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Illustration: Eniola Odetunde/Axios

Some technologists look at the pileup of crises weighing down American health care — overworked doctors, overpriced treatments, wacky health record systems — and see an opportunity to overhaul the industry, which could save lives and make them money.

Yes, but: There's frequently a chasm between can-do engineers itching to rethink health care and the deliberate doctors and nurses leery of tech that can make their lives more complicated, or worse, harm their patients.

What's happening: Last year, investors handed more than $8 billion to health tech startups. But the other end of the pipe is mostly dry — relatively few products have integrated deeply into the labyrinthine medical system. Those that do often focus on sideshows like wellness, instead of core issues like caring for the chronically ill.

  • "People are doing things because they can," rather than to address a need, says Ethan Weiss, a cardiologist at UC San Francisco who advises startups.
  • Even thoughtful, relevant solutions run into a money mess — persuading a critical mass of hospitals or insurance plans to shell out for every shiny new tech isn't easy.
  • "There's not a way while you're still a small company to get enough income flow to survive," says Paul Yock, director of the Stanford Center for Biodesign.

High-profile flameouts show what happens when medicine and technology are totally out of sync.

  • IBM's Watson AI system was meant to upend cancer care at MD Anderson. It failed, at times offering "unsafe and incorrect" recommendations, and the partnership was put on ice.
  • An AI startup spun out of Memorial Sloan Kettering Cancer Center is dogged with accusations that it quietly profited off patient data.
  • Driver, a startup that aimed to connect cancer patients with clinical trials and treatments, quickly shuttered last year because its expensive services didn't fit in the system.
  • Theranos and uBiome are their own unique disasters.

At the root of some failures is the way developers approach health care. Some take it on like any other technical puzzle, when it can be orders of magnitude more complex.

  • Many startups are made up of "a bunch of brilliant people, very arrogant, who think they're going to call a nurse for a few hours," or swing by a clinic, and then build a product, says Ann Farrell, a longtime health care IT consultant. The result: solutions that don't fit the problem.
  • More broadly, the economics of U.S. health care are hopelessly tangled and wasteful — a political problem that won’t succumb to a technical fix.

What's at stake: "If your website comes down, well, OK, you figure it out," says David Shaywitz, a Silicon Valley investor with a medical degree. "If you're promising, 'This is how we're going to figure out the dose of insulin you need,' and you're off, you can kill somebody."

The other side: Some firms have made inroads without isolating clinicians.

  • One Medical, which operates primary care clinics through memberships and as an employer benefit, is expanding and has built its own electronic health record.
  • Large health insurers have adopted and invested in Omada Health, which provides online counseling for people who have chronic diseases.
  • "Love it or hate it, there are some immutable laws of physics in the U.S. health care system. There are some things that you just need to figure out how to fit inside," says Sean Duffy, Omada's co-founder, who spent time in medical school.

The bottom line: "Most of these health care startups are gonna go belly up because the health care delivery system is not all that easily disrupted," says Bob Wachter, a top physician leader at UCSF.

  • The firms that will resonate likely will be designed by or have direct feedback from the doctors, nurses and technicians who will use the technology but were trained to think of patients first.
  • "You have to be in the clinical environment," says Raj Ratwani, a health IT expert at Medstar Health.

Go deeper

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Illustration: Sarah Grillo/Axios

Big banks are no longer allowed to reject business loan applicants because of the industry in which they operate, according to a new rule finalized on Thursday by the Trump administration.

Why it matters: Wall Street has curtailed its exposure to industries like guns, oil and private prisons, driven by both public and shareholder pressures. This new rule could reverse that trend.

Former FDA commissioner: "Reliable drug supply is absolutely critical"

Axios' Caitlin Owens and former FDA commissioner Mark McClellan. Photo courtesy of Axios Events

Having a reliable supply of pharmaceutical drugs throughout America will be "absolutely critical" to boosting affordability in health care during the Biden administration, former Food and Drug Administration (FDA) commissioner Mark McClellan said at a virtual Axios Event on Friday.

The big picture: McClellan, who served under President George W. Bush, says drugs having limited supply and limited competition leads to elevated pricing. He considers drug supply to be a national security and public health issue.

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Americans are still spending money

Source: Census Bureau; Chart: Axios Visuals

Americans spent more money at stores and restaurants in 2020 than they did in 2019 — even in the face of a devastating global pandemic that shut down broad sectors of the economy.

Why it matters: The monthly retail sales report this morning came in well below expectations, and showed consumer spending falling on a seasonally-adjusted basis. Total expenditures were still higher in December 2020 than they were a year previously, however.