Could Apple and Google soon be two of the most important companies in health? What about Amazon, or dozens of other healthtech startups? In this episode of TechFirst with John Koetsier we chat with former Apple CEO John Sculley, who has invested in multiple health tech companies.
Apple owns the most popular healthtech wearable on the planet, and Google bought Fitbit to compete. Both are investing in health, fitness, and wellness technology. Current Apple CEO Tim Cook has even said that Apple’s greatest contribution to history will be in the field of health. Amazon’s jumping into health too, with Amazon Halo.
We talk about who will win, who are the other players, and what Sculley sees as the future of health care in the U.S. and globally.
Scroll down for full audio, video, and a transcript of our conversation …
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(This transcript has been lightly edited for clarity).
John Koetsier: Could Apple and Google soon be two of the most important companies in health? Welcome to TechFirst with John Koetsier.
We know that Apple owns the most popular healthtech wearable on the planet, and we also know that Google bought Fitbit to compete. Both are investing in health, fitness, and wellness technology. About a year ago, current Apple CEO Tim Cook even said that Apple’s greatest contribution to history will be in the field of health.
To dive into this emerging battlefield, we’re chatting with former Apple CEO, John Sculley, who’s now CMO and Chairman of RxAdvance and a number of other health companies. Welcome, John!
John Sculley: Thank you, John. Nice to be here.
John Koetsier: Pleasure to have you. Let’s dive right in … we’re going to talk about Apple and Google. We’re going to talk about healthcare and healthtech and all that stuff in this whole session. We’re going to talk about some of the debates that have been going on politically about healthcare as well. But let’s start here, what’s driving Apple and Google into the health space?
John Sculley: Well, I think you’ve got to sort of zoom out to see the context, and the context is that in the U.S. it’s a $3.6 trillion industry. I think it’s maybe about $9 trillion if you look at a global number for healthcare.
So it’s really big and it’s an industry that has been a laggard in terms of technology innovation, certainly digital health technology innovation. Apple has been a standout success, certainly so far with their Apple wearable, the Apple Watch. And yes, Google has acquired Fitbit, though there’s now an effort by the Justice Department to unwind that acquisition, so it’s still uncertain where the outcome is.
But, what I would point out is that there are some really big success stories which are not Apple or Google, they’re companies that were started as entrepreneurial businesses. For example, if you take companies like GoodRX just went public, $19 billion market cap. Amwell just went public, $9 billion current market cap. You have Teladoc, $19 billion market cap. Livango, which is an online coaching service for diabetes and hypertension, which is high blood pressure — $19 billion.
So there’s some incredibly big success stories, yet it’s an industry that is so large, John, just in the US $3.6 trillion, that this is not a winner-take-all industry. I think we can have quite a conversation if you want about where Apple might go and where Google might go, but it’s still very, very early days for both of those companies. And it’s very realistic to think that they’ll both be significant players, but it’s not a winner-take-all industry.
John Koetsier: Very interesting. Let’s dive into there and we’ll come back to Apple and Google then, because, as you mentioned, it’s about a $4 trillion — $3.6 trillion industry in the States, close to $9 trillion globally. Massive, and there’s been some estimates that I’ve seen that there’s hundreds of billions of dollars of waste in the U.S. and close to a trillion potentially, globally.
If we look at what’s driving some of Apple and Google towards health, it might be some of the smart wearables and other things. We’re getting more and more data, but it doesn’t seem like the system has kept up with the technology, and it’s not entirely clear which technology [to] implement as well. It’s such a complex space.
How do you see it evolving?
John Sculley: Chairman, board member, investor, former CEO of Apple
John Sculley: Well, let me tell you about the U.S. industry ’cause I know that best. We are not a single-payer system as you are in Canada, as they are in the U.K. and in the EU. We are a privately run system but often with government ground rules. So for Medicare, Medicaid for the senior population is a good example of that.
But McKinsey Global Institute has estimated in the U.S. that there’s $900 billion of fraud, waste, abuse, misuse, and avoidable medical costs. Now that’s $900 billion out of $3.6 trillion.
So it’s an incredibly inefficient system, is the first take away. So why is it so inefficient? One reason is that it’s an industry that is highly regulated at both the state level — we have 50 States — and at the federal level. And it’s also an industry that spends the largest amount of money on lobbying. For example, the pharmaceutical industry is the single largest spender of lobbying expenses, that’s $240 million a year — no one even close to that. The next biggest industry is called the healthcare industry, which is everybody but the pharmaceutical industry in health. They spend $154 million.
So it’s an industry where special interests, where influence has made what should be a simple system incredibly complex, incredibly bureaucratic, and therefore it’s an industry that’s ripe for change.
The place where I think you’re going to see the high-tech companies focus first is not on the sick care industry, it’s on the preventative care and wellness industry. So if you look at both Apple and Google, they have focused on the wellness part of the industry. Why? Because sensors are getting better and better with AI and machine learning, you know, we’re able to do more and more accurate things with those sensors.
So, that’s going to be a long runway ahead of us, I think, for a lot of innovation.
For example, I’m involved with a very exciting company out of London, England which is called Zedsen, and they have invented the first noninvasive blood glucose monitoring system, which is incredibly accurate.
And it can be form factored into many different ways that you’re seeing lots of things, from wearables to things you can just finger touch that can actually be part of a smartphone. And they also have even gone further with that technology into immuno-oncology where they can actually use their smart patches and look through a lady’s breast and do early detection of a breast cancer.
And if you did it early enough, way earlier than a mammogram, nobody would have to die.
John Koetsier: Wow.
John Sculley: So there are many, many things on the road ahead in terms of medical grade sensors — remember we’re in the era of internet of things — medical grade sensors getting better and better. Combine that with machine learning, artificial intelligence, and it’s gonna really change the way we think about healthcare.
To give you another example, in the U.S. it’s estimated that about 40% of hospital beds will be eliminated over the next four to five years. Now, the reason for that is that people used to go to the hospital, have a surgery, let’s say a procedure, they’d be there for four or five days. Well, now surgical procedures are minimally invasive and you’re in and out in a couple of hours.
So, what that means is that the hospitals have to rethink where is point of care? Is point of care just in the hospital building itself, or is there an outpatient role? Is there … particularly with an aging population as we have here in the States, more and more older people are going to be living longer.
John Koetsier: Mm-hmm.
John Sculley: They’re going to have high co-morbidity of many different diseases requiring help, maybe mental health, as well as loneliness and things of that sort. So, the ability to use medical grade sensors, whether it’s something you wear, something that’s an ambient sensor in a person’s room or their flat, all of those things are going to be integrated back into the hospital system.
Now, combine that with the fact that while chronic care disease is the majority of the health spend in the U.S. — it’s well over 80% of the health spending in the U.S. — about 75% of chronic care diseases are actually reversible.
John Koetsier: Wow.
John Sculley: So if you take something like Type 2 diabetes, where it’s about 100 million people in the United States have Type 2 diabetes. And if you look at diabetes worldwide, it’s somewhere around 400 million people, growing rapidly because it’s tied to obesity and it’s tied to a lot of other comorbidities.
Well, that’s a perfect opportunity to bring in noninvasive technology like we have at Zedsen to be able to give people a much simpler way of monitoring their blood glucose routinely throughout the day without having to go through patches that you have to wear that have to be calibrated every week, or without having to use a finger prick six times a day and things like that.
So, this era of medical sensors combined with AI and starting to look at it in many different form factors is really a big part of the future. And could Apple be in that? Absolutely. Could Google be in for that? Yes. But don’t leave Amazon out, because Amazon recently introduced Halo.
John Koetsier: Yes.
John Sculley: And that’s a wearable, but the thing that’s interesting about Halo is there’s no screen. And so it’s using Bluetooth to be able to connect with your smartphone, Android, or iPhone. And so all the display and that stuff that takes a lot of battery requirements can be done on the smartphone, and you can have a simpler device that you wear on your wrist.
And there [are] quite some innovative things Amazon has done with their Halo device. So it isn’t going to be just Apple or Google, but it’s certainly Apple and Google should be expected to be there.
John Koetsier: Yeah, it’s interesting. I mean, we see the battle of the tech titans in so many different areas, right? And they’re both coopetitors and frenemies in different areas as well where they work together.
Amazon did come out with Halo, it is an interesting feature. Apple, of course, has the Apple Watch but just came out with Fitness+ which is training and instruction, and exercise classes, and fitness instruction, all that stuff. Fitbit, of course, which may or may not become part of Google depending on where the antitrust stuff goes, has its higher level, higher order training as well.
And then of course, there’s the Pelotons of the world and everything like that.
The question I have is that there’s actually a ton of data that these devices are capturing on a regular basis. This is an Apple Watch — I have a Fitbit Sense coming, I believe, as well — there’s a ton of data that they’re generating, and this one is actually the Series 6 and so I can actually get my blood oxygen here as well. Maybe in two years or something like that Apple will do a deal and they’ll be able to get my glucose levels as well, who knows?
How can that data be fed in an intelligent way to the healthcare system in a way that doesn’t overwhelm doctors? I mean, I’ve gone to my doctor and I don’t go there very often, but I’ve gone to him and have said, ‘Hey, you know, I’ve got all this’ … he says, ‘Oh this is too much data. I can’t even look at it, can’t even think about it.’
How can we use this health data — not the sick care that you were talking about, the health data that you were talking about — and use that to get better outcomes when we actually have to go into a hospital or a doctor?
John Sculley: Well, first of all, Apple’s been very clear about the guidelines of how they’re trying to build their digital health business. First, they’ve said, you know, ‘We Apple, are not interested in looking at this data, analyzing this data, trying to draw any statistical significance from the data.’
They have currently about 120 high profile partners. This could be people in the U.S. like Cleveland Clinic, Mayo Clinic Hospital Special Surgery, you know, Kaiser Permanente — large, respected health organizations, but they are sending that data to them totally encrypted.
And Apple also says, We’re not interested in putting that data up into the cloud. Maybe someone else will, you know, one of those health providers, but we Apple are gonna keep it in the device.’ So, the iPhone just gets more and more powerful. The storage capability gets larger and larger. And so Apple said, ‘Look, we can do so much just on our iPhone device.’ So whether they have a wearable like an Apple Watch, or some other wearable, remember they have earbuds [AirPods] — other people are doing rings, some are doing bands.
So there are lots of different ways that you can form factor this, and Apple says, ‘We’re going to do the processing and the encryption and the transmission from the iPhone.’ Now, that’s very different than let’s say, what Google is saying. Google has a number of different business units inside their corporation. They have Verily, which is where they are doing online coaching for diabetes, a company that they are invested in called Enduro.
They also have Google Health. Google Health is headed by David Feinberg who was a former … you know, he’s been head of many medical systems — Geisinger’s was the most recent one, which is a highly admired medical system.
And David has about 500 people in his group at Google Health and they’re looking at population health, they’re looking at the fact that Google gets — David Feinberg told me — 1 billion health requests over just their Google searches every day.
John Koetsier: Wow.
John Sculley: A day. So, they realize they’re at a point of connection with people and their brilliant data analytics. They’re probably the smartest company in the world in terms of AI talent. So their focus will probably be how do you productize that? How do you monetize that? It’s not clear yet, at least not to me, and I think some others, as to where Google is going to do what.
In other words, is it going to be in Google Health? Is it going to be in Verily? Is it going to be in Google Cloud? Is it going to be somewhere else?
So, I think that over the next year or so, I would suspect that Google will have more clarity as to what their real plans are, but they certainly have huge talent and huge, huge resources. But again, I go back to the fact that it’s new companies, you know, new consumer-facing companies using data analytics that are building incredibly valuable companies without being Google or Amazon or Apple. So, I wouldn’t count out entrepreneurs either.
John Koetsier: Well, absolutely. Especially in the current environment around antitrust that we see that is preceding the election in the U.S. and probably will also follow the election there. It is interesting, and the neat thing I think if you are maybe an HMO in the U.S. or if you’re a national healthcare facility in Canada, the U.K., wherever else you might be, is you could build a connection into HealthKit.
You could build an app that accesses HealthKit and then people can choose individually to send their data to you with some level of privacy provision or something like that, I assume. And then you could have some ongoing monitoring of health, of citizens, or members of your HMO or something like that. Do you see those being the possibilities?
John Sculley: Well, here’s what I see, and I speak more from things that I’m actually involved with at a pretty deep level. One is automation.
Healthcare has lots of people moving paper around. A lot of the inefficiencies are because the systems are antiquated. You know, they’re still using fax machines where most of us don’t even think about a fax machine when we wake up every day.
But the healthcare industry is still, for the large part, using lots of people, call centers, fax machines, filling out paper forms — every time you go to a physician in the U.S. office, whether you’ve been there before or you’re coming for the first time, what do you do? You get a clipboard and you have to fill out forms of the same data that you filled out the last time as you came.
So automation is going to be a major part of the disruption from an innovation standpoint of the healthcare industry, whether it’s disrupting the current incumbents, or whether it’s new entrants who come in, particularly with the growth of cloud computing, and start to say, ‘Boy, we can do this a better way with automation.’ And why do I know that’s going to happen? First of all, I’m involved with one of the most successful automation companies for healthcare called RxAdvance, and we’re already doing that and have several billion dollars of revenue.
But also, I’ve seen what’s happening in other industries like financial services. You know, it was only back in the mid 1990s, 25 years ago, that people were skeptical whether online banking would ever survive.
Then it turned into fintech, and now it is banking, you know, everything in banking is done online.
Well, let’s take healthcare. During the pandemic, the telehealth industry — I’m also an early investor in a company in the U.S. called MDLive, and there’s MD Live, there’s Teladoc, there’s Amwell, are the big three that the pandemic accelerated the adoption of telehealth. No longer is anybody skeptical that there’s a future in telehealth and it isn’t just for low-acuity care, John, it’s for tele-mental health.
You know, our tele-mental health at MDLive this year is up over 500% growth. Why? People are stressed, they’re anxious, they’re dealing with mental health issues.
And again, automation, we’re starting to see that a lot of people would much rather be able to talk regularly to a bot over a smartphone than they would to sit in a psychiatrist’s office, you know, whether the other people are wondering why they are there in that office sitting there with them. So, we’re going to see different behaviors, we’re going to see different alternative ways that people can have routine health.
And it may be that the services side of healthcare — let’s go back to Apple. Apple has seen its market cap double from one trillion to two trillion. Well what changed? Well, the iPhone sales declined, so it can’t be there. What changed was their incredible success of taking their ecosystem and expanding it through services.
And so Apple has had incredible growth in services. So it’s very realistic to expect that Apple will continue to build their service revenue, and why not build it in healthcare. But again, they’re going to have to play within their boundaries, which is they don’t want to see that data that doctors are going to see. So they’re going to focus more on things that they can coach you through better lifestyle. And lifestyle can be, you know, fitness that you can do from home. Lifestyle can be getting you to be more cognizant of things like your weight and exercise and things like that, which fit in naturally to what the Apple Watch is already doing.
I suspect that Google will dive deeper into the actual treatments of health because they’ve indicated that that’s an area of interest with them, you know, with Google Health and Verily.
Amazon is still a wild card to see where they’re going to go. You know, they got into the pharmacy business with a small acquisition a couple of years ago called PillPack, and so they’re now in 49 States with a pharmacy, they have pharmacies in their Whole Foods stores. At our company, RXAdvance, we are Amazon’s PBM pharmacy benefit manager for their employees and they seem to be very happy and we’re very happy with that. But now that they’ve gone into Halo, which looks like a very interesting product, but Amazon has 150 million members of Amazon Prime.
John Koetsier: Yes.
John Sculley: It launched about a year and a half ago, Alexa Health. Alexa is a request and respond system, brilliant smart speakers. But we all know that Google and Amazon are working on taking request and respond through a voice search system to a conversational mode, which means it’s gotta be more intelligent.
But it also means that it can do more things. So I wouldn’t be surprised to see someone like Amazon take their great success with Alexa Health to continue to expand what it can be as your virtual assistant for many things in health and wellness. Probably starting with preventative care and being able to expand what they’re doing in the pharmacy area, some online, some through their retail acquisitions.
So I wouldn’t count Amazon out at this point, though they have not said many things publicly of what their plans are.
John Koetsier: Yeah. So many things in play here. I want to sort of come to a close here and ask you a couple personal questions, I think.
The first one is, it’s been a long time since Steve Jobs came and said, ‘Hey, do you want to stop selling sugar water and start building what he called “bicycles for the brain”?’ Now you’re in healthcare, and Apple, Google, others are moving in that direction, Amazon, as you mentioned. Any reflections on the arc of your career?
John Sculley: Yes, it was back in 1983. I’d been at Apple for about three months and I was having a session with Steve Jobs and Bill Gates, pretty late at night ’cause that’s when most things happened in the engineering labs in those days in Silicon Valley.
And Bill and Steve were talking about how they were going to change the world one person at a time. Steve was going to do it with personal computers for non-technical people to do incredible creative things, that became the Macintosh. Bill was doing it with a shrink wrap software, he invented shrink wrap software. And before Bill did that, everyone thought computers were just hardware and they gave the software away for free. And so you had these two geniuses and they both agreed on one thing, that they wanted to make a noble cause of what they were doing and their visions.
Well that stuck with me, John, through the decades. And about 14 years ago, one of my close friends, Bob Metcalfe, who invented the ethernet — which is the foundational technology in the internet, packet switch networks — that he said, ‘John, you know, people like you and me as we get older, we need to reinvent ourselves to stay relevant.’ So as I thought about that, I said, ‘If I’m going to reinvent myself, I want to do it around a noble cause,’ and so I picked healthcare.
I didn’t know anything about healthcare.
But, by the way, I didn’t know anything about computers when Steve Jobs recruited me to Apple to help him learn about how do you market a technology product the way we market consumer products. So, I’ve been deep in the weeds with healthcare for now 14 years. We’ve had a number of successful companies that we’ve sold, taken public. We have several more in the track to go public over the next few months. And I just love what I’m doing. I don’t actually run the companies anymore, I’m either a chairman or an active board member, or an active advisor to the company.
Titles don’t really mean that much, it’s, you know, can I be helpful? I focus on private companies. I love to get involved when they’re doing something that is truly innovative.
For instance, Zedsen that I mentioned earlier from London, has really invented technology that is as significant as I believe as MRI was or ultrasound was, and they’re now going through the development of productizing that in several different areas.
So, working with talented CEOs like Daniel Honeywell at Zedsen has been a lot of fun for me and just exciting to still be part of the game, even if I’m not the CEO.
John Koetsier: That’s wonderful. That’s really wonderful. John, I want to really thank you for this. This has been illuminating. It’s also been interesting, it’s been fun, it’s been enjoyable. You’ve been a great guest. Thank you so much!
John Sculley: Thank you for inviting me, John.
John Koetsier: It’s a real pleasure. For everybody else, thank you so much for joining us along for the ride. My name is John Koetsier. This has been TechFirst.
You’ll be able to get a full transcript of this in about a week at JohnKoetsier.com, full story at Forbes will come out shortly thereafter, and the video is available on my YouTube channel. Guess what? The audio podcast comes out almost immediately. Thanks for joining, maybe share with a friend.
Until next time … this is John Koetsier with TechFirst.