Wireless Health: Development Pitfalls

As any entrepreneur knows, getting started with a new company is fraught problems that can turn a great idea into a big mistake. There are just so many decisions that, if the wrong one is made, can kill or cripple the company. Worse though are the startups that haven’t encountered the big “Oh Crap” as yet and there’s a glimmer of hope that entrepreneur latches onto.  These startups are under the impression that they are really close to big sales/financing/strategic partnership.  Encountering your first big speed bump can be a slow and painful experience.

Many companies entering the wireless medical device space get stuck in this last category. However, their being stuck and not able to move forward may be less about something they did or did not do and more about the pitfalls along the path of taking a medical device to market.

For example, wireless devices startups may get snared in government processes that were put in place to insure that medical products are safe before allowing them into the market (by our friends the Food & Drug Administration, FDA). Once they are found to be safe, then another government organization gets involved to decide how much Medicare and Medicaid will pay for the product (Center for Medicare and Medicaid, a.k.a., CMS).

Now if you include working with the Patent and Trademark organization on intellectual property applications and issues, that’s a total of three government organizations involved in the product realization process. And, as we know, government organizations are not the fastest groups to deal with. Not only is this two-pronged FDA-CMS process time consuming, it is very costly, and every entrepreneur in this space has to make sure that he/she has planned on having sufficient financing and investors who understand what’s required to get through the FDA and CMS.

I am sure that this is one important reason why many investors avoid life sciences deals including medical device space altogether. After all, an entrepreneur can start an consumer Internet company for a few thousand dollars, a couple of great programmers, a good understanding of the demographics of the prospective customers and someone who understands the elements of SEO and Conversion. Consumer Internet startups can begin generating money in a matter of months. Contrast this to medical devices requiring large initial cash outlays over an extended period of time; in many cases years.

I find it interesting that, when there is talk about fixing the issues in the FDA, e.g., around the long timeframe for a wireless medical device company to get its products through the FDA’s 510 (k) process, there are always many comments about making sure that the primary goal of safety isn’t overlooked. I’m clearly not a proponent of having the pendulum swing all the over and weaken the process so that unsafe products get to market faster, but who can argue that the US economy and consumers both can benefit from an overhaul to the 35-year old 510 (k) process?

On a positive note, in January of this year, the FDA announced a plan consisting of 25 proposals targeted at overhauling the approval program and is targeting to implement some changes in 2011. Their list includes streamlining the review process for lower-risk devices, clarifying when companies should submit clinical data for a 510 (k) application and creating a new council of senior FDA experts (“Center Science Council”).

As for the insurance reimbursement process shepherded by CMS, a number of major stumbling blocks are under review. For example, the current process allows reimbursement for a medical device or associated devices only if the patient is at a medical facility when using the device. Now, given the nature of wireless medical devices, this just doesn’t make sense. Why should we mandate that an elderly or ill patient, having a wireless device that collects information and sends it along to a health care professional, leave their home and travel to some medical facility to use a product that works perfectly well in their home?  Especially for a device that’s merely sending data—readings of blood pressure, etc. along to the physician. This is one that we all hope is resolved soon.

I assume that it will take some time for both the FDA and CMS to make changes and integrate the improvements into their overall processes. In the meantime, what can we do to facilitate getting wireless medical devices to market faster and have them reimbursable?

Here are my suggestions:

•    What can entrepreneurs learn about the language they should use on an application for a specific device that would both position it correctly with the FDA reviewer and ensure that it is not incorrectly categorized into a class that all but ensures a lengthy approval?
•    A medical device will have both a “patent” which needs to be innovative and not intuitively obvious while the goal of a 510 (k) application is to describe the device as very much like something that has already been approved. What is the best strategy for an entrepreneur to follow given the diametrically opposed requirements of these two required organizations? There are knowledgeable people who know these organizations and have dealt with them and can provoke great suggestions to entrepreneurs.
•    So how do we get the knowledge where it is needed? This is, in fact, one of the goals of a startup acceleration program and one that we will be attempting to resolve as we move forward with an accelerator in our region.

As we put our program together, I am constantly looking for ideas and contacts that can help with this. Any suggestions or recommendations are always welcomed.

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