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A Founder’s Guide to the Legal Framework for Digital Health

Oluwagbeminiyi Ojedokun, Deji Sarumi & Ridwan Oloyede from Tech Hive Advisory have produced a new guide* for digital health founders.


Introduction

Digital health is the intersection of technology and healthcare that looks at how technology can be used to improve the quality of treatment given to a patient. Digital health refers to digital products or services that can be used for monitoring, diagnosis and prevention of diseases and conditions. In recent times, there has been an increase in the use and deployment of digital health globally. Though still a nascent development, the proliferation of internet enabled mobile devices, use of wearables and implants, electronic health record, predictive medicine, telemedicine, artificial intelligence, software, are examples of digital health solutions used to transform healthcare delivery.

According to mHealth Alliance, “the ubiquity of mobile devices in the developed or developing world presents the opportunity to improve health outcomes through the delivery of innovative medical and health services with information and communication technologies to the farthest reaches of the globe.” In spite of the immense benefits, these advances could pose risks and dangers if not properly administered. There is, therefore, a need for effective structures and systems to be put in place through laws and policies in order to fully embrace and unlock the immense benefit of digital health.

Considerations for Starting a Digital Health Business

Starting a digital health business is often similar to starting any other business. The first consideration is the choice of business formation. There is an option to start out under any of the business formations recognised under the law.

For example, in Nigeria the Companies and Allied Matters Act, 2020 allows a business to set up as either:

  1. Business Name;
  2. Company Limited by Shares;
  3. Limited Partnership; and
  4. Limited Liability Partnership

At this stage, the founding members coming together to establish the business should be considering the ownership structure, obligations and responsibilities, vesting of shareholding, mode of operational activities, etc. These considerations can be contained in agreements such as:

  1. Founders Agreement;
  2. Shareholders Agreement;
  3. Vesting Agreement;
  4. Employment Agreement.

Post – Incorporation Considerations

After incorporation, the newly formed entity is ready to commence business. The immediate pain points will be around getting other necessary approvals and certifications where required.

For example, in Nigeria a company with foreign shareholding should register with the Nigeria Investment Promotion Commission (NIPC) in order to access certain foreign investment incentives available. There can also be requirements for companies with a foreign employee to apply for a business permit and expatriate quota to legally retain such employee.

Other considerations may include registration with the relevant tax authorities within the state of business operations and registration for statutory contributions for employees with a pension commission, housing fund scheme, or social investment trust fund.

If your company intends to transfer technology into a new jurisdiction for the purposes of operation, then the company may need to meet registration requirements of a technology transfer agreement, such as Nigeria’s National Office for Technology Acquisition and Promotion (NOTAP).

Furthermore, registration can be vital in the protection of intellectual property (copyright, trademark, patent and industrial design) as well as being paramount to the growth of a business.

Finally, it is important to pay attention to relevant documentation and agreements including but not limited to;

  1. Privacy Notice
  2. Terms of Use
  3. Non-Disclosure Agreements;
  4. Liability Disclaimers;
  5. License Agreements;
  6. Memorandum of Understanding;
  7. Agreements with vendors and third parties

Raising Capital and Dealing with Investors

Access to capital is one of the biggest challenges start-ups face in Africa. It is even more evident in niche/specialist areas like Healthtech which has received lesser investment when compared to the Fintech space. The reasons for the funding disparity in these sectors are numerous but can be managed effectively with adequate and quality professional advice.

We have highlighted the following items below for special consideration when raising equity or dealing with investors:

  1. Traction;
  2. Pitch Deck;
  3. Investor Network;
  4. Financial Statements;
  5. Information Memorandum;
  6. Term Sheet;
  7. Memorandum of Understanding;
  8. Convertible Notes
  9. Simple Agreement for Future Equity;
  10. Investment Agreements;
  11. Joint Venture Agreements
  12. Loan Agreements;
  13. Shareholders Agreement;

Tech Hive Advisory has written extensively on Fundraising mistakes to avoid and on choosing equity or debt for raising capital for businesses.

Data Protection and Cybersecurity:

Security and protection of personal healthcare data can fall under the auspices of national health acts. However, legislation and regulations outside of the healthcare system can be pertinent as well. In the case of Nigeria, both the National Health Act (NHA) and the Nigeria Data Protection Regulation (NDPR) create obligations on providers to ensure implementing data protection principles, the protection of data subject rights, the use of contract when dealing with third parties and other obligations. The NDPR and the NHA creates an obligation on service providers to ensure the security of data and their platforms.

Professional Conduct:

Oftentimes, medical and dental practitioners acts and codes of medical ethics demand professional obligations which may impact business operations. These obligations expected of a healthcare professional in the orthodox set up remains when services are provided over digital medium.

These regulations can cover the licensing, registration, standard of practice as well as professional misconduct in the healthcare system. Healthcare providers may be expected to uphold the highest professional standards. Usually, the use of digital health services does not alter the ethical, professional and legal obligations on healthcare practitioners and providers.

In Nigeria, Section 44 of the Code reinforces patient-professional confidentiality and ensures that any information about the patient that a healthcare professional comes across must be kept confidential. This extends to care provided over digital platforms. Section 42 of the Code regulates sharing of patient health records among healthcare professionals, it mandates the protection of privacy of patients. Section 22 of the Code specifically addresses telemedicine and mandates the security of the platform and personal data at all times against unlawful interception.

Consumer Protection:

The continuous development of consumer facing technologies for healthcare has made consumer rights very crucial. Without these rights, consumers would be left open to unconscionable and unfair trade practices, price gouging, market competition, distortion, as well as infringement on their rights. 

Consumer protection provisions place emphasis on timely and quality performance and service, delivery of goods free of defects, merchantable products and delivery of products that comply with prescribed standards and practices. Additionally, such regulations can prohibit false, misleading and deceptive marketing to consumers. The implication of this is that digital health platforms cannot make false representation as to the quality of their products or services.

Other Legal Frameworks

Aside the regulations described above, there are many policies, strategies and guidelines issued by both federal and state government that could impact digital health. Some examples in the case of Nigeria include:

  1. National Health ICT Strategic Framework 2015-2020;
  2. Nigerian National e-Health Strategy 2011;
  3. National Strategic Health Development Plan 2018-2022;
  4. National Health Policy 2016;
  5. Nigerian Health Information System Policy 2014.

Outside the law, policies and strategies, there are pending legal instruments that could impact digital health. Currently in Nigeria, the National Electronic Health Record Bill, the Electronic Transaction Bill and Draft Framework on Alternative Dispute Resolution for the ICT Sector all have potential to directly impact digital health.

Challenges of Digital Health

There are various challenges facing the implementation of digital health systems in Nigeria. These include, but are not limited to, sustainability, availability of human resources, funding, poverty, lack of infrastructure, digital divide and inclusion, governance and infrastructure. For a successful implementation of a digital health system across the country, much effort and coordination are of importance.

Conclusion

Digital health has the potential to democratise healthcare by enabling patients to become more involved in their wellbeing. There is a need for effective structures and systems to be put in place through laws, policies, frameworks and strategies. The place of regulation is germane to foster the promotion and deployment of digital health across the continent. A good regulatory framework will promote investment, growth of the fledgling space and consequently make healthcare available to more people.


*Usage of the Guide: The Guide is general, non-exhaustive, and educational in nature and is not intended to provide, and should not be relied on, as a source of legal or business advice. This information and material provided in the Guide may not be applicable in all (or any) situations and should not be acted upon without specific advice based on particular circumstances.


About the Authors:

Tech Hive Advisory is a technology advisory company based in Nigeria, and a member of the ALT Network.

Deji Sarumi, Co-Founder
Ridwan Oloyede, Co-Founder
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