Capitalism without bankruptcy is like religion without sin. Bankruptcies and losses concentrate the mind on prudent behavior.
– Allan Meltzer (rephrasing of an old adage)
Last weekend, I binged through an incredible podcast (thanks Alexa!) called The Dropout about the saga of Elizabeth Holmes and her ill-fated biotech venture Theranos. It made me look forward even more to when I get to read Carreyrou’s Bad Blood, based on all of the WSJ articles I had read before. Her’s is a very compelling saga about our insatiable desire as Americans to be pioneers and frontiers(wo)men of the 21st century while simultaneously making billions.
Before I get into the meat of my latest thoughts, I want to be very clear on one thing: I am of the belief that Theranos was an unjustifiable criminal enterprise. Putting millions of patients’ lives at risk through fraudulent behavior is not “flying the ship and building the ship”. Real-world decisions have real-world consequences, and I think that this case seems more clearly a case of right and wrong as time goes on.
However, one of the questions that the podcast explicitly brings up is this: what role does Silicon Valley’s “win at all costs” and “fake it till you make it” have when it comes to disrupting healthcare? More broadly, what role does capitalism have in healthcare? Is it corrupting? Should we just listen to the 2020 Democratic candidates and accept that Medicare-for-All (single-payer or some safety-net alternative) is the right way forward and enough with healthcare as a money-making venture?
I’ve written before about how private markets are an incredible technology that help focus the whims of many to align to simple, achievable goals. I’ve hinted at how complex our healthcare system is (largely driven by anachronisms in how we pay for and deliver it). But now I want to answer the question directly: should innovation in healthcare be different than for existing industries Silicon Valley has disrupted?
Yes, but Tech can actually provide a model for how we have our cake and eat it too.
Let me explain this by way of analogy. Let’s say you are about to buy a home. Congratulations! You’ve signed some papers, found the perfect neighborhood, and lined up a lender. The offer was accepted and you are about to close. Just one small process: the inspection. The inspector is walking through your soon-to-be-home and as he sees the outside of your house he says, “Hrmm, uh-oh.” You wait for him to continue his walk-through, and just before he finishes he goes to your basement foundation wall and says, “Hrmm, uh-oh.” Which of those worries you more? If you’re like me, probably the foundation wall. The foundation of your house crumbling is a far costlier, scarier proposition than a small leak or missing piece of vinyl siding.
And that’s how we have to approach Silicon Valley disruption to healthcare. There are varying degrees to which healthcare must continue to evolve. Core phlebotomy and related lab work that is the basis for clinical diagnoses needs to be treated with infinitely more care than improved teeth-whitening products. Some of the FDA’s guidelines on real-world evidence have been really illuminating on this topic and frankly, hearten me that our government agencies are being responsive in the Age of Tech.
However, these lines are going to get blurred very quickly. For example, Amazon’s recent acquisition of PillPack shows that it is getting serious about disrupting healthcare logistics. This is less concerning in cases of delivering vitamins. A missed day of vitamins won’t have major adverse impacts. But what if Amazon misses a shipment of at-home chemotherapy pills? How about if Amazon becomes the primary supplier for a hospital’s perioperative department and misses a day’s worth of disposable surgical instruments?
In my opinion this is a solved problem. At major tech companies, product capabilities are segmented into one of two major “buckets”:
- Platform and Core: These are software solutions and services that should be very rarely modified and undergo extensive review/testing when they are
- Applications and Non-Core: These are portions of the software stack where it will not cause undue burden to the business or to users if they are non-functional; they can be updated at a daily/weekly cadence with ease
This segmentation is the reason that you will see far fewer upgrade to the GMail core encryption protocol than you will to the “One-Click” integrations GMail has for airlines, car rentals, tickets, etc.
Prudent leaders of 21st century health systems are going to have to be clear in drawing these lines for their own organizations. For example, modifications to core insurance eligibility checking systems should be performed far less frequently than updates to fitness monitoring apps. With this in mind, innovation won’t die on the vine for core capabilities, but rather be entrusted to be as advanced as possible without sacrificing patient safety or operational stability. Silicon Valley is more likely in this model to be successful improving healthcare by nibbling away at the edges of healthcare delivery than providing a grounds-up rethink.
 Supply chain risk in pharmaceuticals and medical devices is a huge concern for the modern healthcare organization, leading organizations like Intermountain to develop their own non-profit, named CivicaRx, for generic drug delivery.