Digital Health: Law and Regulation as Part of Your Business Strategy 

Considering legal and regulatory aspects early in product development is crucial for streamlining time-to-market and enhancing business strategy. Legal issues can become obstacles during due diligence or serve as valuable assets for investors. Proper planning avoids delays, facilitates a robust business model, and aligns with long-term goals. 

Why Regulation is Critical for Business Strategy: In digital health, the line between regulated medical devices (e.g., “software as medical device”) and non-regulated software can be thin. Regulatory status influences the business model, time-to-market, and sales strategies. Adhering to regulatory requirements during development prevents costly last-minute changes and accelerates market readiness. 

When to Consider Regulatory Requirements: Regulatory assessments should begin during the initial stages of product planning and development. A detailed understanding of your product’s features, intended use, and indications ensures the viability of the business model and mitigates future hurdles. 

Highly Regulated Environment: The U.S. healthcare sector is extensively regulated, with federal and state laws governing healthcare provision, institutions, professions, and medical data. Tailored regulatory evaluations are essential for compliance and should account for product-specific requirements. 

What to Check 

  • Privacy Protection: Privacy compliance is mandatory, especially in healthcare. In the U.S., HIPAA compliance is essential for products involving “covered entities” (e.g., hospital, physicians, clinics) or “business associates” (e.g., a supplier to a covered entity). For business-to-client models, and when HIPAA does not apply, federal and state privacy laws can be relevant. This legislation varies by state, necessitating a thorough review. DNA & biometric data may trigger  specific legislation as they usually attract regulatory attention.  
  • Regulatory Authorization: Determining whether your product qualifies as a medical device can impact timelines and costs. Regulatory frameworks for “software as medical device” are evolving, with significant FDA guidance on mobile medical apps, clinical decision-support tools, and AI-enabled devices. Regulatory compliance spans the product’s lifecycle, covering quality control, design, risk management, and labeling. 
  • Artificial Intelligence: AI regulation is rapidly developing. While no federal AI law exists in the U.S., hospitals (and other medical institutions) are required by federal law to implement measures aimed at mitigating bias in clinical decision-making tools, and the FDA has issued draft guidance on AI in medical devices and clinical trials. In addition, several states have enacted AI specific state laws that might be relevant. In this period of regulatory uncertainty, adopting AI risk management plans is strongly encouraged to align with emerging standards and best practices, mitigate exposure, meet the expectations of major companies, and attract investor interest. 
  • Apps, Websites, and Patient Interfaces: Legal aspects such as terms of use, privacy policies, and informed consent must comply with privacy laws, consumer protection laws, advertising regulations, and disability legislation. Special care is needed for claims about medical benefits and products targeting healthcare professionals. 
  • Reimbursement/Insurance: U.S. insurance coverage, known as reimbursement, affects pricing, sales potential, and clinical data requirements. Regulatory approval alone does not guarantee reimbursement, making reimbursement/Insurance expert consultation vital for market entry. 

Additional Considerations: Regulatory choices influence tax planning and Intellectual Property (IP) strategies. For instance, claiming regulatory similarity to existing devices for approval may expose your product to IP challenges. Strategic alignment with regulatory requirements can assist with smoother market integration and long-term success. 

This newsletter is provided for educational purposes only and does not constitute legal advice or legal opinion. Do not act on the information presented without appropriate professional advice after a comprehensive and thorough examination of the specific situation. 

About the authors

Netanella Treistman
Leading Partner Privacy, Technology and AI Arnon, Tadmor- Levy law firm

Netanella Treistman’s practice focuses on matters relating to technology companies, with an emphasis on (emerging) technology, complex licensing agreements, intellectual property and privacy compliance. Netanella represents various types of companies including startups and global companies. Netanella is experienced in business-to-enterprise contract negotiations, and assists clients in various privacy matters, including comprehensive privacy compliance projects, privacy consequences of corporate transactions and privacy due diligence.  

Netanella is a Certified Information Privacy Professional/ Europe (CIPP/E) and a Certified Information Privacy Professional US – private section (CIPP/US). 

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Tamar Tavory
Special Counsel Digital Health Arnon, Tadmor - Levy law firm

Tamar Tavory’s legal focus is digital health, with an emphasis on legal and ethical aspects of artificial intelligence, medical data, pharmaceutical and medical devices, clinical trials and innovative medical technology. 

Before joining the firm, Tamar had a notable career in the Israel Defense Forces. Tamar served as deputy head of the Legal Counsel and Legislative Affairs department in the Military Advocate General’s Corps. Her rank is Lieutenant Colonel (ret.). 

Tamar teaches an M.A. course in “Health Law” in a graduate degree program at the Faculty of Management at Tel Aviv University. She also lectures regularly in these fields and has published several articles. 

Tamar is a PHD candidate at Bar Ilan University, and is a member of the Israel Bar since 2000.

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