device development over the last 20 years—many of the challenges identified by IOM/NAE in 1988 persist today (IOM/NAE, 1988).
The medical device innovation ecosystem has multiple components:
“Fuelers”—venture capitalists, investors, and public markets that support the process and invest in the innovators.
Innovation catalysts—small startups, large companies, incubators, and other entrepreneurs that invent the technology or take a concept through to commercialization.
Regulators—the Food and Drug Administration (FDA), the Centers for Medicare and Medicaid Services (CMS), third-party payers, and professional societies (which play a substantial role in patients’ access to new technologies).
Consumers—patients, physicians, and hospitals.
Innovation catalysts with ideas need resources if they are to advance their innovations to the product stage. Those resources come from the fuelers. Products then enter the regulatory system in the hope that they will leave it to be delivered to consumers (that is, patients, physicians, and hospitals). Marketed products produce revenue that is returned to the innovation catalyst and rewards the fuelers, consumers generate new ideas on the basis of experience with the products, and the cycle continues. All the players in the system are responding to their own sets of risks and rewards. As the risks and rewards change, the player’s behavior changes.
The primary fuel for device innovation comes from venture capital. However, little of the total pool of available investment capital is invested in medical device innovation. When venture capital underperforms, or when the total public market is compressed, venture capital for device innovation is reduced. From 2008 to 2009, for example, venture investment in medical technology declined by nearly $1 billion. As the global economy struggles, companies that have valuable technologies for patients are struggling to find capital. Only when venture capital outperforms does more money flow in.
The survival of small companies is critical for delivering innovation to patients, Makower said. Most of the ideas that really change the practice of medicine come from small companies or individual inventors. Department of Commerce statistics show that in 2002, 3,725 of the 6,007 US medical device firms being regulated by FDA had fewer than 20 employees, and only 150 had more than 500 employees. Large companies commonly acquire small companies. That provides a larger company with the innovation that it needs to grow and provides a small company with capital and with access to