VCs Turn Up The Heat on FDA to Get Faster, More Predictable

4/25/11Follow @xconomy

The FDA felt the heat in the 1990s when AIDS activists marched in the streets, shouting about how bureaucratic foot-dragging meant that patients died while waiting for approvals of experimental drugs. The FDA listened. It started clearing more new drugs for sale, and completing safety and effectiveness reviews faster than before.

Now it’s venture capitalists, and their industry friends on Capitol Hill, who are on the move, applying pressure behind the scenes to try to get the same result. Done right, this could be a healthy way to keep the FDA on its toes and allowing valuable new products on the market while protecting public health. But if the lobbyists and their allies in Congress overreach, I worry that this could hobble the agency and turn the pharmaceutical and medical device industry into a lightly-regulated Wild West (remember how that turned out for financial services in 2008?).

The effort to shake up the FDA is still in its early days, and it’s way too soon to say how it will turn out. But it is progressing, and this time the central battleground is in medical devices, and the rallying cry is for saving U.S. jobs.

The argument from the National Venture Capital Association and medical device trade groups is that the FDA, stung by high-profile safety controversies in recent years (think cardiac stents, Vioxx, Avandia), has become so fixated on risks of new products that it is stifling innovation in an industry where the U.S. has a competitive edge. FDA reviews of new medical device applications in particular, the VCs say, have become maddeningly slow, expensive, opaque, and unpredictable. The situation has gotten so bad that U.S. investment in medical technology is declining, companies have been testing and marketing their products in Europe first, and now jobs and operations are moving to Europe.

None of these arguments are new, but for the first time in a long time, I’m picking up signs that VCs and industry groups might get their way at the FDA.

“I do think the pendulum is going to swing back for us,” says Ross Jaffe, a managing director at Versant Ventures in Menlo Park, CA. “Back in the ’90s, the FDA got bogged down and it took pressure from AIDS activists and Congress to go back toward a middle-of-the-road path. Now it’s become too risk-averse. It will take pressure from industry and Congress to get it back to a middle ground.”

Both Democrats and Republicans in Congress, as well as the White House, are paying attention, Jaffe says. Leaders in the biotech drug business are making similar arguments, too, he says. “Congress is getting interested because there’s a sense that innovation is moving overseas. And there are implications for jobs.”

Ross Jaffe

Most of the industry’s self-serving arguments about the need to reform FDA regulation have gone nowhere in the past, partly because they were based on anecdotal horror stories. This time, the industry has been offering more data to back up its claims. It appears to be working.

Back in November, prominent medical device entrepreneur Josh Makower released an industry-supported survey of 204 medical device companies that has become frequently cited. About 85 percent of respondents said European regulators were predictable, compared with 22 percent who said that about the FDA. Companies that spoke to the FDA about running a clinical study for a low-to-moderate risk medical device, through what is known as the 510(k) regulatory pathway, said it took an average of 31 months to get their device approved in the U.S., compared with seven months for comparable applications in Europe. For higher-risk devices, it took 54 months here, and 11 months in Europe. It now costs about $31 million to take a low-to-moderate risk medical device application through the FDA approval process, and $94 million for a higher-risk application with more novel products.

The time, expense, and risk of medical device product development no longer justifies investment in an industry where half of all reported exits are worth less than $100 million, according to the Makower report.

Two months later, PricewaterhouseCoopers weighed in with another report, which said the U.S. is still No. 1 in medical devices, but that the nation’s leadership is eroding.

The FDA appears to be listening. In February, Jeffrey Shuren, who heads the FDA center for review of medical devices, announced the agency proposed an “innovation initiative” to speed up reviews of new medical technology to enable safe and effective innovations to reach the market faster.

Shuren’s explained the need for this initiative in terms that are quite friendly to the industry.

“We must assure that our oversight doesn’t stifle innovation—but rather, encourages innovation while maintaining a commitment to safety and effectiveness upon which Americans rely and that other countries follow,” Shuren said on Feb. 8 in remarks which are posted on the FDA website. “We must turn what has long been considered the Valley of Death into the Pathway to Success.”

Earlier this month, Versant Ventures’ Beckie Robertson, a veteran medical device investor, told a group of med device entrepreneurs in Bothell, WA, that she’s hopeful change will come to the agency. The FDA, she said, “is a political body, and as political winds shift, so will the FDA.”

There’s certainly a lot of angst on Capitol Hill about the unemployment rate remaining stubbornly high at 8.8 percent nationwide, and nobody in either party wants to be seen as making the problem worse. Jobs, Robertson told med device entrepreneurs, “can and may have some influence” in changing the way FDA regulates the device industry.

Josh Makower

Makower, who testified before the House Energy and Commerce Health Subcommittee on Feb. 17, isn’t quite as confident that the latest bout of activism is destined to succeed. Yesterday, he told me, “at this point from my perspective nothing has yet improved at FDA, so there is no evidence available yet to be optimistic. The mindset and approach through the ranks continues be focused more heavily on risk aversion rather than risk/benefit balance.” He adds: “Since nothing legislatively has changed to get us here, nothing other than leadership, management and vision is required to fix this situation.”

This issue isn’t making headline news just yet, but if it advances further it will generate attention, and it will attract extremists from both sides. Some on the left will accuse the FDA of being industry’s lapdog, and putting public safety in jeopardy, if it moves an inch toward streamlined processes that allow more innovative products on the market. On the right, there are those (like Newt Gingrich in 1995) who would like to abolish or gut the FDA, as if doctors, patients, and insurers in the free market can sort out what’s safe and effective.

Both of those extreme views strike me as wrong and dangerous. I know it’s been said a million times already, and it sounds Pollyannish, but it’s a shame that we live in such a hyper-polarized world that adults can’t debate drug regulation rationally in public. It’s an important issue that deserves more light than heat. Patients have a lot on the line. If we hashed out these issues more in the open, we could hold important agencies like the FDA more accountable, and avoid the extreme rebalancing act the FDA goes through at least once every generation.

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  • JWilly48519

    Those who argue that FDA device regulation is too tough don’t care about either US employment or device safety. Their only focus is short term profits.

    A softened FDA device review process could be a disaster for US device related employment. US dominance of the global device market is directly related to the FDA’s global reputation for being rigorous. End users want the safety and effectiveness that rigorous reviews are more likely to achieve. Soften up that reputation in order for the VCs to get their short-term quicker returns, and we’ll lose our long-term strategic advantage.

    FDA process changes should be off the table unless proof can be provided that a softer, quicker review process delivers unchanged safety and effectiveness.

  • http://ducknetweb.blogspot.com Barbara Duck

    This is a tough battle by all means with ensuring that the technology is also done correctly. Over the weekend something occurred with the Amazon Cloud failure and it left a cardiac monitoring company flat out of business and patients not monitored. This is not a hospital service but rather a home monitoring service that failed for 2 reasons, one of course is Amazon and secondly no back up or disaster plan.

    This brings to light too in healthcare devices as to how deep investors maybe looking before they fund, how much information the company divulged to potential investors and so on as this situation as commented on the boards too said this looked like a start up company perhaps operating on a shoe string budget hoping to maybe raise more money.

    You can read my post and go to the exact site yourself but as you can see the panic attack written on the Amazon boards for help as it was not around. You even see Robert Scoble jump in here on Twitter and he elaborated on the same thing with his comment on how difficult customer service is.

    I see this as a wake up call, especially in light of the new FDA rule for class 1 devices just put into effect and I think this situation may bounce right back over there. I used to write software so I perhaps have a unique view here but I would not want my senior mother on their service as would you. Its a push and pull at the FDA for sure when you bring in all realms of the conversation.

    http://ducknetweb.blogspot.com/2011/04/what-happens-when-cloud-server-goes.html

  • Some Biotech Guy

    Having worked inside venture-funded biotech startups for over a decade, I think there’s some truth to the argument that FDA regs are burdensome, however, there is also a lot of waste that happens inside venture-funded firms that has nothing to do with FDA. Executive staff in startups will report to investors about their project status and it’s easy to say, “FDA took too long so we didn’t meet our goal.” Oh really? FDA took too long or you didn’t design your studies correctly in the first place? Or those ridiculously aggressive goals you had, those weren’t at all unrealistic? Unfortunately, many investors have never worked in the biotech trenches and they don’t know enough about operational details to argue with the “FDA too slow” message from executives. @JWilly48519, I disagree with your first statement. There’s no evidence to say people calling for FDA reg reform don’t care about US or safety. @Barbara Duck, shame on that cardiac monitoring company for setting up such a unstable system. Yes Amazon went down but the only reason that monitoring service went down too is because of their own poor planning. Setting up a seemless failover is trivial and should be part of ANY company providing an internet-based service.

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  • Consumer Voice

    This hysteria and angst with FDA is not going to help industry. Comparing FDA to the EU process is comparing apples and oranges.

    For med devices, the EU has private entities engaged in premarket review on behalf of the 27 EU member nations. The EU Govt bodies directly handle post market information, which is not publicly disclosed like in the US. FDA handles the overall product lifecycle (both premarket review and post market) as compared to the disjointed EU system as noted above. Yes, FDA should not be risk averse. But using partial or omitting information from the EU (because it was unavailable) to conclude that there are no material differences between the EU & US regulatory systems from a safety perspective is somewhat naive.

    The more every move of the FDA is publicly scrutinized, the more risk averse the FDA is going to get.

    The theme that the EU markets are suddenly more desirable is interesting, especially when reimbursement is a challenge. The US continues to be the most profitable market for medtech innovators.

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  • http://www.husick.com/Innov8 Laura White

    CV, I think I understand the point you’re trying to make about increased press leading to increased risk aversion, but I’d say that’s more a fact of the times. It’s not comparisons to EMA or discussions on Xconomy that have decreased risk tolerance, so much as the continued fallout from a global 24 hour news cycle. (Though oddly enough, this effect seems to be a much bigger deal on the pharma end than the food safety side of things.)

    Oddly enough, I have a classmate at Hopkins who also works at FDA and just published an essay on how the agency could adapt some of EMA’s recent reforms to spur US innovation. Interesting read, really – you can find it here: http://www.husick.com/Innov8 – Chapter 9.

  • Consumer Voice

    Laura, There were two points. One was that putting an Agency under a public microscope is bound to make them risk averse.

    The second is that the US should not be moving to a EU Model. Third parties, i.e. businesses, funded entirely by Industry make premarket assessments in the EU. Many of the big players are good – they actually review files. But there are third parties from certain EU countries that rubber stamp anything. And their approval is valid for marketing in all of the EU. Look up the history of soy oil breast implants or metal on metal orthopedic implants.

    We should reform FDA so the Agency updates its regulations for the technologies of today. And fund it so they can hire top notch science experts.

    The point is both sides are talking extremes. And in the public arena.

  • asdf

    as if doctors, patients, and insurers in the free market can sort out what’s safe and effective.

    I know! How crazy for anyone to think that a doctor who went through umpteen years of medical school should be able to prescribe something to an adult patient without a multibillion dollar bureaucracy’s say-so.

  • asdf

    Shuren’s innovation initiative is total BS. There is literally only one project in it, and it’s another government project (a military one) where there was surely some internal lobbying.

    The FDA cannot ensure the safety of a device or drug. People with life threatening conditions who cannot wait ten years for the FDA to approve a drug should have the choice of whether or not they are early adopters. Right now the FDA has sued to prevent them from having that choice. You as a private citizen cannot opt out of the FDA’s embrace.

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