A Healthcare Expert Tells Us What's Next for Digital Health

If the healthcare industry can find silver linings to the year 2020, what are they and where can we find them? The pandemic revealed what is and isn't working in the healthcare space, and many exciting new products and services have emerged. Ruby Gadelrab is CEO and Founder of MDisrupt, a platform that connects digital health companies to the scientists and healthcare industry experts they need to build, commercialize, and scale health products quickly and responsibly. Ruby joined Olivia Zitkus and Corinne Cardina of Fool.com's Healthcare and Cannabis Bureau on a Jan. 22 episode of Fool Live to answer our questions about the future of healthcare and must-watch trends for 2021.

Corinne Cardina: I am here today with Olivia Zitkus, an editor/analyst on Fool.com in the same Healthcare and Cannabis Bureau. Me and Olivia are so excited to welcome Ruby Gadelrab. How are you, Ruby?

Ruby Gadelrab: Hi, Corinne. Lovely to meet you. I'm very well today, thank you. I'm delighted to be here.

Cardina: Awesome. Ruby is CEO and Founder of MDisrupt. Before we have her introduce herself and tell us what MDisrupt does, a reminder that we are using Slido for question-and-answer, so you can open that up in your browser, there's an app. The code is MFLIVE. You can submit questions. We'll try to get those answered if we have time. But we're going to speak with Ruby for the next 30 minutes and talk about tips for investors in the healthcare space, as well as trends that she's seen at the confluence of healthcare and technology. Finally, the importance of due diligence, which is exceptionally important in the healthcare space. But Ruby, welcome! Why don't we start with a brief introduction about what you do, your background, and what MDisrupt is, and what its goals are.

Ruby Gadelrab: Wonderful. Well, thank you so much for inviting me, Corinne, I'm really delighted to be here. My background, I have been working in biotech, healthcare, and digital health for the last 24 years in a variety of different commercial roles and executive roles. Some notable companies I've worked for include: Life Technologies now Thermo Fisher (TMO 0.33%), Invitae (NVTA -94.44%), genetic information company. I think something happened with an IPO this morning within Invitae, so something to watch out for. Then most recently, I was the VP of Commercial Marketing at 23andMe. After I left 23andMe, I consulted for the digital health space for about two years. I've worked with about 25 different companies myself, and I started seeing some patterns. One of the things that I realized is that many of them were seeking access to scientists and healthcare experts to help them build their health products. These experts are quite hard to find, and so I decided to found MDisrupt to solve their problem. We founded about 18 months ago, and MDisrupt is a platform that connects the digital health industry with scientists and the health industry experts they need to build, commercialize, and scale their health products responsibly.

Olivia Zitkus: Awesome. Thank you for that introduction, Ruby. I'm so glad we get to talk with you today. Hi, [laughs] Corrine and I did not coordinate today even though it kind of...

Gadelrab: I love your t-shirts.

Zitkus: [laughs] Thank you. I want to start off broadly just by looking at digital health. I'm curious what some of your most interesting observations were in the space in the year that was 2020.

Gadelrab: That year that one should never talk about, but yes. Let's first start off by maybe defining what digital health is. Digital health is when digital technologies and genomics are used to solve key problems in healthcare, so think things like algorithms, AI, data analytics, wearables, apps, sensors, telemedicine, genetic testing, and personalized medicine. One of the things pre-pandemic is that healthcare was quite slow to adopt digital health and digital technologies. Many of the solutions did exist before the pandemic, but they really did struggle to get adoption. But in that crazy year, that is 2020, the pandemic revealed a couple of big things. The first thing that it revealed was how unprepared our healthcare system was to deal with the event of that magnitude. Secondly, it also revealed some of the inequity and access issues to healthcare services. But there are silver linings and the silver linings are for digital health. It was as if there was a huge fast forward button pushed on the digital health industry. These were in three key themes: the amount of investment, the speed of innovation, and the rate of adoption. Andso if we go into to each of those, from the investment perspective, 2020 was one of the highest ever years in digital health investment. There's many, many reports out there, I'd like to use Health. Health report showed that there was $14 billion worth of investment in digital health last year, which is 72% higher than the previous landmark year, which was 2018, that's pretty phenomenal in one year. Second major theme, speed of innovation. In 2020, the FDA issued over 300, I think the last number was 322, and I looked yesterday, 322 Emergency Use Authorizations for tests and devices during the pandemic. What was so interesting was that many digital health companies who are in tangential spaces, maybe not in virus testing but definitely not in COVID, quickly pivoted to create new solutions for COVID. One example that I think is interesting is a company called Clear Labs. They were doing pathogen testing in the food industry. But as the pandemic hit, they did a quick pivot, and they've developed a fully automated sequencing system to screen and sequence SARS-COVID virus in under 24 hours. Why that's relevant today is because of all the new mutant strains of the COVID virus that we're currently seeing. We talked about investment, we talked about innovation, and then the final point there is rates of adoption. The big hero here is telehealth and virtual care. This is an example of a technology that had been around for years, and years, and years, but had a lot of reluctance from the health system to adopt it. Partly due to privacy concerns, partly due to physicians and patients didn't think it would be a very good experience, and then most importantly, because CMS was only reimbursing telehealth visits in very specific cases. But the pandemic forced patients, providers, and payers to have to experience it different way of delivering telehealth. I think the numbers are in March, CMS reported that telehealth visits jumped from 10,000 visits per week to over 300,000 visits per week. Of course, that was right in the midst of the most severe part of the pandemic. We do expect those numbers to come down, but I do think the cat is out of the bag when it comes to telehealth and virtual care.

Zitkus: Awesome, those three points were great. How do you think -- from investment to innovation to rate of adoption -- how do you think those trends will evolve in 2021, as we look ahead to the new year?

Gadelrab: For sure, telehealth and virtual care. Like I said, the cat is out of the bag on that one. I think it's just the beginning. Providers and physicians have experienced the concept of delivering healthcare and receiving healthcare from the comfort of your own home and the comfort of your couch. I think that trend will continue because on Dec. 2, 2020, CMS released a policy showing that it's going to cover over 60 new telehealth services that can now be reimbursed by Medicare. Often when we think about telehealth, we think about primary care, but I think given that it's going to cover 60 new services, I think that also does reach into some of the specialized care areas as well. One company I like to think about in this space is a company called Genome Medical. They are a genetic spaced telemedicine practice. They're trying democratize access to genetic experts. There are only 6,000 genetic experts in the country to service 330 million people. Clearly, that doesn't scale by in-person visits. That's a really, really fascinating company to watch. We talked about telehealth and virtual care. So, 2020 was the year of developing COVID solutions, tests, and vaccines, and therapeutics, but I think 2021 will be more about some of the back to work solutions. Hopefully, as we start to get back to work, and school, and reopen the economy, I think there's going to be some interesting innovation in the back to work space. One company that I think is interesting in this area is a company called Mesa Biotech. They basically built a point of care rapid PCR system that you can get results out of in 30 minutes outside of the lab setting, which is the key thing here. This is important when we consider how some of these back to work solutions, we do have to get testing closer to the consumer where they work, for example, or even in retail pharmacies. That company is interesting as well because they were acquired by Thermo Fisher earlier this week for $550 million. In 2020, as we went through the roughest parts of the pandemic, we saw the states struggle to deliver testing efficiently. The struggle was around test availability, distribution, and long turn-around times. I think these problems are worsening now actually as we see new surges in some of the infection rates. One of our clients at MDisrupt who I think is an interesting example is this category is Everlywell. Prior to the pandemic, their mission was to democratize and simplify access to at-home diagnostic testing, and so they have products such as A1C for managing blood glucose levels and hormone testing. But in May, the FDA issued an Emergency Use Authorization for Everlywell, making their test the first stand-alone at home collection device. Since then, they've shipped over a million COVID tests. Why that's fascinating is because it has validated consumer demand for at-home testing, and it has shown that for certain applications, consumers are willing to self-pay for diagnostic testing. From a financial perspective, they're interesting as well because they raised $175 million in November. I think you guys all saw that, and I think now have valuation of about $1.3 billion. To summarize, three trends of 2021: telehealth and virtual care, COVID back to work solutions, and increased demand for at-home testing and monitoring solutions.

Zitkus: That's perfect. I hope everyone wrote all those down. [laughs] I would love to talk a little bit more about the genetic testing industry in general with your experience in that space. You mentioned you worked at 23andMe and then with Everlywell during the pandemic. I'm curious broadly, what is your future vision for genetic testing? Are we just seeing the tip of the iceberg of what value can be unlocked, especially with new at-home capabilities?

Gadelrab: What I think companies like Everlywell and 23andMe have done is demonstrated a few things that are really critical to the future of our healthcare. We will assume that our healthcare systems are going to evolve over the next 10 years and look completely different, so what has it demonstrated. Firstly, I think they've demonstrated one, that consumers and patients can effectively collect a sample at home and ship it back to the lab. Two, that they can accurately report phenotype data. That's a really important factor there. Three, they've shown that a segment of the population wants easy access and are willing to pay for health information. Finally, they've shown that they can deliver some engaging consumer experiences that can create conversations with consumers around their health before they ever get sick and over time. In essence, what they've built is a really novel way of delivering healthcare information and a really engaging consumer and patient experience. Quite frankly, having been a recipient of both of those products, I think it's much better experience than what we get from healthcare systems, from the experience perspective. I think the future of this space largely depends on who is willing to pay for this type of access, experience, and convenience. For sure, as we just mentioned, there is a segment of consumers that are willing to pay for that. But if companies can generate data to show good health outcomes, then potentially, there are some new stakeholders that would be willing to pay for solutions like this. These are employers, payers, and potentially, some health systems. An example in this area is the Renown Health System in Northern Nevada. They launched the Healthy Nevada project. What they did was they gave everybody in their health system the opportunity to get a free genetic test. They had 50,000 people sign up. That's pretty amazing from a recruitment perspective, and from an engagement perspective, and from a data perspective too.

Zitkus: Awesome. Thank you. I want to change gears a little bit to focus on MDisrupt. A lot of your work with MDisrupt is advising and consulting digital health start-ups, so younger companies, what do you tell them about competing with big tech giants that are getting involved in healthcare in various ways. The first thing that comes to mind is Amazon's (AMZN 3.43%) new service, Amazon Pharmacy, as a disruptor.

Gadelrab: That's a great question. Thank you for that. Building health products is hard and it's hard for anyone, and it's hard and it's expensive, and it takes time, and that's whether you're a big tech company or you're a small digital health company. It's hard for a number of reasons, so firstly in healthcare, the user, the influencer, the payer, and the consumer of the product are often completely different stakeholders with completely different incentives, so that's a really tough challenge. Secondly, it's a really highly regulated space and the regulation is not just per country, it's potentially per state as well. When you're thinking about building a health product, you have to think about the regulatory process countrywide and statewide. Thirdly, unlike tech, in health, you cannot test and iterate quickly. You need to do the studies to generate the evidence that your product is safe, is effective, is clinically useful, and that it's economics work, and these studies can take many, many years. Then after that, you have to find your earliest adopters in the healthcare world which involves building specialized sales teams, deploying expensive KOL programs, and then you have to get your product reimbursed and engage the medical community. These challenges apply whether you're Amazon or whether you're a very small start-up. When companies come to us at MDisrupt, this is my advice to them and this is my advice to anybody who's building a digital health company. It is impossible for one company to solve all of healthcare. So pick a very specific problem that you understand really well, and if you don't know it through experience, engage healthcare experts. Ideally, you can hire a Chief Medical Officer, that really knows this space and can really engage with the problem that you're trying to solve from a target-audience perspective. Secondly, I think early on when you're building a health product, you have to be very clear about who you're building this product for and who is going to pay for it, because the type of products and commercial strategy that you would take if you were building a consumer product would be markedly different than if you're building a product that you are expecting to be used by the healthcare system. Then finally, this is the big one, and this is the big one for everybody. Do not skimp on regulatory or evidence generation. This is really an area where there are no shortcuts. The studies are going to be critically important to every stage of your commercial strategy. You are going to need them to engage with regulators, you're going to need them to convince physicians and payers, and you're going to need them to engage the medical societies too.

Zitkus: Great. We've seen lots of certain health tech companies become successful even the small ones. They become successful by occupying some sort of a niche where there are inefficiencies and using tech to create value by simplifying or streamlining certain activities. I'm curious in the health-tech space or in the health space in general, which areas do you think are ripe for disruption by companies that are poised to do the things that you just outlined.

Gadelrab: For sure the $3.5 trillion healthcare industry is ripe for disruption, I think we all know this. Health care is really at an inflection point, we are switching from being this very transactional interaction with our health systems that happens when we're sick. We need to evolve that into an ongoing service that's designed to keep you healthy so I think the term that's been coined is, healthcare needs to stop being transactional and start being healthcare as a service. The healthcare system of the last 100 years, wasn't really about health and wasn't really about care either, effectively it's a sick care system. We need to think about what does a health system look like that can take care of people where they live and where they work before they get sick and outside of the walls of the hospital. I think over the next few years, the changes in healthcare are not only going to be driven by technology but also how healthcare is going to get paid for, so we're moving from the fee-for-service model where the more procedures, the more a health system gets paid, into this value-based care model where health products have to demonstrate better outcomes. When companies come to us at MDisrupt, some of the things that we ask them is we help them understand what are the four categories of outcomes that the healthcare systems care about, so I use this acronym hear, H-E-A-R. H, health outcomes, can we predict or prevent a disease? Can we do a better job of managing a disease outside of a health system if it occurs? A really simple example of health outcomes is, can we keep people's blood sugar levels low in their daily lives through behavioral lifestyle interventions all through with close monitoring, for example, so health outcomes is the first one. The second one is, experience, does your health product provide a better experience, either for the patient or for the physician. People often forget about the physician, but health systems are seeing that physicians are experiencing burnouts, and so if you can improve the patient or the physician experience that is also caused as an improved outcome. We've talked about health outcomes, we talked about experience, the next one is access. Can we simplify access to delivering healthcare for more people when they need it both inside and outside of a healthcare system? Then the final one is reducing costs, is your product able to create some efficiencies in the healthcare system which can either increase productivity or reduce costs. When people come to us at MDisrupt, we work with them to help them identify which of those four areas their product is meeting and then how are they going to generate the evidence to prove that to the payers, to the providers, to the health systems. I think in my opinion, the best way for companies to do this, is to make sure that they are engaging with scientists and health industry experts early and often throughout the process. Clinicians do understand the healthcare system, they know the problems and they know the types of solutions that they need to solve some of those things, and so they can really add some tremendous value to the digital health companies.

Zitkus: Fantastic. I know Corinne is going to ask a little bit more about diligence and evidence as you talk about these products. But one last question from me before I kick it to her. Are you expecting more digital health IPOs in 2021? What do you think that area is going to look like?

Gadelrab: I'm going to stick to my expertise so I'm going to tell you about trends, the trends are telemedicine and virtual care. New COVID solutions for back to work, at home, and testing and monitoring solutions. Then there's a couple of other hot areas which are behavioral and mental health. I think we've all started to see behavioral and mental health be one of the really hot topics after that year that was 2020, and also Femtech, and beyond Femtech as well, any digital health technology that is actually starting to address health inequities or health disparities.

Cardina: Excellent. I will just take over and take us home in the last couple of minutes. I want to dig into the medical diligence aspect of MDisrupt. Diligence is important for investors in any sector. But in the healthcare sector, the stakes can often be life and death. Stakes are high. Investors can only base their decisions on information that the company makes available. We've seen instances of management either withholding certain material information, or even outright lying about what its technology is capable of. Looking at you, Theranos. Ruby, what have you learned about medical diligence, and how can investors have re confidence in a company by harnessing this knowledge about diligence?

Gadelrab: Great question, Corinne. Thank you. This is interesting when founded MDisrupt, because we went to market thinking that this was what we could add value to investors with as we go out to market. Before we could even engage with any investors, what we found was a new breed of digital health founder that were truth seekers, and they were determined to create impactful, responsible, health products, and get them to the market quickly. Really quickly, many of these founders contacted us. They had business and they had tech background, and they understood that access to the health industry experts was going to be critical to their success. They contacted us and started to ask for chief medical officers, regulatory experts, health economists, lab scientists, product managers, behavioral scientists. That was from the company side. At the same time, we were inundated with messages from scientists, and clinicians, and health system administrators basically saying, "We want to help some of these digital health companies that you're talking to, Ruby. How can we help and how can we get involved?" What we quickly realized is that we needed to build a platform that could connect the digital health industry with the scientists and the health industry experts they needed to commercialize and build their products quickly and responsibly. While we initially went out thinking that investors were our market, it turned out to be health tech truth seekers. One of the things that is interesting here is that now, we have access to all these types of experts. If investors do want our help, we are more than happy to help them diligence their investments too.

Cardina: Excellent. Our last question for you is about who we are on Fool.com and at the The Motley Fool, we are investors. A lot of this will probably just be a summary from what we've discussed so far, but can you share three takeaways for investors thinking about buying healthcare stocks in 2021?

Gadelrab: Yes, look at the trends, I think we talked about the trends before, but they are telemedicine, virtual care, COVID solutions for back to work, at-home testing and monitoring solutions, behavioral and mental health, and Femtech. The one thing I would say as well if I was to give one tip from our experience here is look at health companies or digital health companies, where they have a good balance of medical folks, scientific folks, and tech folks because it's the combination of all of those things together that is going to get a health product to market safety, quickly, and responsibly.

Cardina: Excellent. We have a couple other minutes. I will just ask you what is next for MDisrupt? What are you excited about your company and what you're going to accomplish hopefully in 2021?

Gadelrab: We are excited because over the last year, we worked with some amazing clients working on some interesting problems in healthcare. This year is a year for us, where we are going to do our own fundraising and our own financing. Our goal is that what we worked on for this year is helping companies get their product to market quickly and responsibly. The next phase of what MDisrupt wants to do is to help digital health companies find their earliest adopters in the healthcare system quickly and efficiently too. That's what we're working on this year. We will be doing financing later on this year, and we're excited about that.

Cardina: Awesome. I will just double back to a question we skipped earlier because I wasn't sure if we'd have time. But the pandemic revealed inequities in every corner of the world and revealed a lot of health disparities, like what you opened with -- the tragic things that we saw over the past year. But as a health expert, what did the pandemic teach you about the U.S. healthcare system, and what solutions to these problems could be worth exploring?

Gadelrab: The pandemic, it was like the great revealer, I think, somebody called it in another conference. But the pandemic was like putting this magnifying glass over the healthcare system and showing some of the biggest gaps in health disparities. This is everything from the most vulnerable populations catching COVID at higher rates to the most vulnerable populations suffering more severe symptoms when they did contract COVID. Then when we started to roll out testing, there was a question of who had access to testing when and if at all? We did see that black and minority populations were particularly impacted. Again, 2020 was a tough year around the epidemic, around the death of George Floyd -- this did start the big and tough conversations around all the health disparities. I'll give you a couple of examples that are bleeding into digital health. In genetics, all the largest genetic databases in the world are built on Caucasian genomes. Those databases are now being used to create the diagnostics and the therapeutics of the future. When you start to use those on non-Caucasian populations, they just will not be as effective. The second example is wearables. Most of us have some kind of a wearable. Wearables use a particular wavelength of light, that light is used to measure your cardiac rhythms and the darker your skin pigmentation is, the less accurate it is. When those wearables start to be used in a healthcare system to monitor cardiac conditions, this is something we have to be aware of. One company that I think is innovating in this space is a company called 54gene, and they're building the world's first biobank based on African genomes, and their goal is to close some of these gaps in health disparities so that anyone with African descent can have access to new generation of diagnostics and therapeutics. I think if there's one positive thing that came from the pandemic again, in looking for silver linings, it is a renewed interest in solving some of these health disparities, and these go beyond just race. We're talking about women's health, elder care, the LGBTQ community, how do we create solutions to really help some of these underserved communities?

Cardina: Excellent. Well, thank you so much, Ruby. We appreciate your time today. Just unbelievable insights in every little corner that we talked about, and we will definitely keep in touch with you, have you back on to see how things are going, and good luck with everything with MDisrupt.

Gadelrab: Would love to.

Cardina: Absolutely. Have a great week, guys.

Gadelrab: Thank you, guys. So nice to meet you. Thank you. Bye now.

Olivia Zitkus: Thanks, Ruby.