The Theranos Verdict: In Healthcare, Money Should Follow Science

The Theranos Verdict: In Healthcare, Money Should Follow Science

by | Jan 5, 2022

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MDisrupt CEO and founder Ruby Gadelrab on the best way for investors to avoid Theranos-style mistakes

“Move fast—responsibly.”

Silicon Valley has become known for its’ “go fast and break things” approach. But the core principle of healthcare is “do no harm.” However, one cannot safely, ethically or legally “fake it until you make it” when patients’ health and lives are at stake.

That’s one clear takeaway from the verdict that found Elizabeth Holmes, founder and former CEO of the health technology company Theranos, guilty on four counts of defrauding her investors about the company’s blood-testing technology.

From my perspective, it’s extremely unfortunate that Holmes was acquitted of four other counts of fraud involving patients who said they were deceived by Theranos’s claims. While investors were indeed deceived, they had the opportunity to look more closely at Theranos before investing. Patients who believed the company’s claims did not have that option. In this verdict, investors were vindicated, patients were not.

But in the rush to draw meaning from the verdict, let’s not assume that all digital health companies—or even most of them—are like Theranos. There are plenty of healthtech companies out there who are eager to go fast, responsibly—and plenty of investors willing to do the homework that Theranos’s investors skipped.

While healthcare is complex, highly regulated, and probably the hardest area in which to invest, there is a clear formula that investors can follow to avoid making costly—in every sense of the word—Theranos-style mistakes.

Invest in medical diligence

Investors routinely do technical and financial diligence using experts. When investing in healthcare technology companies, investors must also do medical diligence using healthcare experts. It’s a critical element of establishing whether a product is commercially and clinically viable.

The 5 elements of medical diligence

1) Does the technology actually work? This is often known as analytical validation or technology validation. Investors need to determine if there is evidence to back up the founders’ claims. And the marketing must be truthful. It is both unethical and illegal to overstate claims.

2) Show me the data! (Ask for the clinical validation data.) Does the technology actually pick up a disease or biomarker when it’s present—and not pick it up when it’s not there? Not all data are created equal. Good data are generated externally with scientists and research labs, great data are published in peer-reviewed journals, and excellent data are published and replicated. In the case of Theranos, every time they were asked for the data they claimed that they didn’t want to share their “trade secrets.” In healthcare you have to publish your studies and also submit them to regulatory bodies.

3) Evaluate the clinical utility. Ok, the technology works, and successfully detects what it is supposed to. But is the product clinically useful? Does it actually solve a real problem in healthcare or is it just technology for sake of technology looking for an application in healthcare? Will it actually change or impact the medical management of a patient? Is there buy-in from both health systems and healthcare providers?

4) Review the health economic data. How much does the technology cost to implement, and how much does it save the healthcare system compared to the standard of care? Will there be, or is there, Medicare, Medicaid, or private insurance reimbursement for the treatment or product?

5) Confirm legal and regulatory compliance. Has the founder evaluated all the laws and regulations that apply? Can the founders prove that the company and the technology are compliant with those laws? What is the reporting structure of the general counsel, the chief compliance officer, and/or the privacy officer? Are there any conflicts of interest with the same? Healthcare is one of the most regulated industries in the US, making healthcare compliance a crucial and growing field within the industry.

Look closely at company structure & culture

Make sure the RIGHT healthcare experts have a seat at the table and a strong voice in the process (and are not just there for show and credentials). There are a few important signals that can help investors determine whether this is happening.

For instance, does the company have physicians, scientists, or clinical experts within the team, or as investors? On the board of directors? What about as part of the C-suite or in senior positions? The most successful healthcare startups have a balance of clinical, commercial and tech skill sets. And ideally, a digital health company would have a chief medical officer and chief compliance officer on the executive team even in fractional roles. At MDisrupt, one of our specialties is matching vetted healthcare industry experts with digital health startups so they can access all the essential skills they need, on demand.

Company culture is also important. Talk to the employees—do they see a culture of silence and secrecy, or one of transparency and collaboration? One red flag: When there is high turnover in scientific, clinical, or compliance positions, a company is in trouble. (I know this because many such individuals join our expert network at MDisrupt. In fact, often the culture is so bad that they leave the company before they have other jobs.)

Don’t assume all healthtech startups are like Theranos

Every day I meet incredible truth-seeking founders and who are building life-changing health technology products. Unfortunately and unfairly, many are being greeted with skepticism in the shadow of Theranos—particularly women founders, lab testing companies, and companies focusing on point of care and blood collection devices. Yet all it takes is some medical diligence to be able to separate the truth-seekers from the rest.

Involve experts from the start

Engaging the right experts early and often in the development of a health product can be the key to adoption and scale within a healthcare setting. By building collaborative partnerships between digital health and health industry experts, we can get the best of both worlds.

If you want to dive into more interesting topics related to healthcare, check out our blog at MDisrupt.

At MDisrupt, we believe the health products with the most potential to do good in the world should make it to market quickly. We help make this happen by connecting ambitious digital health innovators to the healthcare experts who have the skills they need most.

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Our experts span the healthcare continuum and can assist with all stages of health product development: This includes regulatory, clinical studies and evidence generation, payor strategies, commercialization, and channel strategies. If you are building a health product, talk to us.

MDisrupt One Year On—A Year of Transformation

MDisrupt One Year On—A Year of Transformation

by | Jun 11, 2020

The only constant in life is change. And nowhere is that more true than in your first year as a start-up.

As many of you know, MDisrupt was founded a year ago because we believed the healthtech world was lacking “medical diligence”. We believed this was the missing link in the market and the reason why so many healthtech startups were stumbling on the path to successfully commercializing their health products.

We originally created MDisrupt to identify healthtech companies who were at risk of becoming the next Theranos, or uBiome. Our hypothesis was that if investors undertook more rigorous medical diligence, they would be able to more easily identify and evade potential investments in companies that were not clinically or commercially viable, or who were not taking the appropriate regulatory path.

Like any start-up in its first year, we had ups and downs, learned a ton and we soon identified our true direction – to play an even more constructive role in the healthcare / healthtech industry than we had originally planned. Luckily we were small and nimble enough to be able to react quickly to the market dynamics and, while some of the changes were tough, they forced MDisrupt into a stronger, better place. I want to share with you the ways we have changed and the lessons we learned along the way. 

Changing Focus – Healthtech Investors Were Not The Primary Customers For Medical Diligence

It turned out that healthtech investors were not our primary customers. There is not really a ‘budget’ for medical diligence in an investment transaction. Tech funds source health subject matter experts from within their network to conduct diligence, whereas, bio and life sciences investors already have health domain expertise on staff.

We soon found that it was the bigger and more established health companies that had utility for our medical diligence services to provide an objective external third party view and address their needs in a range of fundamental areas such as: 

  • Benchmarking: 
    • “How do our clinical standards as a laboratory compare to other clinical labs?”
  • Mergers and Acquisitions: 
    • “We are considering an acquisition and want to understand the new market of the company we are acquiring.”
  • Market Sizing: 
    • “We are launching a new product in a new market and want an objective view of the market size and opportunity.”

Our True Market: Healthtech Truth Seekers Wanting Much More Than Medical Diligence Services

While we had limited traction with investors, one of the most inspiring parts of the last 12 months was meeting the healthtech founders who were determined to build their companies responsibly and cared deeply about building impactful, scalable and data-driven health products. But they did not just want our medical diligence assessments, they wanted access to us and other health industry experts to help them build their health products well in the first place. They were aware of how other healthtech companies had stumbled in their early days and did not want to make the same mistakes. 

These companies wanted our help to solve problems such as: 

  • Should my test be an LDT or an IVD?  Is it a health or wellness product?
  • What is the appropriate regulatory path I should take in the US?
  • How do I find a part-time Chief Medical Officer?
  • How do I access the self-insured employer channel?
  • What is the right strategy for engaging healthcare providers and payors?
  • Help me define a marketing strategy for reaching medical audiences.

Even the investors we engaged with in our early days, started to connect us to healthtech companies in their portfolios. Very soon we were overwhelmed with these types of requests and had to start tapping into our network of colleagues to help us on these projects. We quickly realized that our real market was helping the healthtech founding teams themselves.

Uncovering The Unmet Need: “The Gig Economy For Health Industry Experts”

As we began to reach out to our networks for help on these projects, and with all the press coverage we received when we launched, we were inundated with support from experienced health industry professionals and colleagues. The same key themes emerged: 

  • It is about time someone helped improve standards of health products.
  • How can I help and get involved?
  • Can I work for MDisrupt?
  • I want to work with healthtech companies and help them get to market quickly and safely.
  • How can I find the healthtech companies who could use my skills and expertise?

We heard from our client healthtech companies that they were struggling to access the experts they needed and here we were with hundreds of emails from passionate, experienced experts ready and willing to help. That was the moment we realized that the real problem we needed to solve was how we could provide easy access to experienced, vetted health industry experts. We knew then what we needed to build into the MDisrupt platform – a health expert two-sided marketplace. 

And so we did.  To date we have 58 consultant subject matter experts spanning the healthcare continuum, averaging 10 years’ experience in their discipline. Our expert consultants include:

  • MDs
  • Scientists
  • Market Access Experts
  • Regulatory Experts
  • Commercial and Channel Strategists
  • Lab Test Designers
  • Clinical Trial Designers
  • Health Economists

Many of these industry experts are still practicing and so are able to provide the most current perspective within their disciplines. They are able to assist healthtech companies in a variety of capacities including: 

  • Experts-in-Residence
  • Part-Time Chief Medical or Chief Scientific Officer
  • KOLs
  • Medical or Scientific Advisory Boards
  • Consulting Projects
  • Expert Opinions

Engaging these health industry experts as consultants has enabled us to solidify our mission of helping to bring the most impactful health products to market faster and more responsibly by uniting the healthtech and healthcare industries – benefiting from the best of both worlds.

The Covid-19 Pandemic: An Unexpected Driver In Uniting The Healthcare And Healthtech Worlds 

As we entered 2020 the onset of the coronavirus outbreak changed the world for us all. Never has healthcare, healthtech and science been more in the spotlight than over the past 6 months. Very soon we started to see healthtech companies make significant shifts in their business models to help address the global pandemic. Some examples of these include:

  • Lab testing companies that wanted to shift into developing Covid-19 Testing
  • Telemedicine companies that had to scale significantly
  • Instrument companies that had developed products for adjacent industries wanting to move quickly into clinical lab testing
  • Behavioral apps who pivoted to address mindfulness and stress-management issues arising from lifestyle shifts due to prolonged shelter in place mandates
  • Regulatory and clinical activities for “Back to Work” scenarios – how employers, colleges and schools can bring people back safely

Once again, we have been inundated with requests for health industry experts to help healthtech companies make these pivots and transitions. Increasingly, healthtech companies are seeing the value of having scientific and medical experts as core parts of their teams to help them navigate the new opportunities that the pandemic has brought to the industry.

As Start-Ups Evolve, So Do Their Teams 

Earlier in my career, while working for a start-up, a wise CEO told me that the people that found a company are not always the same people that grow the company, or scale it or take it public.  Teams evolve and different people and skills are needed for different stages of progression. 

MDisrupt was founded by myself and my close friend and colleague Jill Hagenkord, who I nicknamed the “Godmother of Precision Medicine”. We founded MDisrupt with the mission of helping bring the most impactful health products to market faster and more responsibly by uniting the healthtech and healthcare worlds. Today is the one-year anniversary of MDisrupt and, while that mission has not changed, it is bittersweet for me to announce Jill’s departure from MDisrupt. Jill was offered an incredible opportunity that she could not refuse and she is off to pursue her next amazing adventure. I don’t want to steal her thunder by announcing where she is going until she does, so stay tuned for her announcement. I am so incredibly grateful for the blood, sweat and tears Jill poured into MDisrupt working alongside me over the past year and how she helped turn a glimmer of an idea into a business that can truly make an impact for so many companies. Myself, and the MDisrupt community she helped to build, thank her for her dedication, passion and brilliance and we will be cheering her on as she embarks on her next journey.

We have also been lucky enough over the past few months to add some new and incredibly talented people to our team:

Ragan Hart, MS, PhD – Director of Operations and Business Development
Ragan is an applied health economist, who evaluates clinical genomics and digital health technologies.  Learn more about Ragan Hart

Dr Pamela Mehta – VP of Medical Affairs
Dr. Pamela Mehta is a board certified, practicing orthopedic surgeon and the founder of Resilience Orthopedics. Read more about Dr Mehta 

Please join me in welcoming them to the MDisrupt Community!

A New Year, A New Look

As a health product marketer by blood, I believe it is important that a brand is not only representative of your company’s personality but also a critical communication vehicle for your target audiences. We serve both health innovators and our health industry experts equally. Our goal has been to create a brand that resonates with both sectors, keeping the modern feel that the healthtech industry is accustomed to, but enriching this with content written by our experts to address the real issues entrepreneurs may face as they take on the challenges of responsibly building scalable health products.  

We also wanted to make it easier to showcase some of our experts’ skills and create simpler ways for health companies to find them. So we gave ourselves a rebrand – take a look at our new website, we welcome your feedback. I want to thank Paul Bohanna, our creative and technical director who has worked tirelessly over the past few months to reimagine our brand and build our website. 

A Company Is Only As Good As Its Network of Supporters – Thank You

As with any start-up, the first year is a year of learning, pivoting and identifying new opportunities. But one thing has been clear – we have been blessed with incredible support: from the clients that believed in us and trusted us to work closely with them on their projects, to the network of health industry experts that joined our platform and have been passionate about not only helping the healthtech companies but also helping us directly, advising us, writing amazing blogs for our website and evangelizing our message.

Finally, I want to acknowledge a few partners who have supported us and provided wisdom and guidance from our very first day.  

One year on, I am humbled and grateful for all the support and from the bottom of my heart I thank you all. 

Ruby Gadelrab
CEO

Why medical diligence is essential for healthtech

Why medical diligence is essential for healthtech

by | Jul 26, 2019

We spent the early part of our careers working in the traditional health and life sciences industries. That’s where we met, traveled the world together on medical roadshows, and became great friends. We bonded around our shared frustrations at the slow pace of innovation within our respective fields. We had recognized that technology was going to transform the healthcare industry and were inspired by the early trends in consumer-empowering health products. We wanted to contribute to that transformation.  Ten years ago, we each decided to move to Silicon Valley. Since then, within our industry, we have seen and witnessed the incredible, the inspirational, the irresponsible, and the wasteful. And now we are on a mission. Despite healthtech being one of the fastest growing industries (over $50 billion spent since 2011) it can claim relatively few success stories. Most venture investors expect an exit within 7-10 years. Yet for a health product, it can take 10-17 years to gain widespread adoption and reimbursement. Many companies have (and will) run out of money before they become profitable. Furthermore, many companies with promising ideas have suffered completely preventable missteps because they simply didn’t understand the process of successfully getting a product into the healthcare market. Some well-known examples include Theranos, uBiome, and 23andMe. There are many other stories that weren’t high-profile enough to make it into the mainstream press. Our early years at healthtech companies in Silicon Valley were challenging. After working at a number of startups we realized that medical expertise was often significantly underrepresented. We learned that tech had a completely different culture from what we had been accustomed to in health care. For example, a common ethos in the tech industry is move fast and break things . It’s standard practice in consumer tech to launch a minimally viable product (MVP) and iterate on the fly. In contrast, the primary rule in health care is first, do no harm. And the data proof points for health products are much higher than in other industries. And yet there is a clear and well-established formula for healthcare market adoption and reimbursement. Unfortunately, entrepreneurs are often several years in before they are fully aware of all the steps that this formula requires. For example, when commercializing a health product you have to communicate in a different way in order to convince a skeptical audience. There is a strategic approach to marketing and business development activities. It requires a combination of the right message, at the right time, with the right data, from the right person, through the right channels. Persuading a scientist or physician isn’t done with a testimonial or a five-star rating. It happens through studies, peer-reviewed publications, podium talks, health economics data, and medical society guidelines.   We believe that what’s missing in the healthtech industry is a medical diligence process. In most investment transactions, there is usually a rigorous due diligence process which includes legal, financial, and technical diligence. But there is currently no established protocol for assessing the clinical and commercial viability of a healthtech product.     

Our hypotheses are

  •  Healthtech entrepreneurs need to find the balance between “go fast and break things” and “first do no harm.” If they understood the formula for healthcare market adoption earlier, they could accelerate their path to market.
  • Investors in healthtech need better ways to assess whether or not a healthtech company can successfully capture sufficient market adoption in the expected timeframe.
  • Organizations such as employers, health systems, and commercial retailers who are being approached by healthtech companies need an objective way to assess the clinical viability of health products before they adopt them.
It’s taken us 10 years to learn how to speak both languages and balance the best of both worlds. Our aspirations when we came to Silicon Valley were to be a part of the responsible transformation of healthcare. We believe that a core part of this is bridging the cultural divide. 

That’s why we founded MDisrupt.

MDisrupt is the world’s first medical diligence company for the healthtech industry. Our mission is to unite healthtech and healthcare stakeholders to accelerate the responsible disruption of medicine. By doing so, we can get potentially impactful health products to patients faster. MDisrupt also provides an easy path for practicing medical professionals to participate in our mission. We will matchmake them with the healthtech companies who need their expertise. Our network consists of some of the most experienced people from the scientific, medical, regulatory and commercial sectors of health care. We call them MDisruptors.  We all share a common desire to see the products that can have the biggest impact on patient care make it to market quickly and responsibly. We believe that by uniting the innovators, entrepreneurs, and investors from the healthtech industry with our team of experienced MDisruptors, and applying a medical diligence process, we can get there faster together.

Written by Jill Hagenkord, MD and Ruby Gadelrab