By: EIC Student
December 2017
The first half of 2017 saw a record $3.5 billion invested in more than 180 digital health startups.[1] With seven deals exceeding the $100 million mark, and with an average investment of more than $18 million, investors are putting a considerable amount of capital in digital health.[2] As the digital health industry continues to mature and more investment floods into the space, the entrepreneurs pioneering these new technologies are ultimately tasked with positioning their startups, and their respective investors, for a handsome exit. Like other industries, these startups will need to flawlessly execute a product launch and successfully differentiate themselves in order to drive revenue and gain market share. Yet, unlike other industries, the U.S. health care system is one of the most heavily regulated. Political risk and regulatory ambiguity can stymy a go-to-market strategy and derail a product launch. Leaving the former to those on the “Hill,” the FDA has started to address the latter in their recently announced Digital Health Innovation Plan.
What is Digital Health?
Consumers are becoming more engaged in their own health care in many ways—often through technology-enabled innovations that provide new personalized insights.[3] And, depending on who you ask, the term “digital health” may be defined as a mobile app that counts their steps and tracks their heart rates; an IT solution that enables their family doctor and emergency room physician to view the same medical record; or even, tech-enabled exercise equipment. In other words, digital health is a term used in a wide range of contexts. Similarly, the FDA’s characterization is broad and expansive. Digital health is described as a class of products spanning categories such as mobile health, health information technology, wearable devices, telehealth and telemedicine, and personalized medicine.[4]
The FDA recognizes the power of digital health to reduce system inefficiencies and costs, improve access to care and increase quality, while also making medicine more personalized.[5] And, in recent years, the agency has designed policies that allow lower risk technologies, such as mobile medical applications and general wellness products, “[t]o be readily available to [consumers] while assuring these connected products continue to be high-quality, safe and effective.”[6] For example, the agency has stated it will not focus regulatory oversight on products that simply “[p]romote a healthy lifestyle”—which may include exercise equipment, video games, or software programs.[7] While a step in the right direction, this did not alleviate the regulatory ambiguity entrepreneurs face when their rapidly evolving innovations are subjected to the traditional FDA regulatory framework.
That is, until now. The 21st Century Cures Act—a bipartisan initiative signed into law late last year—aims to “[a]ccelerate medical product development and bring new innovations and advances to patients who need them faster and more efficiently.”[8] One way this groundbreaking legislation seeks to achieve this objective is through re-thinking what a “device” actually is. More specifically, the Cures Act—as those in the know commonly refer to it—amends the term “device” in section 201(h) of the Food Drug & Cosmetic Act (“FD&C Act”) to exclude certain software functionality, such as software for administrative support and managing a healthy lifestyle.[9] The FDA has recognized that the traditional regulatory approach to “[h]ardware-based medical devices is not well suited for…software-based medical technologies.”[10] And, pursuant to the Cures Act, the FDA is required to—and is currently in the midst of—implementing new policies to shape the way “[l]ower risk digital health technology including software” will be regulated.[11]
Digital Health Innovation Plan
In response to the Cures Act and the rapidly evolving digital health industry, the FDA has outlined its regulatory approach as a balance between two core policy principles: fostering digital health innovation and protecting public health.[12] This vision is embodied in the recently announced Digital Health Innovation Action Plan, which takes an integrated approach to refining polices and providing guidance, growing expertise in digital health and software development, and re-thinking digital health product oversight.[13] As the FDA Commissioner has stated, “FDA’s traditional approach to medical devices is not well-suited to these products.”[14]
The cornerstone to this new regulatory approach is the Pre-Certification Pilot program, which marks a fundamental shift from the traditional regulatory framework. Instead of primarily focusing on the specific product to be launched into the market place, the FDA will first look at the software or digital health technology developer.[15] In other words, the FDA will review and approve the company, not the specific product. Therefore, once a company is “pre-certified”—hence the pilot’s namesake—their subsequent products will be exempt from pre-market review, and will allow for an almost immediate product launch and collection of post-market data.[16]
Tell Me More
Software-as-a-medical-device, or “SaMD” for short, includes software used for one or more medical purposes that are not part of the device’s intended use, and does not control the device’s hardware.[17] For example, SaMD may utilize a device’s microphone to detect abnormal breathing patterns.[18] This category of digital health remains subject to the section 201(h) “device” definition, and is the focal point of the Pre-Certification Pilot.[19]
The pilot is designed to be a learning process for all stakeholders. Staying true to the twin policy underpinnings guiding FDA’s larger digital health plan (i.e., fostering innovation and protecting public health), the pilot seeks to inform the development of a regulatory framework that balances the reduction of time and cost to market entry with ensuring the safety and effectiveness of these technologies.[20] At first, the FDA will be working with just nine (9) initial participants, ranging from small startups, such as Pear Therapeutics, to large enterprises, such as Apple and Samsung.[21] Participants will have the ability to get their products to market faster, capture and utilize real-world evidence in product iterations, and gain regulatory predictability, while providing the FDA with feedback on how best to design, test, and evaluate the benefits and risks of digital health products.[22]
The Bottom-line
The recently announced Digital Health Innovation Action Plan and Pre-Certification Pilot provides digital health startups—and their respective investors—with clarity on how the agency intends to regulate the space. This pilot will continue the trend of industry collaboration and introducing practical policies, which in turn should translate to more predictability for startups—especially with the development and execution of a go-to-market strategy. And, with the level of recent investment in the space, coupled with the broad and expansive digital health category, this pilot illuminates the agency’s approach to regulating these new technologies. This brief overview of the evolving digital health regulatory framework highlights FDA’s approach to removing regulatory ambiguity, and the role startups can play in guiding the ever-changing landscape.
[1] Rock Health Mid-Year Funding Report
[2] Rock Health Mid-Year Funding Report
[3] FDA Announcement July 2017
[4] FDA Digital Health overview
[5] FDA Digital Health overview
[6] FDA Digital Health Innovation Plan
[7] FDA General Wellness Products Guidance
[8] FDA 21st Century Cures Overview
[9] FDA Digital Health Innovation Plan
[10] FDA Digital Health Innovation Plan
[11] FDA Digital Health Innovation Plan
[12] FDA Digital Health Innovation Plan
[13] FDA Webcast
[14] FDA Announcement July 2017
[15] FDA Announcement July 2017
[16] FDA Webcast
[17] FDA Digital Health Criteria
[18] FDA Digital Health Criteria
[19] FDA Webcast
[20] FDA Digital Health Innovation Plan
[21] FDA Announcement September 2017
[22] FDA Webcast