Eyecare is big business – estimated by some at around $40 billion per year in the U.S. Opternative has come up with a Mobile Cloud solution that CEO Aaron Dallek believes can serve many of the individuals who account for about 100 million eyeglass and contact lens prescriptions per year.
“Our guiding principle,” he states, “is to use technology that only requires equipment that the user already owns.”
Simplicity for The User
A user can perform a refractive eye exam using Opternative, at home or anywhere they have an Internet connection, using just their cellphone and a computer or PC screen.
The subject signs in with Opternative over the web and answers some qualifying questions. They are instructed to darken the room. A link is texted to their phone, so that the phone is coordinated with test images on the screen. The subject views the images and answers specific questions, submitting their responses by tapping choices on their phone.
The subject follows test instructions, e.g.: how far from the screen to stand; when to cover one or the other of their eyes; to observe various images on the screen, such as different symbols, shapes, colors; and answer questions on their smartphone about what they see, for example, which one of a group of shapes is different, or how many lines they see on the screen, or questions about a colored shape on the screen.
Opternative estimates that the test should take about 25 minutes, but Dallek explains that the pacing is up to the individual. The test is also customized, he notes, and will vary according to responses the individual makes. The company also states that it has built “redundancies” into the process, so that even if the subject makes a few mistakes in answers, the test should still be quite reliable.
Dallek points out that they are “testing the individual’s vision for failure – the point at which you don’t see something accurately.”
The test results will be reviewed by an ophthalmologist, in the state in which the user resides, who will determine if a prescription is required. The test itself is free. If the user requires a prescription, it can be ordered through Opternative for a fixed charge of $40 ($60 with contact lenses.) The prescription can be filled at any eyeglass retailer.
While anyone can take the test, Opternative currently only offers prescription service to people between 18-40 years of age, who do not have any of a list of conditions.
Benefits to Consumers – And Limitations
Opternative views the benefits to the consumer as: a) The $40 charge is reasonable, even cheap compared to the cost of a visit to most eye doctors’ offices; b) It’s obviously very convenient to take the test at your own convenience, rather than having to go to a doctor’s office; and c) It also saves a lot of time, as anyone who has ever waited in a waiting room can appreciate.
Dallek also states that they believe that the simplicity and low-to-no cost will induce more people to check their eyes more often. Virtually all sources on the subject agree that there are many people walking around who should have their eyesight tested.
It should be noted that: “The refraction test is an eye exam that measures a person’s prescription for eyeglasses or contact lenses.” (NIH U.S. National Library of Medicine.) The test is not an examination for possible eye diseases or conditions, e.g., cataracts, glaucoma, etc.
Opternative makes this clear, stating: “Opternative’s service does not include any type of eye health exam.” They recommend periodic doctor’s appointments to users for purposes of checking eye health.
Two questions jump out about the business strategy. First, how does Opternative control distribution costs? Dallek explains that they have “an aggressive consumer presence.” While they do some advertising, the primary reliance is on distribution through retailers who sell glasses. Dallek declined to identify any of their major marketing partners.
Secondly, do they have a defensible position in the market? Here there are at least two considerations. The first is that Opternative went through a grueling process to establish the validity of the results of their eye tests. Simple as their service sounds, it was not simple getting there. They tested hundreds of patients and he states, “We probably went through 20 different versions of the combinations of images that we use.”
Anyone trying to duplicate the service would presumably have to go through a similar process. In addition, however, he states that they have several patents on the technology, as well as copyright protection on the images and trade secrets for their backend system.
Dallek was reported in the press stating that the service had had 19,000 sign ups as of October of 2015. He states that, “a lot of people will end up buying, while some are just checking out the service.”
Patient results are stored in Opternative’s electronic health records system, in the company’s cloud. The cloud is maintained on Amazon, in a HIPAA compliant section.
The service is subject to state regulations and is currently available in 33 states. Dallek states that it does constitute practice of medicine and is subject to rules that apply to telemedicine. When asked what is to prevent a person in one of the other states from falsifying information about their location, he replies that they assume that people are telling the truth.
Dallek refers to the company as “the gold standard of subjective refraction.”
Outlook and Growth Opportunities
The company currently has 15 employees. Dallek reports that they have recently raised $6 million of new financing for their expansion.
There are a number of further opportunities for Opternative. Besides expanding to additional states, Dallek mentions exams for other types of eye conditions. Some of these could involve use of smartphone cameras (which are not necessary for refractive exams.)
While they don’t currently accept insurance (and Dallek points out that co-pays may often be as high as the $40-60 fees charged) they may do so in the future. Referring patients to medical professionals could become a source of revenue at some point as they scale. The company also states that they will offer a version of their technology for use by ophthalmologists in the future. Dallek also describes international expansion as “a huge opportunity”.
Dallek states that there are about 110 million prescriptions issued in the U.S. each year. He believes there is potential for 50-60 million additional prescriptions. The Vision Council of America reported that eye care exams increased by 3.5% in 2015. The Council estimates that “approximately 75% of adults use some sort of vision correction.” About 64% use eyeglasses and 14% contacts, according to the Council. However, an estimated 14% use non-prescription glasses that can be purchased at retail.
The Bureau of Labor Statistics estimates that there were over 75,000 opticians in the U.S. as of 2014. It forecast that the number would increase from 2014-2024 by “24% (Much faster than average)”.
Since we started analyzing the Mobile Cloud about four years ago, the Healthcare area has fascinated us as one where cloud and mobile convergence could have enormous positive impact. The area is fraught with information gaps and failures, as well as connectivity and information sharing problems.
A lot of very talented people have perceived this opportunity and are offering creative mobile cloud solutions for different medical applications. In general, our concern has been whether these solutions – often well-conceived and well-funded – have a business model that can realize profitability in a reasonable period of time.
It appears to us that Opternative probably doesn’t have to get a large share of the refractive eye exam market to be quite profitable. A 1% share of the total eye exam market, for example, would equate to a million or more exams and potential revenue, just with the company’s initial offering, of up to $40 million. The limitation of its initial offering to persons 18-40 years old, however, means that it is currently only addressing about one-third of total U.S. population. A table shown below illustrates that only about 40% of the U.S. population in that age range wear glasses or contacts.
As with every area of healthcare, there are other interesting approaches to the eye exam and eye care area. Peek Vision, for example, has done a good deal of eye care related research in Africa and elsewhere. It offers its Peek Acuity eye exam test. Peek states that it is doing research on a “self-test versions” of its technology for visual acuity and colour-blindness exams. However, the Peek system currently requires a technician to administer the tests.
The company also conducted a successful Indiegogo fund raise for its Peek Retina device, which it describes as: “It’s a clip-on camera adapter that gives high quality images of the back of the eye and the retina. This helps us to diagnose cataracts, glaucoma and many other eye diseases, ready for treatment.”
Another provider, EyeNetra, has developed a virtual reality headset device, the Netra, that can enable a user to conduct their own refractive eye measurement tests. The company also offers a service, Blink, which involves a visit by a technician and use of a number of devices, including the Netra, for an eye exam, at a cost of $75.
It appears to us that Opternative probably has the simplest alternative for refractive eye exams at this point and could have that part of the market to itself for at least some time. Its success should be primarily a factor of its ability to motivate key retailers to offer and support its solution.
Following is one estimated breakdown of the percentage of users of eyeglasses and contact lenses in the U.S., by age group.
Visit their website: www.opternative.com