Medical Device Daily Washington Editor

GAITHERSBURG, Maryland — As buzzwords go, "Innovation" is perhaps less annoying than the phrase "disruptive technology" — if only because the latter term, which peppers the industry's press releases, is even more grandiose.

Still, a recent session examining the nuts and bolts of innovation in the medical device and diagnostics industries showed that device makers take the "I" word very seriously.

The event was hosted by the Institute for Health Technology Studies (InHealth; Washington), an organization that sponsors research into evidence-based valuation of the impact of devices and diagnostics. Now in its fifth year of operation, InHealth has pulled in $4.2 million in its current fund-raising campaign, designed to bring in as much as $10 million.

Among the donors are Johnson & Johnson (New Brunswick, New Jersey) and the Edwards Lifesciences Fund, financed by cardiac valve maker Edwards Lifesciences (Irvine, California).

Some might consider an odd feature of the event — which included indirect federal agency participation — the absence of any large focus on reimbursement. FDA's interest in innovation was on display, since at least 47 of the roughly 100 registered attendees were from the agency, but the Centers for Medicare & Medicaid Services was not represented.

In the first presentation, John Linehan, PhD, professor of bioengineering at Northwestern University (Evanston, Illinois), said devices and diagnostics rang up sales of more than $77 billion in 2002. "It's a very large industry," he said, "employing 350,000 employees in 2001 and undoubtedly more now."

Linehan cited statistics indicating that devices and diagnostics generate a trade surplus for the U.S.

Referring to what is well-known by those in the industry, he said that the sector "is populated by small companies."

Venture capitalists, he said, pumped $9.1 billion into 862 deals for device makers and biotech firms last year, and that a "tremendous amount of effort" in innovation is indexed by "the percentage of sales that are dedicated to R&D," putting it at roughly 11%.

He emphasized that innovation is more than a one-step process: It is "not simply an invention — it's an invention put to use."

Josh Makower, MD, CEO of device incubator Exploramed III (Mountain View, California), gave attendees a good look at how small companies innovate, saying that it is much more than that infrequent arrival at some breakthrough concept.

"The whole idea is that innovation is a discipline," Makower said. "It can be taught and learned."

He said that the process starts with an objective, adding that focus groups are the wrong way to go about identifying what doctors are looking for in device technology.

"When you ask them what they need, they're going to give you something within the spectrum" of familiar technology, Makower said, and that physicians "are not going to think the whole procedure is wrong." Consequently, a focus group will typically disclose not much of anything.

On the other hand, the observing — and observant — outsider might see the conspicuous elements of a surgery more readily, "and that's where innovation comes from."

Makower said that entrepreneurs, before moving forward with an idea, too often fail to flesh that idea out exhaustively.

"Let's not fall in love with an idea too early," he cautioned, suggesting that innovators "set a few criteria before we go ahead."

He added: "Its amazing sometimes that the difference between success and failure is defined right here," Makower said, "because a path was not chosen that could have averted expense and insecurity."

Too many entrepreneurs, he said, fail to think about regulatory or reimbursement processes until they're about to meet with FDA or CMS.

Still, a great product does not necessarily a great business make.

"If it's going to make people's lives better, but it's not a good business," Makower cautioned, the idea probably will never leave the ground. He pointed to a lack of investment as the main stumbling block.

Makower said that his approach is to try to take a device into first-in-man testing with the first few million dollars of investment and then work on a Series A financing.

"That is a great advantage we have because ... we actually know whether we should succeed" before loosening the purse strings to the tune of eight figures.

One idea that Makower came up with himself is a treatment for "one of the most common chronic diseases" — sinusitis.

"Everything you do is through the lens of a crushing headache," he testified from personal experience. "It's amazing how under-appreciated chronic sinusitis is," but several hundred thousand treatments are performed for the problem every year, with a minimally invasive procedure.

Despite the lack of invasiveness, he described this procedure for patients as "the worst experience of their lives."

The standard procedure is functional endoscopic sinus surgery, a procedure that forcibly gouges bone out of the skull, and Makower decided to pursue another solution.

His answer: Balloon sinuplasty.

"The question was, 'Could the balloon be strong enough to remodel the bone?'" The procedure was first developed by using a cadaver, and Makower said that the surgeon performing it accomplished it in two minutes.

Additional work with other cadavers was done in order to see if the compression affected nearby regions of the skull. It appeared the effect was strictly local.

The balloon, now marketed by Acclarent (Menlo Park, California), came through FDA as a 510(k) device, and Makower said "market acceptance has been tremendous" with the company now having trained 3,000 surgeons.

Still, reimbursement is proving tricky.

Makower told Medical Device Daily that even though CMS was "on board right away," private insurers have not followed the agency's lead.

"There is no actual incremental reimbursement required, but some insurers are still pushing back," he said in reference to a few larger payers. In contrast, he said, "Our experience with FDA has been fantastic," he said, and entailed "no unreasonable hurdles."

Patents "are an entirely different story," Makower said, blaming the situation at the Patent and Trademark Office on that agency's well-known applications backlog.