Start-ups would save the human race if only the Luddite regulators – probably still typing on BlackBerrys – would just get out of the way. That view comes from the innovators who would turn heavily-regulated industries upside down. Indeed sometimes it does appear that regulators are more intent on protecting entrenched interests than on promoting competition. But this week’s news about healthcare start-up 23andMe is a reminder of how crucial regulators remain.
The much-hyped 23andMe (there are 23 pairs of human chromosomes) offers $99 mail-in DNA test kits. Swab some saliva, send it back and the company will tell you which medical conditions you are disposed to. The problem is that the Food and Drug Administration had not signed off on the efficacy of the tests. The FDA is concerned that consumers might initiate significant medical treatment based on the data provided by 23andMe. As such, it ordered the company to stop selling its kits.
Cautious healthcare regulation is appropriate. But start-ups such as Airbnb, a peer-to-peer hotel service, and Uber, a mobile-based taxi service, have run foul of rules about who can sell lodging or drive a car for a fee. Those rules may have been designed to protect customers but the consumer response to Airbnb and Uber (both now boast multibillion-dollar valuations) may show regulators were unnecessarily heavy-handed.
The FDA decree just may be a bump in the road for 23andMe. Consumers are now allowed to buy thermometers, home pregnancy tests and even HIV tests. Regulators are slowly working out how to deal with radical departures such as Bitcoin, Tesla and Aereo. But initial opposition may be enough to sink the first movers. So hiring the best coders is great but start-ups should save some venture capital cash for lawyers and lobbyists.
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