Apple's new watch event draws attention to its health-care play

On Tuesday, Apple gave a starring role at its fall product launch event to the Apple Watch - letting it take the spotlight that is usually reserved for a new iPhone.

The event is the second one streamed online from its Silicon Valley campus, known as Apple Park, since the global pandemic forced it to switch to virtual product launches. Apple themed the event "Time Flies," an apparent marketing tease for its watches. The company also unveiled updated iPads - but no new phone is expected yet.

While the absence of the iPhone's shadow at Tuesday's event may just be a quirk of pandemic-related supply-chain disruptions that Apple says have delayed production of its next smartphone, it also offered Apple an opportunity to showcase its six-year effort to break into the health care industry. The Apple Watch is the physical manifestation of the company's health care play, and perhaps the most important but least understood prong of the company's new business model anchored around services rather than gadget sales. The announcement also comes during the peak of a global pandemic in which the conversation about health and technology has accelerated.

Apple has said its participation in the health care industry has been aimed at helping people, not necessarily to benefit its bottom line. And at the virtual event Tuesday, it highlighted vignettes, showing how the Apple Watch keeps people healthy, even saving their lives by alerting them to heart problems.

The Apple Watch 6, the company announced, will include a new sensor that can detect blood oxygen levels, often called a pulse oximeter, which the company said will deliver helpful information about health. Apple executive Sumbul Desai said the tool can help detect early infection of covid-19 and announced a new research study with the Seattle Flu Study and University of Washington that will examine the relationship between blood oxygen, heart rate and the coronavirus.

As sales of iPhones have, until recently, been declining, the company has been looking for new ways to make up for lost revenue. Mainly, it has done so by finding ways to sell subscriptions for music, TV and cloud storage. Analysts long expected Apple to bundle those products into one offering, like Microsoft did with its Office suite in the 1990s. On Tuesday, Apple finally did that, announcing Apple One, a new subscription bundle ranging from $15 a month to $30, that includes many of its digital products. It also announced a new service for Apple Watch users, called Fitness +, which will cost $10 per month or $80 a year.

But health care is different, and Apple's route to profitability is murky. Unlike other services, Apple doesn't charge consumers or companies for any of its health offerings, other than for the watches, which cost from $400 to $1,500 for the most recent version. Analysts say Apple will shy away from profiting directly from the data collected by researchers and drug companies that use Apple Watches in clinical trials.

On Tuesday, Apple announced an inexpensive version, called the Apple Watch SE, which will start at $279, compared to $399 for the Apple Watch 6.

While six years is a long time for the technology industry, it's a blip in the medical field, where change is slow and arduous. Apple's investment is only beginning to bear noticeable fruit, and experts in the pharmaceutical industry say it could take years more for the company to become a major player in the field. As Apple builds a track record for producing reliable research based on watch data, it will probably add more sensors, expanding the breadth of research possible with the device. One day, Apple Watches could be a common component of drug and device studies, experts say, even if that is a far off and ambitious goal.

Apple isn't alone in its drive into health care. Google's Verily is making a concerted push into the clinical trial industry. Amazon, which acquired prescription service PillPack and online symptom-checker Health Navigator, has partnered with Berkshire Hathaway and JPMorgan Chase to lower health costs. Microsoft's Healthcare NExT initiative is focused on artificial intelligence in health care. (Amazon CEO Jeff Bezos owns The Washington Post.)

Apple Watch wasn't the first smartwatch, or even the first health-related one. Fitbit and Jawbone pioneered the fitness tracker market and new start-ups are pushing the ball forward on hardware. Oura, for instance, packs a lot of health-related sensors into a simple ring. But none of those companies have Apple's massive install base of loyal customers. Apple Watches outsell the entire Swiss watch industry, according to a Strategy Analytics report.

There are reasons to buy Apple Watches beyond health. For customers locked into Apple's ecosystem, they make for a nifty accessory that can adjust AirPods' volume or unlock MacBooks without a password. Because of the sheer size of its user base, Apple can corral thousands of research subjects in a short period of time.

Six years in, Apple Watches can detect signs of atrial fibrillation, a potentially deadly heart disorder. But that detection isn't 100% accurate. False positives can send patients to the doctor unnecessarily. It may take a decade or more before the watch has the kinds of sensors and hard-core research necessary to be a comprehensive health solution for customers, said Gene Munster, an analyst with Loup Ventures, a venture capital firm, making the watch as a health device a long-term bet. "I don't think they're close to being there. I think the current watch is limited in what it's picking up on," he said.

In the meantime, Apple is earning "credibility in the industry," according to Tom Dorsett, CEO of RazorMetrics, a health technology company aimed at lowering prescription drug costs. Apple gained FDA clearance for its atrial fibrillation algorithm and its electrocardiogram. "If they're investing in FDA approval, they're looking to be something more than a novelty device," he says.

Apple's first watch, announced in 2014 and released the following April, came with the introduction of ResearchKit, open-source software that allows medical researchers to find subjects for their studies. Using the software, academic institutions and pharmaceutical companies can enroll Apple's customers in clinical trials, collecting data on Apple Watches to learn more about the human body.

Apple's ResearchKit has been used for clinical trials, some of which it has announced to great fanfare. Last year, the company announced three major studies on women's health, heart health and hearing. In terms of the massive amount of research constantly being conducted by drug companies and in academia, Apple isn't much of a player.

In part, that is because Apple Watch is limited to a subset of the population - mainly, to those who also use iPhones. In the United States, that's roughly half of smartphone users. Those customers tend to be more affluent and have fewer chronic diseases that drug companies aim to treat. Apple provides Apple Watches free to many research subjects and offers discounted bulk pricing to companies conducting research. Still, the sheer number of people who own Apple Watches may make it possible for researchers to find diverse groups of research subjects.

When Apple launched ResearchKit, there were already companies - many of them start-ups - charging for similar services. Naturally, they viewed Apple as a competitor with the potential to dominate the space. "When ResearchKit came out, I thought we were toast," said Matthew Amsden, CEO of ProofPilot, which offers software services for controlled trials. It didn't play out that way. "I just don't hear a lot about ResearchKit anymore. I don't think I've heard about it in two years." ProofPilot is booming, Amsden says. ResearchKit is considered a niche player in the overall clinical trials industry, Amsden and others in the industry say.

In addition, ResearchKit isn't a full-service offering. Companies that aim to use ResearchKit for trials still must have the resources to create customized software, and companies like Thread Research and Medable have sprung up to meet that need. Large drug companies tend to opt for bespoke software with actual medical devices for traditional trials, industry experts say, rather than rely on ResearchKit.

One executive at a major pharmaceutical company, who spoke on the condition of anonymity because they aren't authorized to speak publicly, said that is slowly beginning to change. The executive discussed several studies Apple is working on with pharmaceutical companies that haven't been announced.

In addition to testing the efficacy of drugs, pharmaceutical companies also conduct more broad research into health. Those projects, which tend to benefit from large numbers of participants, are more tailored for the Apple Watch. Apple announced three new research studies at its virtual event Tuesday, including one relating to asthma in partnership with the insurance company Anthem and the University of California, Irvine.

Apple doesn't collect fees from researchers, like it does from software developers, so its path to profitability isn't as clear. But if Apple is successful in encouraging more studies and research using Apple Watch, it may benefit if the research leads to new algorithms that would allow Apple to offer useful advice to customers.

"Apple doesn't want to make money off of users' data. If they create a large business around selling data from Apple Watch, that's a problem," Munster said. That's because Apple markets itself as privacy-conscious, and profiting from health data could hurt its image. Apple doesn't receive data from studies that use ResearchKit when Apple is not involved in the study. But he said the data can help sell more devices. "The data is making the watch more useful and ultimately making their products more indispensable."