We are happy to present to you the third episode of #TechFoundersTalk, ByteAnt podcast series with tech product launchers and industry innovators. This time, please welcome our guest John Hsu, the CEO, and co-founder at iPill Dispenser.
Yuriy Stakh (Y.S.): Hello everyone. Hi John, it’s great to have you here.
John Hsu (J. H.): Hi, thank you for having me.
Y.S.: Let’s talk about iPill Dispenser. As far as I understand, it is a hardware device aimed at fighting the opioid crisis. Can you explain how it works?
J. H.: Sure. So the simplest way to explain it is with the examples. To prevent opioid abuse and aversion, we need to make the opioids secure. So we have a mobile app that requires two points of biometric authentication. We use the app as a carlock. Only you can open your car and start it. Likewise, only you who have the prescription can access the opioids and only at a prescribed dose. The mobile app connects to the iPill Dispenser that dispenses the opioids only at the prescribed amount. And there is the maximum amount you can get per day.
Here is a curious fact about iPill Dispenser. If you try to tamper with it, it actually destroys the pills inside. In 90 days, it also destroys the unused opioids. In the USA, we have 3.3 billion unused opioids in the cities every year. So this is a sound way to securely store, actively control, and dispose of unused opioids to prevent abuse and addiction.
Y.S.: Ok, and as far as I understand, you have a rich medical background. Probably it inspired you for this idea. How did you come up with it?
J. H.: You will laugh at this. One day, I was going to play golf. So I had to start my car. And I was thinking, wow, only I can use my keys to open a car. And only I can use my card and my personal code to get the money at the bank. And then I thought. When given to a patient at home, opioids don’t have any type of security or control dispensing. What is a better way to dispense opioids as if it was money? You know, we put our jewelry, our stocks in a safe place, even though those things do not kill people.Yet, opioids can kill people. It overwhelms me that 1 in four overdoses today involves children. So, how can they be safely secured at home?
Y.S.: Sounds terrific. Your device is connected via Bluetooth, even though it is not the only method. In terms of security and overall, is it the best method, and what others are there?
J. H.: I think BLE is a very reasonable way to connect your smartphone to the iPill Dispenser. You have to open your phone with two points of biometric authentication. The first security layer is that most people are addicted to their smartphones. As they are afraid to lose them, that is an important security measure.
The second security layer is that you need to open your phone to use the app. So your face, your fingerprint, and your personal code serve as a second degree of authentication. It is unique to you. We make the connection between the app, the phone, and the iPill Dispenser unique, as we use the 128 encryption. We add a random number generator to numerically enhanced security of the device.
The third part of the security is related to proximity. We can dial down the energy level of the BLE transmitter so that you have to be within 4 or 5 feet to make it work. This way, a person with ransomware trying to login to your app won’t be able to do it.
Y.S.: These are great measures in terms of security. When you are launching your product, what are the key risks? How did you handle them?
J. H.: Well, the key risks are pretty basic. First, we need to make sure that someone pays for the device. Thus, we need to promote the device to the pharmacy insurer who will pay for it. To do that, we need to make the gadget less costly to them. Since we are the FDA Innovation challenge winner, we got the CPT and other reimbursement codes faster. So the device is reimbursable for the insurer. We are also trying not to increase the cost to the patients. We want to show that the device can save costs and increase profits to the insurer.
Every year, it costs $19 333 to take care of a subscriber who is abusing opioids. Each opioid death costs the insurer 1.8 million dollars, because for every death, there are 119 visits and 22 hospitalizations.
Let’s say that we deliver iPill Dispenser to patients under 26 years old. In such a case, we can save a medium-size insurer around 4.5 billion dollars. So the key for us is to show that we can use a small amount of money to save much more to the insurers.
Y.S.: So it may benefit customers, doctors, insurance companies, everyone. It sounds amazing.
J. H.: Yeah, this project is unique because it’s a win-win-win for everyone involved. Patients get their opioids in a safe manner. As the federal government has decreased the prescriptions, patients struggle to get them. The device also has the respiratory sensors associated with it, so if you are not breathing well, 911 is called.
The insurance companies make more money. Physicians no longer risk their license due to patient overdose. The FDA can save $698 billion a year in medical expenses and grow their productivity. And the pharmacies win because they have a secure way to dispose of opioids.
Y.S.: Ok, but I have another question: as a startup with such a brilliant idea, what were your mistakes? What wouldn’t you do if you had a second chance?
J. H.: As I have many friends, some of them have told me that they could raise money for the startup, but few actually did. So my biggest weakness is probably trusting people too much. We need to be discerning in how we listen to people. Eventually, I had to put in $500 000 of my own money to make this project go forward. Part of this sum I paid to people for raising money, but they didn’t. I should have raised the money and then paid them more if they succeeded.
Y.S.: Ok, I see. What were the overall costs of launching your product? Did you have any overheads you could avoid?
J. H.: Since I am a programmer myself, I built the initial programs for the iPill app. It was me who made the device. I bought products on Amazon for the iPill and put them all together in my garage. So I programmed the Arduino chip and add-in the BLE transmitter. The cost of it was fairly minimal.
As I moved on to prototyping, I had to hire people. I didn’t have enough time anymore to do it. But overall, I did a lot of work myself.
Y.S.: That’s great. In terms of competition, are there any other solutions in the market now that copied you? Were there similar devices when you started?
J. H.: Right now, we have two main competitors. One of them is called MedicaSafe. They exist for 14 years, and they’ve taken around $8 million of grant. But their device uses only one point of authentication, which is quite a weakness. If you want to protect your money, you use two points of authentication. The other weak point is that they are using a plastic container.
The other device is TAD by Intent Solutions. They also use one point of authentication, and they don’t destroy the pills. Thus, if you break into it, you can easily access the drugs.
My product, on the other side, controls human behavior. So if you decide to take more pills than usual, you can pass the cognitive behavior therapy. The app diverts your needs with music, yoga poses, games, and more. We know it works because the medical industry players have taken the opioids from 60% per claim to 25% per claim by using a multidisciplinary team approach to control pills and behavior.
Y.S.: Thank you. If we talk about hiring people, how did you build your team? Did you do it in-house or outsource?
J. H.: My team includes experts in their fields. I wanted specific jobs done. The cheapest way to do this is to get experts and give them well-defined tasks. So if I want to distribute the iPill Dispenser with all the opioid prescribers in the United States, I may need 191 million iPill dispensers per year. I contacted FoxConn, the makers of the iPhone. They were very intrigued by the project as they saw its potential social impact. We had a mutual understanding and signed an MOU letter. They can build 1 to 2 million dispensers per day. So, to do this correctly, I need to look at this scenario several iterations down the road.
Y.S.: Yes, this is true. Can you also share what technologies you used to build it and why? Did you use any ready-made IoT solutions & platforms, or did you create the device from scratch?
J. H.: I built the iPill Dispenser from scratch. We used the Arduino board, BLE chip, and 3D printed devices for the housing. For the future, we need to do ingestible design so that we can manufacture the product in very high volumes. I would like to use a PCB board with the embedded BLE transmitter. This way, I can make the device inexpensive so that all patients can access it.
Y.S.: How many devices did you produce for three years? What is your market reach?
J. H.: We only produced a prototype, and we are launching to market now. We have two purchase orders from behavioral science centers. They are planning to start with 200 units and are going to expand to 13 000 units. If all 450 behavioral treatment centers in the US use it, this model for this segment will give me the growth & income of $2 billion.
Y.S.: That sounds good. In terms of sales & marketing, how do you promote your product? Is it through personal connections or promotional campaigns?
J. H.: Two behavioral centers found me on the Internet. They were so interested in the device, as they wanted to decrease the death rate of their patients. To make selling more efficient, I would get the insurance mandate. If one insurance company decides to put all their opioids in this, the US government may see the value of this, a very inexpensive way to save billions of dollars.
Y.S.: I find it a wise strategy to get interested customers before you even launch to market. What would be your advice to rising startups? How can you get this great attention to your product?
J. H.: In most cases, you have to think about the end customer. You have to make a product that the end-users and the purchaser will demand. In this case, we have patients, pharmacies, and FDAs. I think we successfully determined who will need our product. That is what you have to do.
Y.S.: So what will be your final price of the device?
J. H.: To set the price, I asked a pharmacy insurer company with 40 million subscribers, how much would they pay for this device? They said “$300”, while we were ready to offer it for $50. I think that at $50, you can get reimbursement by the government. I don’t want to make it stressful for the pharmacy insurer. Above all, it is a social impact project that reduces the risk of diversion.
Y.S.: I also wanted to discuss the topic that bothers everyone, the coronavirus. What changes do you see in your industry right now?
J. H.: Wow, that’s a great question. As for me, there are actually two pandemics: the coronavirus pandemic, and the opioid pandemic. In March, due to the quarantine, the opioid overdose death went up 18% in the US. In April, overdose death went up 29%. In May, it was 42%.
The pandemics also slowed the ability to market the device to investors, even though we’re using Zoom. I think once the situation with social distancing becomes better, people will realize that the opioid crisis has never left. Instead, the Covid has accelerated the opioid overdose issue. Therefore, I need investors to help me, and I need to spread the word about it.
Y.S.: Yeah, I think it’s great what you are doing, as the social impact of it could be huge.
J. H.: The issue is that you have uncontrolled access to controlled substances. The child-resistant cap doesn’t protect adults. So people can take the opioids as soon as they decide. Besides the USA, Canada has a big problem with opioids overdose too. You need to treat both the patients and pills. So I’m planning to leave 90% of profits in Canada to help fight the other social problems such as homelessness. Mainly, that is a social impact project. My main goal is to help people.
Y.S.: That’s absolutely great. Did you consider expanding your business to other countries that are not so rich but have the same problem?
J. H.: Yes, we have the PCT patents (note: Patent Cooperation Treaty - the International Patent System) in the EU, South America, Asia, and Canada. Another problem I see is that you can’t promote patient inherence due to the complicated study protocols during the clinical study. You need to remind and record the time when a patient takes the pill. Our device reminds the patients to take the pills and determines when it hits the stomach. So it can improve the way we evaluate the drugs. I actually make the device for dentists as well, since this is the first point where patients under 26 years old can abuse the opioids.
Y.S.: Do you see your product changing the industry?
J. H.: Potentially, I think this product will go worldwide. That’s why it has to be inexpensive.
Y.S.: I see. These are all the questions I have for now. Thank you for this productive discussion.
J. H.: Thank you for having me. Just one last thing: most people don’t realize that the opioid crisis is 20 years old. Thus, we have to do something different. We can’t repeat the same things and expect a different result. I hope people will have open minds to change this situation.
Y.S.: Great. Thank you.
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