With convergence of healthcare and technology going stronger, digital health companies are slipping into more legal issues. Privacy of patient information, consumer protection, fraud and patient safety issues have become more legal hurdles for digital health companies. Investors, buyers of digital health companies need to be cautious about legal hurdles in any financial deal.
Digital health companies mobilized $4.5 billion funds from 302 deals with average size of $14.8 million each in 2015. The volume of funds rose marginally from 2014, but number of deals was significantly high. The latest launch of Apple CareKit, an open source platform to simplify the development of healthcare apps for iOS devices, is indicating the growing demand for services of digital health companies.
Increasing demand for digital health industry's services is expected to be more robust in 2016. However, the increased activity in digital health services is also creating an alarming situation for technology companies and their investors over legal hurdles. Several digital health companies are facing legal issues by unfamiliar regulators, privacy of patient information, consumer protection and fraud and patient safety, as reported TechCrunch.
When compared with protection of users of digital health products in the US, the consumer electronic is lightly regulated. Several US digital companies entering into digital health sector are facing with interlocking and overlapping legal regime. Several laws of Federal, State and Local regulatory bodies are overlapping and causing legal hurdles for digital health companies.
Archy Newsy further adds that Theranos, a bloodstream testing startup, is facing some legal issues related to regulation and funding within the digital health industry. Behnam Dayanim is a partner in Paul Hastings Washington DC, office. He oversees company's advertising and promotions practice in addition to co-hiring privacy and cyber security practice. He sees several legal hurdles for digital health companies. US FDA doesn't control individual mobile apps. Digital health companies keep enforcement discretion over patient information. Recently, a bloodstream pressure calculating application gave inaccurate information. This has prompted US FDA to be more careful in regulating such apps.
Regulatory compliance across several laws right from Federal, State and local bodies is the need of hour, opine some analysts. Health Insurance Portability and Accountability Act (HIPAA) at Federal level has a privacy rule that governs permissible uses and disclosures of protected health information (PHI). Security Rule governs electronic storage and transfer of PHI by certain entities. These include health plans, healthcare providers and any business associates of digital health companies.
The first quarter of 2016 recorded an encouraging period of fund mobilizing for digital health companies. A record $1.8 billion funding has been recorded in the digital health segment during the quarter. The year already registered four deals over $100 million as against a total number of seven in 2015. Majority of investors in 2016 so far are institutional venture capitalists (VCs), according to StartupHealth.
Majority of technology health companies have no reason to be concerned about the regulatory authority of US Food and Drug Administration (FDA). US FDA regulates food, drugs and medical devices. However, US FDA is a bit reticence on suggestions for low risk products related to only general wellness use. These include health software programs as well.
