Startups may find the healthcare market harder to break into and the scrutiny of what they offer more severe after recent reports about the veracity of lab testing company Theranos' technology.
New health IT entrepreneurs will have to be careful of overhyping their products, Justin Smith, a pediatrician and medical advisor for digital health at Cook Children's in North Texas, tells Fast Company.
"If we overhype things that aren't real--and I'm not saying it [Theranos's technology] is not--that we'll have a harder time getting buy-in for things that are real," he says.
Theranos' troubles began in mid-October, when the Wall Street Journal published numerous reports questioning the use of, and accuracy of, the startup's flagship testing technology.
According to former employees of the California-based company, who spoke to WSJ, the technology was used for only 15 out of more than 240 types of tests in 2014. Further, the employees were unsure of the accuracy of the Edison machine, which is used to test the blood samples.
That report was followed by more, and not just from the WSJ. The Food and Drug administration released a report saying that the company did not properly validate its technology, determining that Theranos's collection containers are "uncleared medical devices" being used for interstate commerce.
Recently, the WSJ reported that the company is being investigated by U.S. health regulators.
Malay Gandhi, who recently left his role as managing director of Rock Health's digital health fund, tells Fast Company that new health tech could be seen as "digital snake oil."
"I think the skepticism about digital medicine has increased in the wake of the Theranos scandal," he says. "I do worry about unethical companies that opt to go to market without following the right rules."
However, despite all the news plaguing Theranos last year, funding in the digital healthcare space hit its stride in 2015, raking in $5.8 billion, according to StartUp Health.
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