Medical Device Start-Up Flight to Europe and its Market Implications

Medical Device Start-Up Flight to Europe and its Market Implications

Future upsides to the global medical device market may increasingly originate in Europe as many start-ups seek initial market approval within the European Union (EU). Recent criticism of the U.S. FDA has been preoccupied with the relative complexity of clinical trial plans in the United States. At a recent conference, Mark Deem, managing partner of medical device incubator The Foundry LLC, noted the FDA’s deficiencies relating to his issue:

Clinical trials are a particularly sore point - the FDA traditionally takes much longer to approve trial designs, so companies head outside the U.S. when they bring their device or diagnostic to the clinic.

“People naturally need to make progress where progress can be made, so it’s going overseas,” Deem said. “The industry has institutionalized this as the way to do business.”

Frank Boermeester, a partner at HealthStartup, also noted how EU clinical trials and initial CE-marking provide a viable strategy for a company eventually seeking out the U.S. market:

Once a company has obtained its CE mark (which certifies that the product is safe, but not necessarily effective) it can, in principle, begin commercializing its product anywhere in EU while simultaneously gathering data and conducting the necessary clinical efficacy trials. In the U.S. products typically don’t receive FDA approval before successful efficacy trials, which lengthens the development process.

The FDA recently created an expedited access premarket approval program for select medical devices that address serious conditions without other viable treatment options. Wholesale reform of clinical trial regulation is unlikely, however, as the FDA has noted the importance of harmonization efforts and a general sense that the EU may strengthen its own medical device regulation. Pressure on European regulators increased following the shocking deficiencies of on-market implants produced by French manufacturer PIP and discovered in 2012.

While recent discussion has stressed the faster avenue to market for EU-approved medical devices, greater parity is evident between the U.S. and EU medical device markets in terms of time to market access. Indeed, Eucomed has pegged the EU’s head start on device approvals (CE) at three years compared to the United States; the Boston Consulting Group (BCG) found an average 42.8 month delay between CE marking and U.S. approval. Yet EU consumers have little to no advantage in terms of when an approved device becomes available under reimbursement. In some cases, reimbursable devices are available first to U.S. consumers even when initially CE-marked. Single-payer and national healthcare systems in Europe remain slower to approve reimbursements.

Boermeester touched upon the associated advantages of the U.S. medical device market, including the more “commercial” aspects of U.S. healthcare as well as the more cohesive regulatory and reimbursement policies in place in the United States. Clearly, while start-ups are drawn to Europe, their visions and strategies remain fixed to North America - particularly in the case of new and disruptive medical device technologies.

Sofinnova senior associate Katie Ellias in a recent interview commented on the changing prospects for medical device start-up in pursuing the conventional CE-to-United States strategy:

Investors probably are thinking differently about the traditional strategy in medtech, which was kind of a “CE Mark/European commercial launch first, FDA/US second” approach….  In the past maybe investors were a little more comfortable with a Europe-only strategy, whereas now that that approval process in Europe has a lot of uncertainty around it, we are more wary, and we have to think more globally.  So that’s the biggest change.   At the same time, before these changes were proposed there were a lot of US based VC’s saying, “We really want to get more tapped into things going on in Europe, can we partner together?”  I would say in the last year since these changes have been bubbling around we hear a little bit less of that.

The current focus of medical device start-ups on consumer-oriented health data and the integration of enhanced IT into devices conforms well with U.S. rethinking of health delivery paradigms. While the United States remains at a disadvantage in nurturing higher medical risk device start-ups, increased scrutiny of such devices in the EU may even the playing field. The western-centric nature of many start-up products signals the continued relevancy and primacy of the U.S. market for companies moving beyond initial commercialization.

FDA protocols will not be responsible for any U.S. market weakness compared to Europe. Kalorama Information estimates in its fifth edition of the Global Market for Medical Devices that the total volume of the U.S. medical devices market is approximately 66% higher than the European market. The preservation of a predominately private payer health system in the United States, as well as stronger macroeconomic factors, will preserve, if not further skew, the importance of the U.S. market for the next generation of medical devices.

Kalorama Information offers recently-published overviews of the global medical device market and regional medical device market in Europe, the Middle East and Africa (EMEA).