Is the U.S. losing its competitive edge?

In the meantime, “ordinary Americans are missing out,” said Fifield, who works for Practice Fusion, a venture-funded health startup based in San Francisco.

At a recent health care meetup at Rock Health’s offices, Fifield noticed that many of the medical device entrepreneurs were more excited by opportunities in India than by opportunities with the most prestigious U.S. hospitals. Likewise, Duggirala will try to secure strategic partnerships in India and China, before giving up and shutting the Novobionics project down.

Carusi said that patients in Europe are already three or four years ahead of the U.S. when it comes to access to medical devices. A new device for aortic valve replacements from Percutaneous Valve Technologies was offered to approximately forty-thousand patients in Europe before it was approved in the U.S.

The breakthrough device offers an alternative to open heart surgery.


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“I think the sad reality is that medical device innovation is being driven out of the U.S. because of too much regulation,” Carusi observed. The situation is so precarious that almost all of the firm’s portfolio companies are in discussions about whether to try to pursue a domestic launch at all.

The future for medical device entrepreneurship

The FDA announced in May that it would launch new initiatives to expedite the development of new medical technology. During that time, the Medical Device Innovation Consortium was established by LifeScience Alley, a Minnesota-based group that includes Medtronic Inc., the world’s largest medical device company. The mission is to find more cost-effective ways to test medical devices before they reach the FDA.

In response to criticism from medical device manufacturers, FDA commissioners promised to slash red tape and accelerate review times.

However, it’s still a tough economic climate, and Silicon Valley’s medical entrepreneurs are counting their pennies. The hope is they can survive long enough and that venture funding will pickup.

Divya Nag, founder of StartX Med

Above: Divya Nag, founder of StartX Med.

Divya Nag, the founder of StartXMed, a Stanford-affiliated health accelerator, said the medical device entrepreneurs in the program are struggling to raise money. Many of them were able to raise a series A round, but they are finding it tricky to close further investment.

“We’re banding together to find solutions to reduce costs,” she said. Animal testing is expensive, but usually necessary for FDA approval, so entrepreneurs with devices intended for different parts of the body are partnering up to share the costs.

Some have achieved success marketing their devices overseas. The most fortunate have succeeded in procuring small grants from new funds that would support medical innovation, like Johnson & Johnson’s. Others have approached physicians and medical device entrepreneurs who made their money in the dotcom boom.

“Investors may be dubious but entrepreneurs are getting scrappier,” said Nag.

Nag is optimistic for the next five years. Johnson & Johnson and large pharmaceutical companies are on the hunt for innovation and growth opportunities, and they regularly meet with firms like ATV Capital.

Medical device entrepreneurs may reap the benefits; Carusi is convinced that medical device companies will get acquired earlier, perhaps even before they go-to-market.

“If you are successful in getting capital or raising a fund, you’ll face less competition,” said Carusi. “I think that bodes well further down the road.”

Facing dwindling resources, medical device entrepreneurs may not be willing to wait that long.

“If we had the same environment we do now, the catheters that can dilate your heart vessels would probably never have got funded,” speculated Duggirala. “It’s hard not to become disillusioned.”

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