA dithers, a small sliver of medical mobile apps used in clinical settings are slipping under its radar, which is a potential public health hazard.

“In short, FDA needs come up with their guidelines already — sooner rather than later,” said Chodor.

Top image via Rock Health