Uncertain Future of Cardiovascular Innovation in U.S.

An increasing number of factors thwart efforts to bring new technologies to patients suffering from cardiovascular disease. In the minds of physician researchers and industry leaders, regulatory barriers, less financial return on investment and government impediments interfere with innovation. However, if innovators can adapt and evolve to a more global healthcare ecosystem, a silver lining may materialize.

Money drain

In February testimony before a House subcommittee, Ross Jaffe, MD, spoke to the “frustrating paradox” in the state of medical device innovation in 21st century America. “Our understanding of human physiology and disease grows almost daily,” he said. “With the aging of the population and increasing pressure for healthcare reform, new and better technologies are critical to reduce the costs and improve the quality of healthcare. The potential for innovation in medical technology has never been greater.”

Yet, in his role as a venture capitalist (VC) with Versant Ventures, he is “forced to turn down investing in too many promising medical innovations and technologies that you and I would want access to in order to help our loved ones if they needed them—because it is difficult to predict how long and how much capital it will take to get a particular innovation approved by the FDA and into patient care.”

Jaffe isn’t the only investor getting cold feet in this market. In 2007, 116 early-stage medical device companies raised approximately $720 million in initial venture capital, according to a report by PriceWaterhouseCoopers and the National Venture Capital Association (NCVA), based on data from Thomson Reuters. Since that time, early-stage device companies have seen more than a 60 percent decline in initial venture capital investment and more than a 70 percent decline in the amount of capital invested—with only 55 new companies raising just under $200 million in 2011.

“Capital investment is an integral part of the process to provide better, innovative care to American patients,” says Peter J. Fitzgerald, MD, PhD, co-director of the Center for Research in Cardiovascular Interventions at Stanford University School of Medicine in Stanford, Calif.
“Progress in [medical] technology usually results less from individual genius and more from collective effort and social, political and economic forces that come together to create an ecosystem which fosters innovation,” adds Martin B. Leon, MD, director of the Center for Interventional Vascular Therapy at Columbia University Medical Center/New York-Presbyterian Hospital in New York City.

This lack of funding for device innovation may create a chasm between scientific discovery and the doctor’s office. In other words, if investors stop doling out funds to smaller companies, there may be a dearth of new technologies available to treat U.S. cardiac patients, and thus, the country may fall behind in providing the best possible care for an aging population.

Most experts agree alterations to the current regulatory process are the only way to halt this downward trend in investment.

Regulatory barriers

Among all the impediments to progress in cardiovascular medical innovation, Leon says “the highest on the list would be the regulatory speed bumps and hurdles that delay approval and create a disincentive for industry to become involved either early or even late stage.”
The FDA, unlike most regulatory agencies in the world, is under a congressional mandate to ensure approved drugs and devices demonstrate clinically significant efficacy, in addition to safety where the probable benefits outweigh the probable risks. To gain approval in Europe, devices simply need to prove they are safe, says William H. Maisel, MD, MPH, chief scientist and deputy center director at the FDA’s Center for Devices and Radiological Health.   

In late 2011, the U.S. became the 43rd country in the world to approve the Sapien heart valve (Edwards Lifesciences) for transcatheter aortic valve replacement procedures for inoperable patients with severe aortic stenosis.

However, defenders of the FDA policy, such as editorialists in a March 8, 2012, New England Journal of Medicine perspective, noted that “differences in timing are related to the need in the U.S. to conduct clinical trials for high-risk devices. Although EU patients may have earlier access to some devices, they also face the risk that subsequent studies will show no benefit to the new device or reveal important harms from adverse events that did not emerge from the premarket review.”

Yet, the cost to meet the safety and efficacy stipulations is no small feat. “Small, venture-backed firms typically spend $500,000 to $2 million per month to operate as they prepare for clinical trials,” Jaffe reported to the House subcommittee. “A six- to 12-month delay in getting to agreement with the FDA staff about a clinical trial design issue, which is not unusual, can result in millions of dollars of extra capital that the company has to raise from investors.”

As a result, medical device start-ups, which have been a hotbed of angel and VC investments, are struggling to find financial support. “Because investors don’t have a clear goalpost for return on investment—which has been impaired by the inconsistencies in the regulatory arena—they are moving to other spaces,” says Fred Khosravi, MS, co-founder and managing partner at Incept, a health sciences and medical development firm. Traditionally, the U.S. has been the leader in medical device innovation, but “we may be losing that distinction.”

A 2012 NVCA survey of 156 firms verifies his observations. Forty-two percent of healthcare investors were decreasing their funding to medical device companies because of the increased time to regulatory approval, while 61 percent of respondents noted that regulatory challenges with the FDA were the primary factor driving their investment decisions. The survey respondents accounted for $10 billion of VC investment in healthcare firms from 2008 to 2010.

“It’s hard to throw money at time constraints that have a burn rate per month to an unpredictable endpoint,” says Fitzgerald, who has consulted with the FDA for 15 years and commends the agency’s discipline.

One concern is the time it takes to bring a new device to market. For instance, 510(k) applications took three months to be brought to clearance between 2003 and 2007, and that timeline is now 45 percent longer at five months in 2010, says Leon. Also, the premarket application (PMA) timelines have increased 100 percent in the same time span—from 15 to 30 months.

During a presentation at the 2011 Transcatheter Cardiovascular Therapeutics (TCT) conference, Leon explained that it costs $31 million on average to bring a 510(k) product from concept through clearance, with $24 million spent on FDA-dependent or related aspects. Also, it costs $94 million on average to bring a PMA product from concept through approval, with $75 million spent on FDA-dependent or related aspects. None of these costs include reimbursement approval or sales/marketing costs.

How does this impact cardiovascular devices, specifically? Cypher (Cordis), which was the first drug-eluting stent to be approved by the FDA in 2003, took 1.2 years to come to market, while the Endeavor Resolute (Medtronic) took five years to come to market in 2008. TAVR took six years to get approved for U.S. patients with severe aortic stenosis.

Leon estimates that the investment burden to bring balloons to U.S. cardiovascular patients totaled approximately $100,000 in the 1980s, bare-metal stents totaled about $10 million in 1990s and drug-eluting stents totaled approximately $500 million in the 2000s. Based on the rising costs, he predicts it may total approximately $1 billion to bring bioabsorbable stents to the U.S. market.

FDA attempts makeover

Due to concerns from industry and caregivers, the FDA has been “actively engaging key stakeholders” through numerous town hall meetings over the past couple years, says Maisel.

“We have met with early start-ups, medical device innovators and the VC committee to better understand their perspective, what they are working for and how they go about making their decisions,” Maisel adds. “One of the challenges clearly relates to the importance of early clinical trials for medical devices. They need to have the capability to investigate the devices early in their product development.”

Recognizing the challenges, in November 2011, the FDA produced draft guidance documents on early feasibility and first-in-human studies, and issued a guidance document on investigational device exemptions. The agency also started the ongoing Early Feasibility Pilot Program.
With these draft guidance documents, two major changes have occurred. First, for early feasibility studies (including some first-in-human studies), the FDA may approve an IDE based on less non-clinical data than expected for a larger study that is evaluating a more mature technology. Second, the Early Feasibility Study guidance outlines new policies to facilitate a greater number of device iterations during the early trials. “When you talk to entrepreneurs, investigators and device engineers, those first device implants are incredibly informative and that allows them to modify their device early on,” explains Maisel. “These guidance documents are the parameters by which devices could be modified without having to come back to the FDA for approval with each device modification.”

Now that trial sponsors can modify devices in a timely fashion in an ongoing early feasibility study, “we would hope to reduce the time needed to arrive at a finalized device design that can then be evaluated in a larger number of patients, ultimately resulting in a shorter total duration of regulatory review and approval,” says Andrew Farb, MD, FDA medical officer and senior reviewer at the Office of Device Evaluation at the Division of Cardiovascular Devices.

“While we are trying to promote early clinical use of devices through these measures,” Maisel acknowledges that conducting a small study in the U.S. is more costly than in Europe, which he attributes partly to “the negotiations and contracts that have to be put in place with individual research organizations or medical centers.”

Regarding the first-in-human option, Fitzgerald says that this may be “an ill-advised approach” because lawyers at U.S. hospitals fear litigation that could arise from conducting such procedures. In addition, it is three times more expensive to conduct these studies in the U.S. than in other countries. Thus, he recommends that the FDA accept data from other countries with state-of-the-art medical facilities, such as

Brazil, Taiwan and South Korea.

The U.S. regulatory agency should adopt a more global strategy, concurs Leon. “Right now, the FDA allows international studies to be the basis for device approval, but it’s not widely embraced and there are opportunities to create a more global environment to assist with device approval.”

Fitzgerald takes the point one step further. “The world is flat; it is truly global with respect to innovation. To foster this, we should ensure international CROs [clinical research organizations] are up to a standard that the FDA accepts, while also conducting thorough post-marketing studies in the U.S. Therefore, we are not decreasing the threshold on the front end; we are broadening the footprint for the whole process. We need to use more eclectic, geographically diverse data to obtain approvals.”

Yet, there is a limit to what the FDA can do under its current restraints. As Leon suggests, the agency is overworked, understaffed and under tremendous political pressure.

To garner capital, it is not just the length of time to bring a device to market that is scaring off investors; it is also the uncertainty surrounding reimbursement. However, the FDA cannot consider cost or cost-effectiveness, says Farb, because “we are congressionally mandated to scientifically evaluate products and assess whether those products hold benefits for patients.”

Although reimbursement is outside of the agency’s purview, the FDA has begun reaching out to the Centers for Medicare & Medicaid Services (CMS) to directly communicate the importance of a particular device, “just so there is no confusion on the part of those making reimbursement decisions,” explains Maisel.

Also, the FDA and CMS recently created a pilot program, where their separate review processes can be conducted in parallel rather than in sequence. “This voluntary program allows companies to get earlier feedback from CMS during the pre-market stage to streamline regulatory review by both agencies,” says Farb.

Finally, Maisel touts the new Innovation Pathway, created in collaboration with medical device entrepreneurs, as “a sort of testbed for product evaluation to try new approaches.” Through all these efforts, the FDA “has been actively working with the device community in an attempt to develop new models and new methods for evaluating products,” he points out.

Better overseas?

Regulatory changes aren’t having the intended impact quickly enough, as the U.S. cardiovascular innovation market has already taken a hit. Given the more lax regulatory environment overseas, the market drain may be impacting the U.S. most severely. Case in point, the NVCA survey found that 31 percent of VCs expected to decrease healthcare investment in the U.S., while 44 and 36 percent expected to increase investments in Asia and Europe, respectively.

In 2000, approximately 50 percent of all CV interventional dollars were spent in the U.S., explains Leon. By 2007, that number was estimated to be 34 percent, and by 2016, it is expected to be 25 percent. “When only one in four interventional dollars is revenue produced in the U.S., it becomes a significant disincentive for industry to focus entirely on the U.S. market. Industry strategies have become global, particularly because of quicker regulatory pathways and more robust reimbursement.”

Khosravi says the governmental attitude is different outside the U.S., as some countries, such as Israel and Singapore, see medical devices as a growth area. These countries offer incentives for innovative U.S. start-ups to re-establish themselves outside of the U.S. (OUS).
Once these companies invest heavily and create the infrastructure to position themselves with a dominant OUS strategy, the likelihood is that the pendulum won’t swing back, Leon adds.

What will this mean for U.S. cardiovascular patients? Fitzgerald admits that he’s already sending many of his CV patients to France for procedures that aren’t available in the U.S. Leon adds, “It is a complete reversal of what we witnessed a decade ago. U.S. patients will travel outside the U.S. to receive better medical care.”

However, Leon and Fitzgerald don’t see this as a reason to panic; instead it presents an opportunity for the U.S. medical establishment to adapt and evolve.

Embrace the evolution

“Accept the fact that the innovation ecosystem in the U.S. has changed forever, and embrace a more ‘adapt and evolve’ strategic approach,” Leon said during TCT.11. “The physician scientist community must reorganize emphasizing multidisciplinary (nonterritorial) activities, better communication and increased society leadership, recognizing that sometimes, the enemy is us.”

The challenges lie in the ability for physician researchers to accept these changes. “The responsibility lies with thought leaders in life sciences, as well as the regulatory agencies and the government. We have to go on creating,” says Fitzgerald, who is working with a large CRO in Shanghai that has data collection capabilities superior to methods used in the U.S.

“Here is a discipline that’s evolving with innovation outside the U.S., which could help collect data in a very favorable way for the FDA,” he says. “I always inform the FDA when conducting an OUS trial. When the agency begins to engage and comment on what we should be collecting, the whole process suddenly gets better. Come to the FDA early and often with international clinical work.”

Due to extensive experience with large-scale clinical trials conducted in the U.S., American researchers can serve as educators for their international peers, while being exposed to new methods of care. “Most other nations still lack crucial elements of the innovation ecosystem, such as cultures of entrepreneurialism and commercialization, coherent reimbursement systems, intellectual property protection, trained management or a comprehensive network of reliable suppliers and distributors,” says Leon.

While U.S. investment dollars are “admittedly scarce,” Khosravi says that American innovators haven’t stopped producing new technologies to treat patients, and he sees great potential in early stage devices for the cardiovascular, neurovascular and oncology spaces. “Eighty percent of medical device start-ups have fewer than 50 employees, and that engine of innovation will continue to grow the industry,” he adds.

Khosravi continues to see entrepreneurs innovating in the U.S. “Innovators are adjusting to these challenges; the ecosystem is readjusting itself a little bit. We have a new class of better, more robust entrepreneurs who are growing out of this environment. The culture of U.S. innovation will continue.”