New Study: FDA Impact on Innovation

Are we suffering from a “Device Gap” in the U.S.?

Do Americans have access to the most innovative and safe medical devices in the world? If not, are patients in the U.S. suffering and dying needlessly from public policy which puts too much emphasis on safety? Are the costs of safety outweighing the benefits of access? 

The idea of risking patient safety to allow manufacturers to bring new devices to American patients quicker is blasphemous and has spawned whistleblowers within the FDA, instigated congressional inquiries and put manufacturers in a negative media light.

What are the costs of proving to the FDA that a device is safe? How do those costs compare to the European Union and what does the data mean for entrepreneurs determining where to develop and introduce their newest devices?

While these questions have been asked for the past few years with plenty of anecdotal evidence offered at numerous medical and industry meetings, a new study by Josh Makower, M.D., consulting Professor of Medicine, Stanford University, is providing the first hard evidence to these questions.

The study, funded in part by the Medical Device Industry Association (MDMA), the National Venture Capital Association (NVCA) and multiple state medical industry organizations, found that:

“Patients in the U.S. wait an average of two years longer than Europeans to gain access to new medical technologies created in the U.S. These substantial delays result in millions more in cost to bring products to the U.S. than in Europe.” [Without evidence of compromising safety.]

Furthermore, from the perspective of American medical technology companies developing new medical technologies in the U.S.:

• FDA substantially lags behind Europe in several performance indices

• Many U.S. medical technologies are available outside the U.S. long before they are available to U.S. citizens

• Reported FDA review times drastically underestimate the actual time required to navigate the FDA process to obtain clearance/approval

• Companies navigating the U.S. regulatory environment incur substantial incremental cost due to delays and inefficiency in the process

• A majority of medical technology companies feel they have been negatively impacted by the current FDA environment

FDA Bristles

Dick Thompson, a spokesperson for the FDA told OTW that the agency believes there were limitations to the study and contained several significant flaws. Thompson said the study compared apples to oranges because companies come to the FDA earlier in the device development cycle than they do in Europe. He also said the study may have had biased results because about 20% of the more than 1, 000 companies contacted for the survey responded.

To read the study and investigation methodology click here.

Cost of Clearance/Approval

Makower's study found that the costs, on average, to clear a medical device through the 510(k) program in the U.S. is $31 million from concept through clearance, with $24 million of that spent on FDA-dependent/related aspects.

Source: morguefile.com

To bring a product through the PMA (premarket approval) process costs, on average, $94 million from concept through approval, with $75 million spent on FDA-dependent/related aspects.

According to the study, the time required to obtain a clearance is averaging 31 months in the U.S. but only 7 months in Europe. For approvals (which are more involved than “clearances”) medical device companies are reporting that the length of time required is an average of 54 months per approval in the U.S. but just 11 months in Europe.

One American entrepreneur attending Drs. Frank Phillips, Todd Albert and Alex Vaccarro's Spine Technology Education Group in 2008 told attendees it costs his company $2 million and a few years to get into the European market and $70 million and seven years to get into the U.S. market.

Or take as an example the approval of lumbar disc arthroplasty in the U.S.

Four U.S. pivotal trials were completed at an estimated cost of $200 million, with a combined 20 years of experience in the U.S. While companies were spending that amount in the U.S. for an early generation of the technology, European surgeons had progressed beyond those early models and are now using fourth and fifth generation devices. 

Slowing Innovation

Makower found that regulatory submissions have been declining in the U.S. over the last several years and approvals and clearances have been trending downwards. In 1999, the FDA reported approving 38 PMAs and clearing approximately 3, 500 510(k)s. By 2009 those numbers had dropped to 15 and roughly 3, 000, respectively. 

It's not only direct regulatory costs that are contributing to the "Device Gap." Regulations governing improvements to existing devices and predicate requirements also slow innovation. U.S. companies are required by the language of the current regulations to seek predicates to pre-1976 devices in order to get indications for approved uses. Physicians are then left only with the "off-label" use option when they see data coming out of Europe. This subjects the physician to potential lawsuits.

European Model

"The Europeans have developed a better system, " said the entrepreneur.

Europeans have brought in private industry—"Notified Bodies"— to be part of the approval process. They have FDA-like entities called "Competent Authorities" that have determined risk categories that are governed like FDA trials. Lower risk devices, however, are largely farmed out for approval to the private organizations that are responsible to the Competent Authorities. They are audited on a regular basis and are paid by the companies to do an evaluation of the product as well as make sure the company is in compliance with European regulations for manufacturers of medical products.

In private conversations with FDA staffers, we have been told that many staffers believe Europeans are serving as guinea pigs for new devices and Americans are safer for their efforts.

How much safer? In a study of 510(k) cleared products over the last ten years, University of Minnesota Law Professor Ralph Hall found that only 0.22% of all cleared devices in the U.S. resulted in a product recall. How much safety is enough while American patients with unmet needs can't get access to devices already approved in Europe?

Investment Perceptions

Makower's study also tried to determine the perceptions of those who make the decisions about which devices to develop, test and bring to market.

He writes that respondents in the study feel the unpredictable, inefficient, and expensive FDA regulatory processes puts the U.S. at risk of losing its global leadership position in medical technology innovation.

"Data from the survey clearly indicate that European regulatory processes allow innovators to make new medical technologies available to patients more quickly and at a lower cost…If the same devices become available in U.S. following their European approval only after extensive delays and additional costs are accrued, we must evaluate whether U.S. premarket regulatory processes are truly contributing to the advancement and promotion of the public health, or if they are actually restraining it.

These perceptions matter as manufacturers determine where to invest intellectual and human capital and the implications to the American economy cannot be underestimated as the nation recovers from the Great Recession.

Industry Impact

In 2006, according to Makower, American medical technology companies shipped products valued at $123 billion and paid $21.5 billion in salaries. The industry directly employed more than 357, 000 individuals and indirectly accounted for another 1.6 million jobs (each direct position generates 4.47 additional jobs in the national economy).

Employees in the field earn above average wages—approximately $60, 000 per year—because the industry requires and attracts a highly skilled and educated workforce. New medical technologies also have the potential to drive down costs in a world of escalating healthcare expenditures.

Internationally, the study found that the U.S. is the largest global consumer of medical devices. However, it is also the world’s leading producer. “The country achieved this leadership position through decades of strong, sustained investments in research and development (R&D) by U.S. medical device companies and the venture capital community that backs them, ” said the study. As a result, the field is among a limited number of industries in which the U.S. maintains a trade surplus. In 2007, the total medical technology industry trade surplus was estimated at $5.4 billion.

But that golden goose is looking around.

“In previous decades, we shipped manufacturing jobs offshore. Now we’re shipping knowledge worker jobs abroad. Once you export innovation jobs, those jobs won’t come back. We need to balance adequate regulatory scrutiny with the rapidly increasing innovation cycle.” said Rodney Perkins, M.D., Clinical Professor of Surgery at Stanford University.

The study concludes that as the nation faces substantial concerns regarding the cost of healthcare, it must also be acknowledge that a substantial number of important patient needs still remain unaddressed.

“A solution to both of these problems cannot be achieved by delaying new innovations and cost-effective treatments. The FDA must impose reasonable regulatory requirements on new innovations, implement more balanced requirements for premarket and postmarket clinical data, and go back to leveraging market forces to reward technology that presents the greatest value to patients.

“Only then will the most effective advances in medical care be developed and delivered promptly to American patients; and only then will the public health and our economy be best served."

And only then can we close the Device Gap.