I broke a thousand hearts
Before I met you
I’ll break a thousand more, baby
Before I am through.
-Lyrics to Bad to the Bone by George Thorogood
Last week I had a startup entrepreneur come to me with an idea about how to “pivot” his company strategy. The company, which had begun as a medical device company but couldn’t quite find it’s market, was considering re-emerging as a consumer-focused digital medical device company in an adjacent market. The idea was to create a device to measure a serious medical condition and market it to consumers directly. Their plan was to target mothers who would be paranoid enough to spend money on medical devices to diagnose an issue in their children.
Imagine my heavy sigh. 
Ever the heart-breaker, I had to tell this person that this strategy did not make any sense to me. As his target market representative du jour, I mentioned that there is no world in which I would trust myself to diagnose a major medical problem. Rather, if I even suspected a hangnail I would rush my precious princess straight to the doctor, do not pass Go, do not pay iTunes fees.
In fact, as I sat there explaining this psychology, I could not think of one single digital health company addressing a major medical condition that had successfully created a company by selling directly to consumers. If I am missing one, please do let me know in the comments section below. Please remember I am talking about companies that sell directly to consumers, not to physicians. And I am also talking about companies that address real, hardcore medical conditions, not fitness and not beauty. People will spend all kinds of money on fitness and beauty products even knowing full well they will make them neither fit nor beautiful. But medical products? Not so much. Insurance is supposed to pay for that. Or at least that’s what most consumers think.
Yes, there are some consumer-direct digital health companies that have had minor successes in the market, but none that have been able to achieve any size at all and certainly none that were able to deliver on venture capital return goals, even reasonable ones. And here’s why: if someone has a major medical problem they sure as hell don’t trust themselves to diagnose and treat it; they want their doctor involved, and appropriately so. Consumers might use a digital health medical device type product if their physician recommends it, but buy it off the shelf on their own without physician prescription or recommendation? Nope.
I have written about this issue before (consumer willingness to purchase medical products) and have seen my Digital Health, Destiny and Doritos article literally circle the globe. I think it’s because I talk about guacamole in the article. Everyone loves guacamole. If you don’t like guacamole, I have a digital diagnostic product to sell you that will determine your mental fitness to visit California, where guacamole consumption is mandatory.
So this is a cautionary tale for entrepreneurs, whose passion for their work is always so admirable but who don’t always think through this consumer issue to its logical conclusion (doom). And all too often, when I break their hearts by telling them what I know is the truth, they get even more committed to proving me wrong. I have broken more hearts than George Thorogood. I am pretty sure I’m not through yet.
I love this quote from George Santayana and even have it hanging on the wall of my office decorating a Road Runner & Wile E. Coyote animation piece, “Fanaticism consists of redoubling your effort when you have forgotten your aim.” Way too many entrepreneurs are way too committed to their vision of minting rational and engaged healthcare consumers when they should be thinking about how to influence those who influence consumers instead. And in case you needed further amplification on this issue: the cost of direct to consumer marketing is beyond the realm of nearly every healthcare-focused venture fund’s checkbook limit. 
If I had a dollar for every entrepreneur to whom I said, “Dear God, please don’t rely on a direct to consumer strategy or you are doomed” and who later came back to me and said, “you were right.” I wouldn’t have to work anymore. In fact, this may be my new business model. Download my new app and receive a small electric shock whenever you think about going direct to consumer. I know you will thank me. That will be $1.
Damn it. $1 sent.
Geoff, it is a recurring payment. Lisa
I guess it’s Health Hero Alumni Day here at VV! How does what you’re saying gibe with the existing and ginormous DTC self-help industry, which largely exists because mental health services are a) unaffordable, b) unavailable, c) and typically suck?
I can only speak from personal experience as a function of having worked for you. Steve, and Geoff.
Interesting point Suneel. I am not sure that self-help qualifies as “real medicine” but perhaps it is a substitute when needed. You are right about mental health services but since this self-help category rarely is served by self-pay medical devices (unless you count tequila bottles), I think I am still on to something. Lisa
Understood – just binning one of my strategy slides – JJ
Jim – Hate to say I told you so, except to you…then it’s fun. L
Lisa,
You’ve done it again. Brought a fresh, clear perspective and message on unchecked narcissism (of people at least smart enough to ask your opinion.). I especially appreciated your cautionary tale about the true costs of DTC marketing, as well as buying behavior.
Readers interested in expanding their understanding of health policy and DTC might enjoy The Weeds Live! Podcast, published April 19, 2017, where they walk through Singapore’s Health Care System:
https://www.acast.com/voxstheweeds/weeds-live
The topic evoked groans (I was there); we all thought the topic was irrelevant (and otherwise Bad to the Bone, heartbreaking relative to expectation).
Instead, Ezra Klein, Sarah Kliff, and Matt Yglesias walked through how another country pursued a strategy that included consumer choice (DTC) combined with forced saving/spending and dramatically lower spend on healthcare (4% of GDP, rather than the US’s 18%).
The related note is that consumers were not trusted to make purchasing decisions with their own health care dollars saved. (In the US, people buy lots of reading glasses the end of their year of HSPs, for fear of losing their healthcare saving. So our policy can be a charade as practiced). Lots of other telling details about healthcare spending and psychology in the story. Less car ownership, gun ownership, drinking, drugs, obedience culture, and non-government transparency rounds out some of the interesting high points.
Thanks for painting such a clear picture, and including a free trip to New Jersey in the video.
Thanks, Joe, for the info. Super interesting. Lisa
You’ll find “The Weeds Live!” podcast episode here:
https://player.fm/series/voxs-the-weeds/weeds-live
1) what is wrong with all you people commenting in the middle of the night. I think you all need to buy a DTC sleep enhancement aid.
2) I think Lisa you are only right “so far”. And I guess as you never tell us what you mean by a medical device your prediction is safe. But it’s pretty clear that the technology for in home detection of lots of stuff is here and being sold to consumers. Weight scales? Blood pressure cuffs? Already here and being IOTed rapidly. EKGs? Alivecor on the phone and soon on the wrist. OMSignal in the shirt. Your Dutch friends are adding a line of diagnosis tools for in home testing and monitoring. And while you maybe happy to run to the pediatrician for a hangnail my slightly-less-spoiled-than-yours-Marin-brats make do with video visits now and algorithms in a few years.
I see an 80% chance of the average consumer bathroom being crammed with this stuff in 5 years. Just as their draws are full of discarded Fitbits now.
So who’s going to buy this stuff for Marin yuppies if not themselves…
Matthew,
Agree with you completely, AND
1a) I already have that DTC sleep enhancement aid, made by Apple and called an iPad with stock apps. Not a greenfield for new entrants.
1b) Not to be too defensive, but 5:30am on this site is Pacific Time. For me, it was 8:30am ET. So I needed the DTC “Get to Work” App, not the DTC “Sleep Enhancement Aid.” And, of course, that also already exists as “Calendar” or OmniFocus or GTD or a long list of others.
Lisa is right. There are lots of reasons a new entrant should be careful. Market maturity, direct competition and substitute products are three big categories.
I will give Lisa my dollar next time I see her. Great advice.
J
Hey Matthew, no consumer buys a blood pressure cuff or anything like it without a physician’s recommendation. Weight scales for weight loss, sure, but real digital health for real medical conditions (eg stuff that needs FDA approval) no way. Sure there is stuff out there like AliveCor, but it hasn’t been able to achieve size as a company because not enough consumers will shell out for this stuff. My point is, you gotta sell the doctor and they may do the consumer selling for you (if you’re lucky).
My Marin brat is cuter than your Marin brats 🙂
Mostly I agree with your point that people should go to the doctors. But I myself actually might buy the product because 1) honestly I do not trust the doctors so much, 2) I have some medical trainings, I would like to have some ideas before going to the hospital. Also you are right, scale could be an issue for the company even though they might has a small market. They will have trouble for the revenue and valuations…
Thanks for the note Qingfeng. It’s a complicated issue. Some consumers are qualified and engaged enough to find products themselves, it’s just such a small number that it’s very hard to make a significant company from it.
I think that someone from Marin ignoring the massive market in self-diagnosis, more or less self-prescription, and for definite self-treatment on 4/20 of all days is missing the leading edge of consumer healthcare!
Great post. Sign me up for the cheap electo shock therapy.
It comes with the $1/month business model.
Lisa, can we we call Omron an early entrant DtC digital health company? They’ve done well with self-diagnosis / self-monitoring devices marketed to consumers.
Agree they have good devices for these uses but they don’t really have a direct to consumer market per se because, at least in my view, no one buys a blood pressure cuff or similar without a physician’s recommendation to do so. So you still have to get the physicians on board and “prescribing” they purchase it.
Good distinction: I see what you mean. You might just be right!
As Santayana also famously stressed, “Those who do not remember the past are condemned to repeat it.” That, too applies to all of those aspiring and passionate entrepreneurs who run hell-bent towards consumer-centric health care business models. Although historians have done a poor job of detailing those pre-Series A failures. Too many to count.
Freestyle Libre BGM was a runaway success in Europe. Early on, when it went viral, they spent minimal money marketing direct to consumer and zero dollars promoting it to physicians. DTC health care products are not the problem. Big spending on DTC marketing is a big problem, especially for early stage companies that don’t specialize in this field.
SO true! We spent over a year trying to find traction with a fertility monitoring device… Finally had to take a lesson from the school of hard knocks and abandon the direct to consumer mindset. A few months later I discover our tech is an even better fit for an enormous unmet need in critical care medicine. I’m retroactively sending my $1
Tim, sorry, but alas not surprised, to hear it. Lisa
Lisa, I think the point you’re trying to make in your article is correct. We went from zero to being the #1 maker of mandibular repositioning devices (MRDs) in the world through a DTC marketing campaign, but we did so by selling these Class I medical devices to treat snoring…not a “hardcore medical condition.” While it can also be used to treat obstructive sleep apnea, we have made no attempt to sell it directly to consumers for that purpose, precisely for the reasons you mentioned. For that, we work with the medical community.
Lisa, this is brilliant! I could not agree more, though my experience is extremely limited (currently a medical student, introduced to your work by people much smarter than I am).
I wonder where products like Direct to Consumer glucose monitors fit in.
For example, Apple seems to be putting a lot of money on individuals monitoring BG levels: http://www.cnbc.com/2017/04/12/apple-working-on-glucose-sensors-diabetes-treatment.html
As far as I know, most people purchase monitor and glucose sticks because, as you say, the doctor tells them to.
Is the difference here that this would be an added capability of the product, and not a product in and of itself? Plus the fact that a physician is still recommending or plotting it?
As a product of the Bay Area, I agree that sometimes the entrepreneurial world gets their lenses clouded by the tech world’s obsession with the health data that doesn’t seem to spread across the nation.
98% of patients I see couldn’t care less about their REM sleep duration, let alone their frequency of pre-ventricular contractions or AM cortisol levels. The data obsessed (guilty myself of that obsession) love it.
It seems that it’s up to physicians to get patients to start caring about the (relevant) data, and to stay connected with them so they continue to care.
Thank you for all your work. I love reading your articles.
-Jack
Thanks Jack! I think that glucose meters that are more user friendly are awesome but no one would ever buy one without a prescription, which is supportive of my original argument. I hope patients get more engaged but honestly people don’t even take their prescriptions half the time when those are clearly helping them control blood pressure and the like. It’s hard unless someone gets very energized due to an acute situation (e.g, cancer diagnosis) and even then many don’t engage the way you would hope. Challenging. Thanks for the nice feedback! Lisa
Lisa, glucose meters are sold all the time in Europe without a prescription (https://diatribe.org/abbott-freestyle-libre-transforming-glucose-monitoring-through-utter-simplicity-fingersticks) and often without reimbursement. This is how the Abbott Libre product I mentioned above is sold.
But no one would buy one without a doctor telling them it’s required, would they? No consumer would just buy one for kicks with no physician recommending it, or am I incorrect? if incorrect, Europe is very different from the US.
Sorry Liza, I’m not following you. The consumers bought the Abbott Freestyle Libre based on word of mouth from other consumers on social media websites and message boards. The doctor was not in the loop. Maybe you could better define what you mean by a “consumer digital medical device” because it is very narrow if you exclude anything that a is used to treat a condition that has been previously diagnosed by a doctor. My point is that the early adopters could have chosen a number of BCGs and the vast majority already had a working system, so the doctor did not play a role in their decision to buy it.
Evan, interesting that consumers chose one particular glucose meter over another due to DTC advertising though of course they would never buy one at all without a doctor telling them they need one. That’s my point. When your doctor tells you that you need a medical product, you tend to buy it. When presented with one by a vendor without a doctor’s recommendation or more, almost never. Lisa
Ok, thanks Lisa for the clarification and sorry for the typo on your name!
I’ve decided that Lisa’s kid is more spoiled than mine (hard to believe as I counted 26 stuffed animals on my 2 yr old sons bed last night!)
But I win the Internet ((or at least this thread) with my 4/20 comment above….
Great article and very true.
Consumer health is hard, and I can agree it is not investor sexy. However we are making $40 on every Pic sent to us…. I think we are the only company in SV making money in this niche. The problem is that it does not go “word of mouth”, which is important for any consumer product.
Do you think there is space in the market for a new Health Care System that leverages the best of both worlds. Both Integrative and Conventional Medicine with an Offline and Online TeleHealth Offering. Using built in self marketing features like doctors using to manage patients and prescribe the App or Ecosystem to make their lives easier. Are there realistic ways to protect against being affected by the high marketing costs of a DTC consumer health offering e.g built in viral loops, celebrity culture, doctors prescribing app.
With the consumerization of health care we are seeing movement towards a Self-Care System. Through scientific approaches to wellness with DTC genetic, blood, microbiome and other home test kits. These are early indicators of the approaching self reliant future of healthcare. Where the individual needs to be responsible for their Health during the other 360 days they don’t see their doctor.
Strictly from an investment point of view it would appear this is one of the biggest opportunities of our time. To bundle all (non-emergency) healthcare products and services into a new digital health care system based on an Integrative AI, TeleHealth, Laboratory Tests, and Emotional Wellness divisions. Providing Free access to everything a consumer or physician would need in a pay for play open ecosystem. Then owning that ecosystem across the entire lifecycle of each consumer to optimize health from womb to tomb.
I’m not sure David. I agree patients need to bear more responsibility for their own health. But agreeing doesn’t make it so. In fact, as health insurance has tightened, people just avoid going to the doctor altogether. It’s a tough one. Agree there is a place for consumer-engaging health systems and plans but having invested heavily here myself, it is a big challenge. Lisa
What do you think of the strategy — that I hear lots of innovators talk about — of using DTC as an entry point to gather data for an eventual second generation of regulated device? Does this get the same “you are doomed” response?
Yes, they are doomed. Lisa
What’s about Kinsa smart thermometer?
Maybe, though I don’t think it’s got the kind of revenue that would justify a whole company. But frankly I’m not sure so if you have that kind of info, let me know. Nice consumer product but can it create a large sustainable business? Remains to be seen. Lisa
Wouldn’t 23andme and be an example?
Lauren, no I don’t think so. They have made it very clear that their real business model is pharmaceutical development. Lisa
I am returning to this great post, following Apple’s recent announcement on FDA cleared ECG monitoring capability packed into the Apple Watch. This is an interesting test case, as this is not a dedicated consumer medical device, but rather a medical feature packed into a device that does many other different things, and marketed under one of the world’s strongest brands.
I am trying to think of the implications. Clearly, someone who feels irregular heartbeat is not going to think to himself, why wouldn’t I buy myself an Apple Watch and diagnose my A-fib. However, I can see many people reaching out concerned to their GP’s, with an indication from their brand new Apple Watch, asking for a professional diagnosis. What do you think? What about BP monitoring capability in a smart watch?
Thanks,
Hi Eran, it is an interesting question but I have to believe that fundamentally this is going to lead to a lot of false positives for people who aren’t already diagnosed. Clearly for those whose doctors think they should be regularly monitored, it could be a great asset, but for the general consumer at large? Not clear to me. I think the BP application, whomever can figure it out, will be far more useful because it is so well known how important it is for BP to be managed and most people have no idea they have a problem. With irregular heartbeat, many have that occasionally or for reasons that are far less worrisome than AFIB so it could be a real challenge for cardiologists. But it is good to think that people are getting more engaged around their health, so a mixed bag. Lisa
Hi Lisa, thanks for the great post.
I’m wondering about using DTC as a stepping stone. To sell a product to an insurance company or self-insured employer I have heard that these stakeholders require some form of data to provide evidence of the advantage of such a digital health solution. I’m wondering if you see value in using DTC as a way to establish early clinical data to lead to these longer term partnerships, which would be the main business model. Early pilots with partners could be another method, but those might take longer to provide data than an early DTC approach, given inherent bureaucracy within organizations.
Can you think of any companies that have intentionally started with DTC in order to build MVP and credibility with data, while maintaining a longer term goal of a more sustainable partnership as you’ve discussed?
Hi Stephen, many companies have tried this but it’s tough, as few consumers are willing to pay for healthcare products and services that they believe should be covered by insurance or approved by their physician. Omada Health started with this approach, as have a myriad of other companies that have learned (often the hard way), that it’s best to go directly to enterprise and build your evidence there. Lisa