The Incredible $24 Million 510(k)

Tuesday, November 23, 2010

"For those who spoke with the FDA about conducting a clinical study for their low- to moderate-risk device before making a regulatory submission, the premarket process took an average of 31 months from the first communication to being cleared to market the device."
FDA Impact on U.S. Medical Technology Impact (Makower Report)

We weren't planning on running anything new before the holiday, but today's hit piece on the costs of FDA complaince demands a response. Of necessity, we can only offer a partial response today.

The Makower report claims that FDA-related costs comprise 75-80% of product development costs. For a 510(k) clearance, it claims, you're on the hook for $24 million in FDA-related costs. For PMA approval, you better set aside $75 million.

On the one hand, the report simply states the obvious: developing a marketable medical product is very costly. It raises the entirely valid point that regulatory unpredictability and inconsistency can aggrevate those costs significantly.

That said, the report vastly overstates the problem by greatly misrepresenting the device development process. The report methodology essentially defines all costs incurred by a company between the first contact with FDA and final clearance as FDA-related costs. Then it carefully measures the problem that it has defined into existence.

The particularly galling thing about this methodology is that it seeks to punish FDA for being willing to meet with start-up companies early in the development process. Product development is very expensive, no matter how you slice it, but when you seek FDA input early, you can apply those costs in the most efficient and effective manner possible.

Early meetings between developers and FDA are a win-win all around. This study turns that wisdom on its head by asserting FDA somehow bears responsibility for a broader range of costs as a result of allowing early meetings. That's a heck of a way to respond to them being willing to take a more proactive, customer service approach to regulation. If you think things are unpredictable now, just see how much you like it after you raise the political cost of getting study design input before you conduct a study.

Device development and regulatory compliance are difficult and expensive. There are many sensible ways we can reduce those costs at the agency level and communicate better how they can be managed at the sponsor level. We are already having (and should continue to have) an adult conversation about how those costs are best reduced and managed.

I share manufacturer and investor goals of reducing expense and time to market, but shenanigans like this report will not help that cause at all. Blaming FDA for the expense of development based on their willingness to give early feedback is foolish, disingenuous and short-sighted. We should all hope that this report has no impact, because any impact it could have would make the process considerably worse.

Tags: 510(k), CDRH, FDA, Industry, PMA, VCs and Investors

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