CE Device Makers Face a Steep Learning Curve in Marketing to Digital Health Market, Say Panelists

SAN FRANCISCO -- Consumer awareness, prohibitive costs and Food and Drug Administration regulations are hurdles to the mainstreaming of the nascent digital health market, said panelists at the “Health and Fitness Tech” session at the 2012 CEA Industry Forum Tuesday. While consumers are beginning to adopt mobile health technology, there are still major barriers to entry, panelists said.

Among the new territories CE companies have to navigate in the digital health industry is product positioning for FDA approvals, said Brad Thompson, an attorney and digital health adviser with law firm Epstein Becker. Thompson identified two “rules,” both based on years-old laws that pre-date current technology, that companies have to understand before entering the medical health space: the dichotomy between wellness and disease, and the FDA’s accessory rule. “If what you sell is intended for use in the treatment of disease and other conditions, the FDA regulates you,” Thompson said. An app directed to people who need to lose a couple of pounds doesn’t fall under regulation, but if in the marketing a company uses the word “obesity,” that is “a disease and you've just crossed over into FDA-regulated territory,” Thompson said. Creative marketers have tried to skirt the language issue by referring to a product’s purpose as “a way to collect data and send it to your physician,” but most people only hire a physician for a disease, Thompson said, which muddies the waters. “We've been arguing with the FDA that they need to clarify rules more than they are today,” Thompson said, “and they say they'll ‘get to it.'"

The FDA’s accessory rule, meantime, has “tripped up a lot of people” in the CE industry, Thompson said. The rule, written decades ago “when things were simple,” defines anything that plugs into a medical device as a medical device that’s subject to the same regulation as the device it plugs into, he said. While that makes sense for a product like a probe that connects to an ultrasound machine, Thompson said, the picture is less clear in the networked world. He cited a smartphone manufacturer putting an app on a phone that allows patients to download data from a blood glucose reader, and said under current regulations the phone would have to be regulated. “When you take that rule and apply it today, you have products that are connecting everything to everything,” he said. “Where is the FDA-regulated device and where does it stop?"

Thompson cited the tablet category as one that could hit obstacles in the digital health world. The FDA has said communication equipment is not regulated, which would include tablets, PCs and fax machines, for instance. If a product claims to move generic data from point A to B, “you're not regulated by the FDA,” he said. “But the moment you layer on a specific intended use for ‘disease or other condition,’ that’s when the FDA will regulate you,” he said. A tablet used to show ultrasound images because of its high resolution would be categorized as a medical device, he said. “That tablet may be no different from the other tablet a competitor is selling where they don’t make that claim,” he said. “It’s the claim that makes a difference."

While those involved in the fledgling digital health market see its potential and need in helping rein in skyrocketing healthcare costs, consumers aren’t plugged in to the concept and have few places to go to purchase the medical health devices or learn about them, said David Inns, CEO of GreatCall, maker of the 5Star urgent-response system. Inns asked the technology-centric audience at the event how many had gone out of their way to learn about digital health hardware or software and he estimated 2 percent of attendees raised hands. “And if this were the general population it would be much lower,” he said.

Some CE companies are coming to the health and fitness space deliberately and “kicking tires,” and others “don’t know they're doing it,” Thompson said. His firm did a survey of iTunes apps and determined that almost 10 percent of the health apps in a sample were subject to FDA regulations, “but to our knowledge they're not in compliance,” he said. Another third were “arguably” subject to regulation, he said. “You're talking roughly 40 percent of health apps in iTunes where there was at least a question” about FDA regulation, he said. While more companies are seeking advice on compliance, he said, “a lot more don’t realize what territory they're in."

Walgreens and Best Buy are early participants at the retail level, although Best Buy’s participation is largely in the fitness segment. At a previous panel on do-it-yourself health, Scott Moore, vice president-marketing strategy and consumer insights for Best Buy, said a challenge for the retailer, which has been beta testing sales of fitness devices, is where to position and merchandise the devices in stores. He also indicated it’s not clear what direction new management wants to take the health and fitness segment.

Walgreens intends to become a “healthcare provider, more than just a pharmacy chain,” said Igor Gershfang, senior director-emerging technologies solutions. Trends driving what Gershfang called the “retailization” and “consumerization” of healthcare include cost and the aging population. “It’s getting just too expensive to manage health,” he said, and “the system is approaching its limits.” He cited a shortage of medical practitioners and a statistic that 10,000 new members are added to the Medicare rolls each day, which is “taxing the system” and creating the need for technology to “empower” consumers to play a more important role in managing their own health.

As part of the “retailization” of healthcare, Walgreens plans to expand into diagnostic and wellness services, including offering devices and sensors, Gershfang said. More than 75 percent of the U.S. population lives within a 3-5-mile radius of one of 8,000 Walgreens stores or clinics, he said. Education will be key to success of the category, he said. Devices and sensors alone “can only take you so far,” he said. “You need the service layer around it,” he said, citing the chain’s pharmacists and clinicians that will advise and consult consumers on digital health products.

Qualcomm has entered the digital health arena to “own part of the value chain,” said Clint McClellan, senior director-Qualcomm Life, the company’s healthcare division. Companies trying to get to market with healthcare services “are having trouble with connectivity,” McClellan said. Going from a blood pressure device back to the cloud “is difficult,” he said, so the company developed the 2net Hub with multiple radios including 3G, Wi-Fi, Bluetooth and others. Qualcomm pairs the hub with a chronic-care kit including blood pressure sensors that authenticate with Qualcomm’s network operations center and connects with all health devices in the house, he said. Qualcomm is now developing a virtual hub app for iOS and Android smartphones that enable the phone to become an intelligent hub that knows “when and how to interrogate sensors,” he said.

The importance of having Qualcomm and other communications companies come to the market is in infrastructure, said Rob McCray, CEO of the Wireless-Life Sciences Alliance. “You no longer have to build the end-to-end system,” he said. “There are reliable business partners available so if you have a component that’s part of the chain, you don’t have to do everything yourself."

Security is a major concern for the digital health market, panelists said. Inns of GreatCall has been working with the Health Insurance Portability and Accountability Act of 1996 and has made sure “privacy and security are the most important things we've stayed focused on.” Without FDA rules in place for digital-age products, “the most important thing is that consumers know and understand that their data is secure and private when it comes to being stored,” Inns said. While security hasn’t been part of the FDA equation because it doesn’t fall under FDA purview thus far, “it is very quickly going to become the most important issue in the consumer’s minds that those who are taking this information know how to handle it properly,” he said.

McCray of the Wireless Life-Sciences Alliance urged companies not to “be afraid of the FDA,” comparing the health industry to the car industry, which is also a “highly regulated and litigious environment.” As a result of the mandates, he said, cars have “gotten better, cheaper and more efficient over the last three decades,” he said. “If the auto industry can do it,” tech companies in the healthcare market can do it as well, he said.

A representative from the Custom Electronic Design & Installation Association asked what would be required for that organization’s members to participate in the digital health industry. McCray said installation is a regulated activity as the final step in the manufacturing process. Installers are typically certified by the product manufacturer, who assumes the responsibility for the installation and provides training, he said.