Medical practice is a big business. Conservative estimates put the total cost of medical malpractice at nearly $35 billion annually and, according to a Kaiser Family Foundation report, nearly $5 billion is paid in claims each year. With an average claims payment of about $300,000 and up to 50% of that going to the lawyers representing the patient, its not surprising that practically every show on cable television has at least one advertisement imploring patients who have suffered practically any bad outcome to contact a lawyer immediately for “the compensation they deserve.”

And its that aggressive pursuit of legal cases that suggests that malpractice lawyers would be receptive to new opportunities for revenue, such as in the area of emerging medical technologies. We’ve talked previously about issues of liability and electronic health record developers. And at least one recent report suggests that iPhone medical app developers, including electronic health record developers producing iPhone interfaces, should be wary that they could become potential targets.

Information Week recently reported on the Electronic Frontier Foundations’, a cyber rights advocacy group, battle against the restrictive iPhone Developer Program License Agreement. Under the terms of this agreement, as reviewed by the EFF, developers are not allowed to, among other things, market apps through competing app stores, jailbreak the iPhone, or reverse engineer any software component. Coincidentally, developers are not allowed to discuss this agreement either – it was only made public through a Freedom of Information Act request from NASA which had released an iPhone app.

But more relevant to the medical app world are the clauses that place all responsibility for legal compliance on the developer, requiring developers to indemnify Apple from any liability issues – these could be big problems for medical app developers.

To be fair, liability being placed on developers is on the surface pretty intuitive. If a developer makes an app that guides clinicians through the PALS algorithm and there is a mistake in that app which leads to patient harm, the developer may share some liability. But if its established that these kinds of apps are medical tools that fall under FDA and other federal regulations, it will be the responsibility of the developer to ensure compliance. Apple, through this agreement, absolves itself of the responsibility of screening apps during the approval process for whatever compliance is necessary. And for anyone that has ever dealt with federal regulations, even through institutional review boards, that can be incredibly difficult territory to navigate. Should this become an actual responsibility of developers, it could force all but the largest developers out of the community.

I suspect its pretty unlikely that this such compliance will ever be required – it would be hard to establish these apps as anything other than reference tools comparable to any textbook or website. But that doesn’t mean people won’t try. Inevitably lawyers and clients looking for big payouts will take the Willie Sutton approach and go where the money is.

Its often argued that malpractice volume is driven by the fact that all physicians are insured – an increased likelihood of a big payout creates a powerful incentive to pursue legal cases. Similarly, health systems, device companies, and pharmaceuticals are all attractive targets for inclusion in lawsuits because they have deep pockets. And so does Apple. But if Apple is named in a malpractice case, however baseless the case may be, the app developer will be responsible for Apple’s legal fees on the basis of indemnification. While large electronic health record companies could probably survive that, it could wipe out a small company. Even worse, an individual physician producing apps on their own, rather than under the coverage of an incorporated business, could be wiped out personally.

Overall, the implication here is that the medical app world could face potentially treacherous landmines on the road ahead. And while disclaimers could help limit liability and incorporation could protect individual developers, any potential damages are essentially being carried by the developer community.