I review a lot of initial business plans for healthcare startups – probably the most in Korea. Just as in other sectors, the most destructive innovations and bold challenges come from startups in the healthcare field.

I recently heard an interesting comment at a U.S. conference. A well-known venture capitalist in Silicon Valley said he was looking for “a healthcare startup in the new era,” replying to a question where he was going to invest shortly.

Choi Yoon-sup

The capitalist must have been searching for a company that crosses over or breaks down the barriers traditionally defined in the healthcare sector, and a company that seeks to solve fundamental problems in new ways. Indeed, we can see such startups sprouting all over the world now.

The U.S. firm Beam Dental is an Internet-of-Things startup that makes smart toothbrushes. Synced with a smartphone app, the smart toothbrush tracks the user’s brushing habits and shows how well the user manages teeth. This seemingly threadbare firm recently launched dental insurance. If an insurance subscriber uses the smart toothbrush and manages the teeth well, he or she can enjoy cuts in insurance premiums.

Another healthcare startup established a hospital. Ginger.io, a spinoff from MIT Media Lab, started measuring depression in smartphone usage patterns. The company analyzes behavior changes in patients with depression by checking the phone usage patterns such as time, frequency and the place of the use. Ginger.io manages mental health of employees of large tech firms such as Facebook and Snapchat. To enhance the service, the startup set up a hospital. Employees who use the service can receive experts’ consultations around the clock across the U.S.

23andMe, a personal genomics analysis provider, is expanding its business to become a pharmaceutical firm. The company has personal genetic information of more than 2 million people. The startup sold these data to multinational pharmaceutical firms such as Pfizer for new drug development. Recently, the company said it would develop new medicines on its own based on these data.

Another healthcare startup has taken a step further, developing a new digital therapy. Last year, Peer Therapeutics obtained approval from the Food and Drug Administration for its mobile app to treat addiction such as abuse of drugs and alcohol and released the digital treatment in the market.

PureTech Health is a new drug developer with pipelines including low molecular compounds and a video game on iPad. Named as Alkili, the technology platform showed improvements in symptoms associated with attention-deficit hyperactivity disorder (ADHD) in pediatric patients in phase-3 clinical trials last year. Alkili is expected to win the FDA’s nod this year, as the first therapeutic gaming program.

Unfortunately, in Korea, few startups are trying to solve the big problem by breaking down the boundaries between industries. There are many reasons for this but regulation is the biggest problem. U.S. examples that I mentioned above are mostly illegal in Korea under the regulations of the “positive list system.”

Even if you obtain approval from the Ministry of Food and Drug Safety, you still have to go through the new medical technology review by the Health Insurance Review and Assessment Service (HIRA). This delays a market launch. Recently, a local startup won the regulatory green light for its AI-based medical device. However, the company failed to release the product due to such dual regulations.

What’s more problematic is the local healthcare industry’s skepticism and widespread defeatism. Entrepreneurs say even if they develop innovative medical technology, they will not be able to make much profit in Korea anyway. It is really hard to blame them because it is true, most of the time. New attempts, not defined by the law, are considered illegal. The world’s first technology, which has no targets for comparison, gets disadvantaged in the HIRA’s review. This is why so many experts advise startups to give up the domestic market and go overseas. From the planning stage, entrepreneurs filter out innovative ideas through self-censorship.

Korea has an advanced healthcare system that most of the world envies. However, the nation has too many regulatory barriers to develop new technologies and realize innovation in healthcare. There are too many factors that undermine innovative spirits. Enhancing the national health insurance coverage for more people is good.

However, it will be better to devise up measures that will not hinder healthcare innovation in the long term. If the healthcare industry collapses, the damage will eventually go to patients who do not benefit from innovation. We need to address this problem before it gets too late.

yoonsup.choi@gmail.com

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