Innovation in Health Care: Time for a Gut Check

Abstract

O the past several decades, advances in science and technology have yielded great strides in our ability to reat major medical conditions such as heart disease and cancer. he genesis of many of these technologies has been innovative iopharmaceutical, medical device, and diagnostic start-up ompanies often formed by physicians and researchers within cademic medical institutions and hospitals. These start-up companies often have taken on venture captal funding to complete product development and clinical rials. As a reward for successful clinical trials, these companies ere historically able to raise additional capital through muliple investment rounds and sometimes through an initial pubic offering of their stock to public investors. Indeed, there are several very successful examples of new herapies that followed this playbook in the area of gastroenerology including treatments for morbid obesity, hepatic enephalopathy, hepatitis C, reflux disease, and Barrett’s esophaus, all developed by small companies that effectively developed nd launched these products with the backing of high-risk nvestment capital and in concert with thought-leading physiians and inventors. Over the past 30 years, this ecosystem of physician, acaemia, start-up, and venture capital fostered a very successful ilieu for the advancement of innovation in health care and as yielded many new drugs and devices in use today by phyicians. Indeed, it has been shown previously that contrary to opular belief, venture capital returns from health care start-up nvestments actually have exceeded the returns from informaion technology and Internet investments since 2000 by a very ide margin.1 Today, however, we are at serious risk of dismantling this medical innovation ecosystem. There are 3 major reasons for this looming crisis in financing innovation in health care.