MedTech or FedTech?
Technology is a field defined by symbiosis. While the field itself has seen leaps and bounds in progress, it has also fostered advancements in many other realms. Transportation, communication, education, and recreation are common facets of our routine, and have all been enhanced by the boon of technology. One of the most productive recent trends in technology has been that of medical innovation. It is a kind of ingenuity that saves or extends lives. Breakthroughs in drug development, patient diagnosis, synergy determination, and even surgical procedures have all been facilitated by technological innovations. But with high costs of pharmaceutical and medical R&D and stringent regulations, how long can this Golden Age of Medicine continue?
Venture capitalism to the rescue
The road to biotech and pharmaceutical commercialization is long, and expensive, and hurdles are abundant, as depicted by the timeline below, demonstrating the average development process for a drug.
But at the same time, many of the medical innovations heralded today spawned from small startups. How do a dozen ambitious individuals provide the millions of dollars necessary for medical development? Well, they don’t; at least not by themselves.
According to a report written by the National Venture Capital Association (NVCA), venture capitalists have been responsible for an estimated $108 billion of investment between 1980 and 2012 in 4,600 life science companies, such as Genentech, 23andMe, and Onyx. This comprises 19% of venture investment in that period. When one looks at the costs of development, it is understood why the big wallets of VC firms are needed to sustain the proliferation of medical technology.
But if current trends continue, the bills to pay may completely outgrow the size of their wallets. As highlighted by an article in Scientific American, the cost of developing and commercializing a prescription drug has climbed to $2.9 billion. After correcting for inflation, this translates to a 162% increase on the estimate made in 2003. Understandably, venture investment in the life science sector has seen a decline in recent years, with many VCs unwilling to allocate their resources. The big question is “what is the problem that is causing this decline”? And the answer does not have a simple solution.
FDA: friend or foe?
According to the report by the NVCA, the time and cost of backing med-tech startups has been steadily increasing, illustrated by the charts below. This has prompted many VCs to shift focus from the sector of life sciences to others with less risk and greater return. Good for them, bad for medical entrepreneurs. At this point, you’re probably thinking “Okay, the increase in cost and risk regarding med-tech investment caused the decline in VC investment, but what causes the increase in the first place?” Ultimately, it comes down to the draconian regulations of the Food & Drug Administration, commonly referred to as the FDA.
In a survey named Vital Signs, conducted by the MedIC coalition of NVCA comprised of venture capitalists and portfolio life science companies, it was found that 60% of VCs “identified the increasing cost and uncertainty in obtaining FDA approvals as having the highest impact on venture investment.” This risk is evident; according to a study by the Independent Institute, only 8% of drugs in development make it to the stage of approval. The rate of success of drugs eventually entering the market is even lower, given approval has to then be obtained. It is alarming to imagine that masses of growing investment costs are spent on products that never make it to market more than 92% of the time. So the FDA must be evil right?
Not exactly. While FDA regulations are harsh, they are warranted. When it comes down to innovations that claim to save lives, it is important that this claim is supported. The subdivision responsible for the regulation and safety of medical devices, the Center for Devices and Radiological Health (CDRH), classifies medical devices as one of three classes according to the level of risk involved. Each class has its own set of hoops through which companies must jump in order to attain FDA approval. All devices require sufficient clinical data from trials to prove its efficacy, large populations of volunteers to treat, and volumes of paperwork to complete. Costly? Yes. But in the context of human lives? Necessary.
What to do?
It seems that there is an inherent tradeoff and complex relationship between the amount of innovation inspired and/or approved, and the safety of those using them. In recent years, the MedIC coalition has worked closely with the FDA to foster meaningful reform that would promote investment in the life science sector. Solutions have included increasing predictability, efficiency, and speed of FDA decisions, allowing communication between the FDA and medical innovators to be more transparent. Despite common belief, the two entities are ultimately working as one, with the common goal of propagating efficient and reliable medical technology.
On a related note, the landscape of medical technology innovation is often competitive; this is the root of another problem. By increasing transparency within the network of med-tech companies, better informed decisions can be made. Open sourcing technology and information eliminate duplication of studies and development, thereby reducing costs of development.
The future of medical technology is bright, and when we realize that we are all working towards the same goal, we will make our way towards it.
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