Devices & Diagnostics

FDA regulations will send medical device companies out of US, VC warns

Healthcare venture capital executive Paul LaViolette warns that an “inefficient and unpredictable regulatory system” at the Food & Drug Administration should have government officials worrying “more about losing firms to Costa Rica than California. One of LaViolette’s killer statistics: three-quarters of the cost to bring new innovative medical devices to market in the United States is in dealing with regulatory issues.

A Boston, Mass.-based venture capitalist and former Boston Scientific Corp. (NYSE:BSX) executive is adding his voice to the chorus of medical device stakeholders calling for an overhaul to the way the FDA regulates medical devices.

In a column published in the Boston Herald, Paul LaViolette, a partner at SV LifeSciences, wrote that an “inefficient and unpredictable regulatory system” at the Food & Drug Administration is “putting thousands of local jobs and billions of dollars in economic activity at risk — and may cause America to give up its mantle as the world’s leading medical innovator.”

“If federal officials don’t fix the way America vets innovative new medical technologies, local leaders may have to worry more about losing firms to Costa Rica than California,” he wrote.

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LaViolette is no stranger to the device market or to the FDA’s Center for Devices & Radiological Health. He spent 15 years at the Natick, Mass.-based device giant, with stops as president of the cardiology and international groups. His resume also includes stints at C.R. Bard (NYSE:BCR) and the Kendall division of the erstwhile Tyco Corp. (now Covidien plc). He served on the boards of Urologix (NSDQ:ULGX), Percutaneous Valve Technologies and AdvaMed and currently serves on the boards of Cameron Health, CardioFocus, Conceptus (NSDQ:CPTS), DC Devices, Direct Flow Medical, DJO Global, Thoratec Corp. (NSDQ:THOR), Trans 1 ValenTx and the Medical Device Manufacturers Assn.

LaViolette cited a recent Stanford University study, which said more than three-quarters of the cost to bring a medical device from concept to the U.S. market is spent clearing regulatory hurdles.

In December, he told MassDevice that the environment for medical device investment was “depressed,” citing several market factors outside the purview of the federal watchdog agency.

“There is a widely held industry belief that FDA, through its science and reform initiatives, is both ‘raising the bar’ on approval requirements while also pulling back from industry interaction,” he told us. “This combination of lost transparency and protracted approvals extends the pre-market status of technologies, which in turn creates higher operating costs for large companies or protracted holding periods for venture portfolios, and each of these further dilutes investor returns in the device sector. So, while the broader economy may ‘bounce back’ from its significant financial sector and unemployment set-backs, the medical device investment category faces an alignment of forces that make a bounce back from the abrupt financial market meltdown highly improbable.”