Medtech Startups: How to Survive Cutthroat Competition


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In the fierce arena of medtech startups, competition is intense and investor confidence is high. A recent Ernst & Young report shows that early-stage medtech firms captured 52 percent of seed funding last year and surpassed the total amount for later-stage companies, the first time it has happened in 10 years (1).

If you’re a startup, is it time to sit back and relax? Hardly. Underneath this rosy picture is a ferocious business environment that calls for decisive leadership and a competitive edge through technology-driven processes. As the report puts it, medical device companies will need to invest in new technologies (2).

In my career, I’ve had the opportunity to work in small and large medtech firms alike. I wish I knew back then what I know now when it comes to startups, regulatory compliance and market competition. I would like to share some lessons that come only with experience.

Four Critical Elements

If you’re a startup, these four elements are critical to your survival and success in a cutthroat business environment. They are imperative if you are looking for capital investment or planning to sell your company.

#1 Establish design control and the risk management process from day one.

It’s do-or-die when it comes to design control. This was true when I first started as a product development engineer many moons ago and is still true today. Last year, 13 percent of Form 483 observations and warning-letter citations pertaining to 21 CFR Part 820 stemmed from design control issues (3). My advice to you: Avoid becoming “statistics!”

Design control and risk management are two discrete areas, but I see them as working hand in glove. Risk management is an inherent part of design control. If you have set up your design control procedures correctly, you will already have a good risk management process in place.

Regulations and standards require both. Under Part 820, design control procedures are meant to ensure that specified design requirements are met. In a similar vein, ISO 13485 requires device manufacturers to “control design and development changes.” It also requires the establishment of a risk management process for product realization.

If you don’t establish an effective design control system from the get-go, you will end up wasting a lot of time trying to backfill a design history file (DHF) when it’s time for 510(k) clearance or premarket approval submission. But if you perform design control properly, you will get the device right the first time and you will succeed in addressing the customer need at hand. 

A final note about the relationship of design control and risk management: Use a risk-based approach during the design process to reduce waste and cost. You will also minimize the likelihood of failure once your device is on the market.

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#2 Gain a competitive edge with effective document control and management.

Part 820 (also known as the Quality System Regulation or QSR) requires proper documentation to demonstrate good design control. This amounts to hundreds if not thousands of documents for every single product launch.

Document control, which covers change control, review, approval and data integrity, is an important foundation for a startup’s design control and quality system going forward. Document management, on the other hand, refers to storing, updating and tracking of documents necessary for compliance. Take advantage of a fully automated system to address both document control and document management. Something as simple as finding the right documents quickly will save you a lot of time and effort in your daily operations. 

An efficient document control and management system is particularly important if you intend to license your device or sell your company outright. Your ability to show a potential buyer that you did things right from the beginning will raise your chances of landing a deal.

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#3 Build a reliable supplier management process for long-term success.

Startups like you are likely to be wholly dependent on the supply chain. Treat your suppliers as partners and build a long-term relationship with them. Having a good supplier management program in place is necessary for your success in bringing a product to market in a timely and cost-effective fashion. 

Aside from the significance of suppliers to your business, you also need them for compliance. Regulations such as Part 820 and the Food and Drug Administration Safety and Innovation Act (FDASIA) in the United States, as well as international standards, such as ISO 13485, require supplier evaluation and monitoring as part of a medtech firm’s quality system.

#4 Make reimbursement a part of your business plan.

A new organization can’t afford to neglect the reality of reimbursement in a market like the U.S., and yet it’s commonly overlooked by a startup focused on getting FDA approval. Clinical efficacy is key to getting paid for your device, according to the U.S. Center for Medicare and Medicaid Services (CMS). The agency said it is primarily “interested in evidence as a condition for coverage” (4).

Develop a reimbursement strategy as part of your business plan. Pay attention to such strategy as much as your clinical trial plan because you need both equally. You need to prove solid patient outcomes from your clinical trial to get reimbursed for your product.

Ready to Go

As a startup, you should always be ready to go, so to speak. How? By being efficient, effective and compliant. Such readiness will make all the difference between success and failure for a new company.

Having survived the old days of paper-based processes, I recommend that you leverage the latest technology and choose the most suitable system for your operations. Automate your quality, compliance and business processes and leverage cloud-based turnkey solutions that require minimal investment and no dedicated staff. Doing so will get you ready for market sooner.


References

(1, 2) “Pulse of the Industry: Medical Technology Report 2017,” published by Ernst & Young, 2017.

(3) FY2017 Annual FDA Medical Device Quality System Data, from the FDA website.

(4) “The Application of Postmarket Registries and Other Evidence for Medical Devices,” by Steven E. Phurrough, director of coverage and analysis group at the CMS Office of Clinical Standard and Quality, 2005.


 

2016-nl-bl-author-matt-loweMatthew M. Lowe, MasterControl executive vice president, is a mechanical engineer with over 15 years of medical device experience in product development, product management and regulatory compliance. He has successfully launched more than a dozen medical devices and has five patents issued. His regulatory compliance experience includes writing a 510(k) that was cleared by the FDA and managing a multisite, multiyear postmarket clinical study for orthopedic devices.

He joined MasterControl in 2006 as a product manager, rising to senior vice president after a few years and then executive vice president. As a medical device expert, he has written many articles in industry publications. He is the author of an e-book, “Convergence of Compliance and Technology: How Technology Has Changed Regulatory Compliance in the Past Decade,” published in 2016. He holds a bachelor’s degree in mechanical engineering from the University of Utah and an MBA from Indiana University.