DÜSSELDORF, Germany – The greater scrutiny of medical devices that is inherent in the coming reform of healthcare payment systems in both the U.S. and Europe is changing the game for the development of medical devices, putting a heavier burden on startups to prove performance against health economics models, and it will also have deep impact on how, and to whom, devices are sold. (See sidebar, "When cost-savings do not benefit your customer, who is the buyer for devices?" page 8)
"Evidence-based requirements will be greater and will require longer development timelines, which slows down product introductions," said Erik Baas, director for Medicine and Technology International with Medtronic (Minneapolis) during the EuroMedtech conference here.
"This will make things tough for a lot of smaller companies," he added ominously, leaving no doubt as to who will be required to pay for bringing forward the evidence.
Currently the prevailing trade route for success with medical devices is to land a CE mark for early commercialization in Europe, and then file for a 510(k) approval from the FDA, using another – usually a competitor's – device, as an equivalent.
Yet this process, which fast-tracks products to market and earns much-needed revenue for early sales, is coming to an end as the FDA increasingly requires products to face the more rigorous requirements of the pre-market approval (PMA) process.
Where a device developer spends on average 20 hours on a 510(k) filing, the four-step review process for a PMA takes not less than 1,200 hours and includes rigorous approval requirements, post-approval reporting, and sales restrictions.
The sticking point regarding the CE mark is the restrictions on sales as the long arm of the FDA reaches across the Atlantic, where any device sales ahead of FDA approval may be viewed unfavorably and adversely impact the application review.
"As a likely buyer of your company is going to be based in the U.S., or have a significant share of business there, the first question they are going to ask you is if you are going for an FDA approval and which one," advised Antoine Papiernik of Sofinnova Investments (Paris).
"It is becoming a fact of life," he said, adding that as a potential early investor who expects to exit the investment via an acquisition, Sofinnova will ask the same question even at the earliest stages of development.
"You need to know very early on in development the regulatory route you will follow in the U.S.," Papiernik said.
"Certainly do in Europe what you can do best in Europe," he advised, "which is to get the CE-mark approval and get your product to the best key opinion leaders. Yet it may not mean you will launch your product in Europe."
"Rush for the CE, as soon as possible," Papiernik said. "But also have discussions with the FDA to be sure they know what you are doing and plan for the hurdles you will face with them."
Another panelist at EuroMedtech, Timothy Haines of Abingworth Management, added, "I would put it even more strongly than that."
"One of the weakness for European companies is to view the CE mark as a significant milestone," he said.
It may be a significant commercial milestone, he said, but "it is a weakness for start-ups to not think of the FDA from the outset and if you have not done the proper work for the FDA from the beginning, you will find yourself going back to scratch," he said.
"The differences between the CE requirements and the FDA requirements are enormous, as anyone who has done both knows perfectly well," Haines said
Having hammered home his point, Haines provided a kicker for the audience, saying that his firm is prejudiced toward products that are positioned for a 510(k) product approval by the FDA.
"There probably are PMA opportunities, but the days of the $10 million to $20 million PMA are gone," he said. "Today it is probably closer to $80 million and eight years to get to an approval, and it is pretty tough for a venture capitalist to think along those kinds of product timelines."
André-Michel Ballester, CEO of Sorin Group (Milan, Italy), said he recently looked at an acquisition opportunity where "the dilution to our earnings extended to 2018 due to clinical trials required and the investment in technology.
"In the past it might have been possible, but I did not want to go to the board with this opportunity," he said.