Why Health Care Is Not the Future for Apple

on February 12, 2014

AliveCor EKG

As Apple looks about for ways to extend the iPhone-iPad ecosystem, personal health care seems like a natural. The iOS devices are already extremely popular with health care professionals, and apps that supply health information to doctors are among the most expensive products in the App Store. In a Tech.pinions Insider article, John Kirk figures that health care-based wearables could be the next big frontier for Apple. While I agree that health care will grow as a important element of the iOS ecosystem, Apple will likely leave the devices to third parties that are better equipped to compete in this specialized market.

The reason, in a word, is regulation. Throughout its history, Apple has wisely steered clear of highly regulated markets, whose hallmark is slow moving cautiousness. And markets don’t get much more regulated, or slower moving, than health care. Anything the Food & Drug Administration classifies as a Class II medical device ((Class I devices, “not intended to help support or sustain life or be substantially important in preventing impairment to human health” (Code of Federal Regulations) are simple  items such as canes or walkers and can generally sold without advance approval as long as they are safe. Class II devices, which includes most things that do any measurement or assessment, require proof of both safety and effectiveness. Class III devices are  the most regulated and are almost never sold except through medical professionals.)) , especially if there is anything novel about it.

The 23 and Me Challenge. The same sort of regulatory regime that cracked down on the Google-backed genetics company 23 and Me can make the consumer market for medical devices a big challenge. The AliveCor Heart Monitor (photo above) is a two-contact electrocardiogram that works as a case for an iPhone or a Samsung Galaxy S3 or S 4. But even if you know how to read an EKG yourself, you cannot just use it that way (at least not legally.) Although you can now order the $199 device without a prescription, you must send  the readings off for interpretation by either an AliceCore “cardiac technician” or clinical review by a board-certified cardiologist.

An executive of one company, who wanted to remain anonymous because of ongoing negotiations with the FDA, gave me an example of the frustrations. As part of a comprehensive home care system, the company had developed a connected blood glucose monitor. A diabetic patient would take regular readings, which would both be sent to a physician and measured against a database to give an interpretation and advice, say to go for a walk or eat something soon to regulate the glucose level. The FDA was fine with the physician notification part, but said absolutely no to advice and interpretation because that was practicing medicine and could only be done by a licensed professional.

Verizon wireless pulse oximeter
Verizon wireless pulse oximeter

The Challenge of Integration. Another impediment to entry into this market that the for mobile healthcare devices–glucose meters, pulse oximeters, blood pressure monitors, or pretty much anything else–they need to be part of an integrated system that pumps data into providers’ systems and specifically into their electronic medical records. This is an extremely complicated integration task and is almost certainly left to companies such as Verizon, AT&T, and Qualcomm that have made major investment in these systems. And even then it isn’t easy. It took Verizon more than two years to win full FDA approval for its machine-to-machine Healthcare Enabled solutions network.

The complexity of the approvals process makes for a painfully slow path to market. The realities of the system means that most purchasing is done not by consumers and often not healthcare providers, but third-party payers. Prices are high and markets are relatively small.

Just the sort of business the Apple hates.  I do expect that Apple will enter the wellness and fitness market with sensor devices that take advantage of the M7 sensor chip, which made its debut in the iPhone 5s.This is a crowded field, with companies such as Fitbit, Jawbone, and Nike already established as incumbents, but I would be surprised to see Apple do something new and exciting in coming months. But the broader healthcare business is a cup Apple may well prefer to let pass its lips.