What Were the Year's Biggest Digital Health Stories? An Interview With CNBC's Christina Farr

We like to check in every once in awhile on the world of digital health, an area full of promise but not, thus far, overbrimming with results.

There are exceptions, however, and as we did last year at this time, we're turning to San Francisco-based CNBC journalist Christina Farr, who breaks a lot of health tech stories, to clue us in on her beat. This year we asked her what were the really  big stories she covered in 2018.

Here are some highlights from our talk, in Christina's own words. The following has been edited for length and clarity.

Big Digital Health: It's a Thing

It was a really big year in digital health, particularly where large tech companies are concerned: Apple, Amazon, Google, Microsoft, Samsung...

John Doerr, the venture capitalist who is a big health investor, recounted at the Forbes Healthcare Summit how internet companies in the '90s aimed to disrupt the advertising space, which back then was based mostly on television advertising. Those companies thought they could do a better job because there was really no way at that time to measure and track the performance of ads in real time. So they took on this industry, which is now worth about $75 billion in the U.S.

By comparison the health care opportunity is $3.5 trillion in America alone. As these tech companies attempt to become trillion-dollar or greater businesses, they need something more than just their core competencies. And you can't ignore health care; it's just too big.

Here Comes Amazon ...

Amazon’s acquisition of online pharmacy PillPack in June was a very big story. The announcement really marked them as a player, and the market response -- billions of dollars were knocked off some of these pharmacy stocks -- showed how much of a threat Amazon could be. It's also a very good deal for PillPack and probably showed the digital health community that those sorts of exits are possible.

Around the same time, Amazon also looked at Confer Health, a company in the at-home medical diagnostic space. That's interesting, because it speaks to a strategy that goes deeper than just drug delivery.

Where Amazon could potentially go is this: Imagine you're experiencing symptoms for strep throat, and you talk to your Amazon Alexa device, and there's an AI system, or a real physician, even, that speaks to you and recommends you get tested. A courier comes to your home with a portable device from which you run a sample and you get a result immediately. Or from there the same physician ships you a prescription. And that could all be done in a couple hours.

Or imagine an elderly person who potentially has the flu and might have to go to a physical clinic, and then from there bring a prescription to a Walgreens. That is an annoying user experience but also think about how many people they could infect with the flu on the way to the clinic and pharmacy. So I think there could be some basic things Amazon can do with diagnosing illness in the home. And if they can do that coupled with prescription drug delivery, that's a very different experience of health care than we've seen.

...and Apple

The whole Apple health care rollout was big, and I would probably pinpoint the electro-cardiogram being introduced on the Apple Watch as the biggest story from what they've done this year. It got Apple into a more regulated medical device space; I don't know if they are now a medical device company, but they're certainly a consumer tech company that makes medical products.

It’s an important story because it sort of changed the game around proactive health monitoring. They were looking specifically for people who didn't even know they have a type of arrhythmia called atrial fibrillation.

That's controversial, as there are doctors who think this is bad news, because it's going to lead to a lot of anxious people thinking there's something wrong when there isn't. I've been hearing from physicians who already have patients with normal results reach out and ask, ‘Hey, does this look right?’ Doctors are already overloaded and don't want to be managing an influx of healthy people. So Apple's got to really make sure the false positive rate isn't too high, and they need to be transparent about what this ECG means.

But I think this is probably the beginning of what Apple's overall strategy is when it comes to bringing health monitoring to the watch.

... and, uh, Facebook? 

This year even Facebook was trying to get into digital health. At one point it hired some people in the medical community to approach top hospitals about a patient data-sharing agreement. Facebook wanted to see if it could match up the health system's user data with its own data to see if patients might need special care. That seemed to be have fallen apart out of general fears of data privacy  surrounding the company.

'Real Money' for Digital Health Startup 

Pharmaceutical giant Roche bought Flatiron Health in February for just over $2 billion. I think that was a big deal because it was a pharmaceutical company spending real money on a digital health startup. I think it shows that there can be real successes in the space. It's also a thumbs-up for precision medicine; Flatiron was basically creating a medical record system that was popular with oncologists, and then using data to figure out better treatments for those patients.

Watson Stumbles, or: Health Care Ain't 'Jeopardy'

In talking with folks familiar with the IBM Watson strategy, I think where they may have gone wrong is in building this AI system that was trained using top U.S. oncologists, and then they tried to sell it to other big cancer centers. So if you're an oncologist at one of these other places, why wouldn't you just say, "Well, I'm as good as these physicians at Memorial Sloan Kettering?"

So I think they tried to sell into the wrong market because they thought they could get these really big contracts, and what they probably should have done is figured out a much cheaper system that they could have sold to smaller health systems; you can see why some of these local offices and physicians who don't have the same resources as Sloan Kettering would find it beneficial to get information on what Sloan Kettering would do in any given situation.

It's the Outcomes, Stupid

For a long time you didn't really see digital health companies invest in outcomes, because I think they wanted to be viewed more as technology companies. But there were a few -- Livongo, Omada Health, Propeller Health --  that were always sort of forward-leaning and did do that investment from the outset, and I think those companies are the ones that are doing better now.

Propeller Health was sold this year to ResMed, for instance. I think it was because it had that focus on outcomes.

That model is especially important for the influx of companies trying to sell into the employer space, because in order to tell the difference between them, there has been a lot of questioning around: "Is this actually making my population healthier? Is it really going to save me money?"

In general I think the companies that are coming up this year have kind of learned from the mistakes of some of their predecessors and are positioning themselves with a bit more humility, and in many cases doing the right thing. They don't describe themselves, when pitching potential customers, as startups. They take themselves more seriously now, and they want to be viewed as new health care companies and businesses.

It just speaks to a general sort of growing-up.