Check out Larry Popelka’s latest Bloomberg Businessweek article on innovative start-ups 23andme, Uber and Airbnb
What Do Government Agencies Have Against 23andMe, Uber, and Airbnb?
The U.S. Food and Drug Administration announced last week that it will no longer allow Silicon Valley startup 23andMe to sell its genetic testing kit, effectively putting the company out of business—for now.
23andMe, founded by Anne Wojcicki, the estranged spouse of Google co-founder Sergey Brin, has raised more than $125 million from Yuri Milner (investor in Facebook and Twitter), Johnson & Johnson, the Roche Venture Fund, and Google. The company sells $99 genetic tests that consumers can administer to themselves at home by spitting into a plastic tube. Samples are processed by a DNA lab and results are sent directly to the consumer, helping them understand their genetic makeup and allowing them to make proactive choices to prevent disease. In its short existence, 23andMe has attracted more than 400,000 customers, many of whom became part of an online community that shared genetic information for additional research.
In a letter last week to Chief Executive Officer Wojcicki, the FDA stated that 23andMe could no longer sell its product without premarket approval for each of its tests. This process would require several years and millions of dollars for each of the 250+ genes it tests, making approval prohibitive and impractical. The FDA reasoned that if consumers were to misuse the results of 23andMe or encounter false positives or false negatives, it could lead to mishandling of medications or unnecessary surgeries, making the tests themselves unsafe.
This is a great example of how government regulators often overstep their bounds to control new-to-the-world businesses. Genetic testing is all about information, and 23andMe helps individuals get information about their genetic make-up; it does not prescribe treatments. Only doctors can prescribe medications or surgeries, and it is unlikely any doctor would recommend treatment based solely on a genetic test. Using the FDA’s logic, WebMD and self-help books should be regulated too, because they dispensing advice that can potentially be misused by lay people.
The real issue is that the FDA—like virtually all government agencies—is predisposed to support the industry it regulates, so existing constituents in that industry are protected by it. As a result, innovative new businesses that challenge incumbents are penalized….
The FDA is not the first regulatory agency to make it difficult for startups with a new take on an existing business. Taxi competitor Uber is under attack from municipal taxi and limousine commissions that favor existing services…. Airbnb, a successful startup that allows individuals to rent apartments or homes via online postings, is facing heat from hotel commissions in several cities that support the hotel industry….In Minnesota, Coursera—which offers free online classes from Stanford, Johns Hopkins, and other leading universities—was temporarily shut down last year by the Minnesota Office for Higher Education because the courses didn’t meet its standards….
We can only hope that a few members of Congress—which spent the last five years bickering over health care—will step in to save 23andMe.
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