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The U.S. Food & Drug Administration has all but stopped approving new medical devices-much to the benefit, for now, of foreigners. Block that innovation! By Laura Jereski IN OVER TWO DECADES as a successful builder of inno- vative medical-device-mak- ing companies, Manuel Vil- lafana has overcome many a scientific and financial hur- dle. But nothing prepared him to deal with the faceless government bureaucracy that is the U.S. Food & Drug Administration. Villafana, now 52, helped launch Cardiac Pacemakers, now a subsid- iary of Eli Lilly. Later he cofounded St. Jude Medi- cal, a maker of high-tech valves used in open-heart surgery. Since 1990 Villa- fana has run ATS Medical, a Minneapolis-based startup that has developed a heart valve Villafana hopes will one day supplant St. Jude Medical's valve, now the in- dustry standard. tllion to $760 million. But that day may be a long time How do startups like ATS survive if coming. Embarrassed by much-pub the bureaucrats keep their products licized problems with silicon gel offthe market? The better-capitalized breast implants and heart valves, the ones do so in part by looking overseas. FDA has almost stopped approving ATS' new heart valve is almost com- new medical devices. The FDA's ap- pletely asser.tbled in Minneapolis and p ovals of new devices have sunk from then shipped to Scotland where the 47 two years ago to 12 in the fiscal last piece, a sewing cuff around the vear that ended last September. Offi- valve, is attached. From Scotland it is ciallv the FDA attempts to complete sold into France, Switzerland, Ger- reviews of new medical devices and many and five other foreign countries. give a thumbs up or down within 180 Foreign sales brought in S225,000 days, but in some cases the review through the first three quarters of last process has stretched to two years or year, not much but enough to help more. Contrast this slowdown to the the company raise some S27 million growth of the FDA's total staff-up in a private placement to fund extend- from 7,600 in 1990 to 8,700 now- ed clinical trials in the U.S. Even so, and to its budget, up from $598 says Villafana, ATS' valve probably won't be available to American pa- tients until 1997. Or consider Waltham, Mass.-based Summit Technology. In 1988 Sum- mit developed a laser technique for the removal of corneal scars; the laser procedure could substitute for risky corneal transplant surgery for as many as 20,000 U.S. patients annually. Summit has been trying for a year to win FDA approval for its procedure. But the FDA's ophthalmology panel, which usually meets at least four times a year, met only once last year, and so didn't even consider Summit's clini- cal results supporting its request for approval. Fortunately, Summit's laser device is used in 35 countries for refractive sur- gery to improve vision by changing the shape of the cornea. That foreign busi- ness accounted for virtually all of Summit's $30 million in sales last year. "We are lucky," savs Summit Presi- dent David Muller. "If it weren't for the refractive surgery overseas, we'd be out of business." Says Daniel Lemaitre, a medical devices company analvst at Cowen & Co.:, "There isn't a company that isn't thinking of mov- ing its research and devel- opment, and its manufac- turing, overseas." The FDA'S ap rp ovals slow-in concert, probably, with uncertainty as to what future U.S. health insur- ance policies will cover-has begun to drain venture capital a~y ~m medi- caTdevicc companies. Walter Chan- ning of Cw Group, one of the largest investors in medical innovations, says that ten years ago 40% of his capital would have been invested in medical device companies. Today only 20% of his funds are so invested. Warns Robert Daly of Boston's 1-.+. Associates, a big venture firm: "The new regulations and delays mean add- ing S10 million to $20 million to a company's budget, and several years until the device gets to market. At that rate, most [venture] deals don't make sense." And when medical innovation deals suffer, everyone does. ~ Forbes 0 January 18, 1993