Issue Overview

For over three decades, venture capital has spurred the creation and growth of the biotechnology and medical device industries.  Small venture-backed companies play a critical role in bringing revolutionary medical innovations and discovering groundbreaking treatments and cures  aimed at diagnosing, treating, and curing the most deadly and costly diseases.

Recently, however, venture capital investment in medical innovation has come under pressure due to the escalating time, cost and uncertainty of new product development, combined with increasing reimbursement pressures. The result of these challenges is that venture capital investment in life sciences companies in the U.S. is experiencing a sharp decline, particularly in the medical device sector.

In 2013, the number of new U.S. biopharmaceutical and medical device companies receiving start-up financing and the number of life-sciences venture funds raised fell to their lowest rates in 15 years.  Meanwhile, over that past 30 years, the cost of developing a single new drug has grown more than ten-fold to over $2 billion and the time required for development has reached 15 years on average, with only 10% of drugs ultimately reaching the market.

As a result of all this, many life sciences-focused investors are shifting their investments out of life sciences companies or have sharply reduced their asset allocations in healthcare.  There are many reasons why medical innovation in the U.S. is under threat, but the primary culprits are the increased time and cost of developing new drugs and devices resulting from the antiquated approval process at the Food and Drug Administration (FDA), and obtaining coverage and reimbursement for breakthrough products.

Policymakers need to recognize that the medical innovation ecosystem in the U.S. is at a crossroads—rich with new scientific promise and opportunities to improve patient care, but starving from a lack of capital to help move promising new ideas forward.  The U.S. needs to make the advancement of medical innovation a priority for patients and for our overall healthcare system.

NVCA’s Position

Medical innovation provides value and saves costs across the entire healthcare system. While many innovative therapies and technologies are often costly on the front end, they can actually decrease overall healthcare costs over the long-term. For example, every dollar invested in newer treatments saves nearly seven dollars in other costs by reducing or eliminating hospitalizations, minimizing one’s inability to work at full capacity, and empowering people to live independently. They also deliver better care at lower costs and create new efficiencies in treating many prevalent diseases.

Continuing down a path where we focus only on costs without regard for to the expenses incurred through the development process or consideration for the long-term outcomes and overall value to patients and society could have unintended consequences, including fewer treatment options, a dried-up innovation sector, and job and revenue loss as companies close up shop or relocate overseas.

To ensure a vibrant medical innovation ecosystem in the U.S., policymakers should make the advancement of medical innovation a national priority and adopt modern approaches development, regulation, and reimbursement policies. NVCA supports policies that seek to streamline the regulatory approval process at the Food and Drug Administration (FDA), particularly for novel technologies, as well changes to the reimbursement process at the Center for Medicare and Medicaid (CMS). Process improvements at these agencies are critical to encouraging investors to take the long-term risk of pursuing new medical innovations that will save and improve patients’ lives and spur U.S. job creation.