Over the past 18 months, this blog series has explored the intricate, time-consuming, and expensive process required to bring a new medical device to market. The process involves many steps, corporate functions, and people inside and outside the company. Many technical founders and inexperienced device investors fail to appreciate the complexity of the process that will be faced along the way and don’t realize the interconnections between those steps and the people involved in them. They may lack an understanding of how decisions made early in the process may drastically alter the achieved end, which may be the difference between commercial success or failure. This blog has attempted to elucidate much, but not all, of this complexity.
It is worth reviewing some statistics presented at the beginning of this journey:
- The average cost to bring a 510(k) product from concept to market exceeds $31 million, with greater than 77% of the cost—approximately $24 million— spent on regulatory and FDA-related activities.
- The cost of a PMA averages $94 million, with $75 million spent on FDA-linked stages. That is nearly 80% of the total amount. Read More.
- As of 2019, startup failure rates were around 90%. More than 21% of startups fail in the first year, 30% in the second year, 50% in the fifth year, and 70% by the tenth year. In the US, 75% of medical device start-ups fail, and 98% of digital health startups fail. Moreover, 75% of venture-backed companies never return cash to their investors, and in 30-40% of cases, investors lose their entire initial investment. Read More.
- The time it takes to bring a new medical device to market averages three to seven years or more. This does not include the time required to realize insurance coverage, which can double the timeline. Drug approval can take even longer, averaging 12 years.
Just the regulatory and reimbursement process for a medical device is a highly complex and interconnected process that can take anywhere from one to five or more years. There are several regulatory paths than can be taken when bringing a new device to market in the US, and the importance of making the correct regulatory path decision early in technology development cannot be overemphasized. On the one hand, if a PMA is submitted where a 510(k) would have been sufficient to realize all market objectives, many years and multiple millions of dollars may end up being wasted, with those additional years and costs at the front end where investor dollars are the most expensive. On the other hand, finding out late in the game that a PMA would have proved more fruitful than a 510(K) when it comes to realizing reimbursement coverage will add cost and time at the back end, which may result in revenue loss more significant than the cost if incurred upfront.
Furthermore, no matter how great a new technology is, it is difficult to become a standard of care if it relies on cash pay patients or if it is paid at a rate less than the cost of performing the procedure. Because the US healthcare system is based on reimbursing for procedures performed rather than outcomes achieved, a facility’s decision to invest in new technology is based as much on the profit that can be made from its use as it is on whether it results in better outcomes. Wide-ranging decisions will impact payment levels and coverage decisions in ways not readily apparent at the start and are often counterintuitive to standard teachings.
This last point is perhaps the major take home message from this blog series. Knowing what you do not know early and considering the implications of all facets of the process together from the start are of utmost importance when trying to minimize the time and cost and maximizing the likelihood of success for a new venture. Because of the interconnectedness of all aspects of the process, decisions made early in the process without considering or being aware of the impact those decisions might have on later steps can be costly. Mapping out the entire path forward at the very start and updating that path as results accumulate along the way will bring new technology to market in the shortest time possible, benefiting both the company and patients significantly.
Many resources are available to the budding entrepreneur to help reduce the likelihood of costly errors. The internet is full of self-help articles that usually examine only one or two aspects of the process. However, remember to always transport the teachings of each article back to the overall pathway being followed. There are numerous and well-experienced consultants that abound within our community. Some are well-versed in a particular function, such as regulatory. In contrast, others have experience across various functions due to direct experience in companies that have gone down this path previously.
A company’s professional investors have people on their teams who can lend expert advice at each step of the process. This is where having at least one group of professional investors engaged in a start-up can be helpful. They may be more likely than private or family/friend investors to bear sound and realistic experiential guidance and direction based on their prior successes and failures.
The Focused Ultrasound Foundation has many articles, blogs, reports, roundtables, seminars, and people available who can answer questions and guide entrepreneurs along the way. In addition, a separate group within the Foundation – FUS Partners – specializes in helping nascent companies. The FUS Partners team exists to help address the critical unmet needs of the companies in the focused ultrasound community, including fostering relationships and developing critical resources concerning regulatory and reimbursement; corporate financing; training and credentialing; employee recruiting; strategic partnerships and technology transfer; industry advocacy; and intellectual property.
Along with the entire team at the Foundation, I am more than glad to field questions and provide help to companies navigating the perilous but rewarding path to creating technology that will improve the quality of life and longevity of millions of patients with serious medical conditions in the shortest time possible.
Mark Carol, MD, is a senior consultant at the Focused Ultrasound Foundation.
Read the Series
- Part 1: The Complex Ecosystem of a Medical Device Startup
- Part 2: Novel Technology Development
- Part 3: Regulatory Authorization
- Part 4: Reimbursement
- Part 5: Physicians
- Part 6: Patients
- Part 7: Facilities
- Part 8: Societies and Guidelines
- Part 9: Commercialization
- Part 10: Technology Advancement
- Part 11: Publication Strategy
- Part 12: Cybersecurity
- Part 13: Financial Challenges
- Part 14: Conclusion