Heart of Glass

Posted on Tuesday, September 18, 2018

Apple’s big announcement last week included an upgraded Watch that does electrocardiograms (EKGs). This week the US Food and Drug Administration (FDA) ruled that it was not a medical device. The implications may not be obvious to many of my readers, but this is huge… and may get different treatment in other jurisdictions.

I probably would not have given this FDA ruling a second thought two years ago. I might have even thought it was negative: the US’s medical regulator saying “Don’t think of this as something you can use to monitor your health!”, which of course is the opposite of what Apple, or at least Apple sales people will be saying.

The product launch talked about detecting arrhythmia – a potentially dangerous heart condition which can only be diagnosed with an EKG.

The technology has improved over the years. Patients no longer have to go into the hospital to be measured on a big machine. There is a ‘portable’ device known as a ‘Holter’ but it still requires electrodes to be stuck to your chest and to carry around a device about the size of a package of cigarettes (kind of ironic).

I do not know what a Holter costs, but this is not something that the average patient would pick up just to keep tabs on their health. Cardiologists prescribe ‘a Holter’ and a hospital or lab fits you out for a 24-hour or longer test. The box records the electrical signals from your heart in onboard memory and the lab prints out a paper EKG for your doctor when you bring in the Holter.

At the 2017 Mobile World Congress in Barcelona, a friend of mine who distributed cellphones found a device called ‘WiWe’, manufactured by a Hungarian medical implant firm called Sanatmetal. It is the size of a business card and slips into your wallet. The device can do an EKG whenever you want and it produces a pdf which you can review on your smartphone or send to your cardiologist. The app has a number of graphics and will make simple recommendations like suggesting you have arrhythmia and you should see your doctor. You can even program it to send the EKG automatically to a list of interested parties (your family doctor, your spouse, your kids etc.).

Sanatmetal sells the device on their website for EUR289 and the smartphone app downloads for free (iOS, Android).

The Apple Watch 4 base model without cellular connectivity sells for US$399 and obviously it does a whole lot more in addition to EKGs. A Polar-brand fitness watch with accompanying heart monitor band can be had for around the same amount or even less. It does more fitness things than the Apple Watch but is not a smartphone substitute like the Cupertino product.

Sanatmetal claims to have research that says one point-of-contact devices like the Apple Watch or fitness bands do not give accurate measurements, especially of arrhythmia. Instead you grip their WiWe device with your two thumbs and it measures the electrical signals passing through your heart. The company says that this is the only way to get a good EKG.

I will leave the medical debate to others; that is not my focus.

We did the quick market research, negotiated a distribution contract, hired a person to visit doctors and get them onboard with the concept, built a website to sell the devices on line and began contacting retail chains we thought would be interested.

Together we invested about US$25,000 plus a lot of own time getting this going.

But then we ran into a brick wall.

The doctors we talked to, especially those who worked in clinics, asked for an ‘INVIMA’ or the certification by Colombia’s equivalent to the FDA. We also knew that once our soon-to-be-wildly successful product took off, and we were importing hundreds, nay thousands of devices, customs officials would ask for this certificate to prove the Colombian government had authorized it for sale in the country. WiWe has European and FDA certification and Sanatmetal has stacks of research so we assumed this would be no problem.

And it probably would not have been.

Except that the first step is for INVIMA to decide what type of device it is, precisely the declaration that the FDA just made about the Apple Watch.

And Colombian authorities decided that our EUR289 WiWe was indeed a ‘medical device’ of the highest standard.

You might think this is a ‘good thing’ because doctors and nervous patients can be assured that WiWe has the necessary certification to diagnose potentially life-threatening situations.

And it does.

But the marketing and business model consequences of that capability were ‘fatal’ for our business plan.

Amongst other requirements, the inventory had to be kept in a caged, locked and separated part of the warehouse, not just as part of the normal electronic device inventory in my partner’s phone and accessory business. The inventory had to be managed by a certified technician. These arrangements were subject to random inspections by the health authorities.

If we wanted to advertise, the proposed publicity had to be submitted to health authorities in advance for their approval. And it could only be advertised in academic medical journals.

The marketing challenges were manageable. We had already learned that the best channel for the device was doctors prescribing one for their patients with heart conditions.

But the inventory management cost was too much. As a consumer products company, not a medical device company, with only one medical-grade product (today), the required procedures would have killed margins or pushed an already somewhat pricey device for the Colombian market into a much smaller segment.

We were already concerned that it would be hard to make the one-point-of-contact / two-points-of-contact argument to the average consumer. Cheaper fitness bands and more versatile smartwatches in the same rough price point were going to be our biggest competition. Sanatmetal insisted to us that these competing devices were not sufficiently accurate but that was going to be a tough sell to the average consumer.

By not being a ‘medical device’, Apple Watches, Polars etc. can mass-market their capabilities (rightly or wrongly) and avoid the overhead of being treated like a highly sophisticated and sensitive medical diagnostic device.

We cried (to ourselves and our spouses). We screamed (ok, our lawyers did the lawyerly-acceptable equivalent of screaming). We pleaded with the health authorities. They offered to review the case but assured us that they had made the right decision the first time. We could pay the appeal fee and pay our lawyers again, but the result would be the same.

We asked about fitness bands and were told the provisional ruling that excluded them from ‘medical devices’ was under review. We asked about thermometers and were told they were indeed ‘medical devices’ because a high fever is a potentially life-threatening condition.

The difference with thermometers is that they are already distributed by medical supply companies with trained warehouse technicians and the appropriate cages.

So we gave up.

Now we are looking for a medical supply company that might be interested in distributing the WiWe along with their other products. This is not going well.

Given the nascent state of the medical wearables market, especially in less-health-obsessed Latin America, companies that distribute medical devices are not so interested in consumer devices and companies interested in consumer devices lack the infrastructure and procedures to handle medical devices (at least under Colombian regulation).

WiWe’s higher diagnostic standards means that it gets held to a higher medical-products standard. Fitness devices and the Apple Watch will slip under the health authorities’ radar but may not be as appropriate for those with heart conditions. The FDA’s ruling is probably correct. How consumers interpret that ruling is another story.

We also suspect some suppliers will simply not ask about certification or even classification. Apple in particular will leverage the clearance it already has for importing watches and never mention, perhaps never even think of mentioning, the EKG feature.

For now, our affair with diagnostic wearables is over. For anyone that is interested, we have a small amount of inventory, a great website with e-commerce capability, a ton of local market research and a business plan. It even has a growth strategy. We can sell it to you at cost and we will throw in some free consulting for three months to get it rolling. Make us an offer.

Once I had a love and it was a gas / Soon turned out to be a pain in the *ss.

(Songwriters: Chris Stein / Deborah Harry, Heart of Glass lyrics © Warner/Chappell Music, Inc, Peermusic Publishing, BMG Rights Management)


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