The CE Mark process in the European Union is a far shorter and simpler approval pathway for medical devices than FDA's approval or clearance process represents in the US.  Sure, if you have a simple Class I low risk device, you can roll it out in the US quite quickly, but that's not what most medtech startups are developing.  To make a clinical difference, and to generate an attractive return for their investors, young medtech firms tend to focus on Class II, medium risk, 510k products, or on Class III, high risk, PreMarket Approval ("PMA") products.  These are getting increasingly tough to get through FDA with each passing year. 

At a time when IPO's are no longer available as a source of capital for young companies to fund the clinical trials that follow their initial first in man ("FIM") tests (which are often conducted in the easier to manage and less expensive Latin American countries), FDA's insistance on ever larger and more expensive pivotal trials has forced most venture capitalists to reject out of hand the funding of any company on a PMA pathway.  So what is a young company to do?

To paraphrase Horace Greeley's famous 1865 editorial . . . "Go East, Young Man!"  Go to the EU.  All you need there to legally market a medical device is a CE Mark, which is recognized in many countries outside of the EU as well.  The CE Mark is far easier to obtain than an FDA PMA approval, since it merely certifies the product's safety, and not its efficacy.  FDA wants to see proof of both.  The fundamental philosophical difference resides with the relative trust placed in the judgment of individual physicians on the different continents.  The EU lets its doctors (and, indirectly, the reimbursement agencies and insurance companies within its countries) decide whether or not a particular device will be effective enough for any particular patient.  FDA grants doctors no such latitude, but instead attempts to make their job easier in the end by pre-approving everything they may use as both safe and effective.  That, my friends, often requires a lot of expensive clinical data, sometimes involving the gold standard: a randomized, controlled, prospective, clinical trial.  Many startup companies simply cannot afford to undertake these massive efforts anymore.

Then, along comes another fortuitious circumstance.  The major medtech giants out there are starving for new products.  Like their pharmaceutical brethren, they are simply unable to generate a sufficient flow of exciting new products from within their own very capable R&D departments to meet Wall Street's demands for growth, so they're aggressively on the prowl to acquire products by buying small, VC-backed companies outright.  They are willing to pay a price of somewhere between 4X and 10X the revenues of the smaller firm, which can generate a significant return to the entrepreneurs and their VC backers.  But those revenues must first be generated somewhere, so that Mr. Big will come calling.  More on that in a minute.  And what else . . . besides innovative new products that are already generating revenues . . . might the big medtech firms want in their quest for acquisitions?  Remarkably, according to a few top VP's of several of the largest firms at a panel session that I attended last October at the AdvaMed convention, they want their acquirees to STAY AWAY from FDA!  Dealing with FDA is not only expensive, but it requires in-depth expertise and product-specific regulatory experience, something often lacking in young ventures.  One wrong move in an FDA meeting can result in an excessively large clinical trial commitment, to name just one of a number of possible sins.  The big companies have entire departments of experts who know the FDA's ins and outs, with many of these experts being former FDA staffers themselves. 

So . . . The big companies want our little companies to develop exciting and valuable new products, they want us to prove their clinical attractiveness through the generation of real revenues, but they want us to stay away from FDA.  Well, the only practical way to do all of that is to head straight for a CE Mark in the EU, jump through the hoops needed to get reimbursement procedures in place in at least the top several EU countries (typically Germany, France, the UK, Italy, and Spain), and start selling, either with company-employed boots on the ground in the form of (often stolen from the big guys) field reps, or through specialty distributors.  Which distribution channel you choose depends on the pricing and proposed application of your product.  A new cardiac pacemaker almost certainly needs an experienced on-site rep to give it any chance of adoption, but a simpler/cheaper dialysis catheter might best be marketed via a series of local distributors.  Also, there are some impressive facilities in several countries (perhaps most notably in the Netherlands), where you can drop ship your products directly from the US or elsewhere, get them repackaged for local countries, have package labels and product insert documents printed in local languages, arrange for shipping within the entire EU as directed, and even man 24 hour customer service phone banks, with multi-lingual capabilities.  This takes much of the headache out of shipping to foreign markets, although it doesn't come cheap.  Such services can cost something like 20% of your top sales line.  Still, I'd recommend this approach to an emerging company that is just starting out.

There are lots more tidbits to learn about introducing your products in the EU, but a good place to start is to check with friends in other companies who have introduced devices similar to yours into the EU.  Notified bodies, i.e., the third party entities that actually manage the approval process in the EU in place of our centralized FDA, vary in size and capabilities, so do your homework before selecting one of those.  Also, study up on reimbursement policies within the various countries.  There are some very capable consulting firms that can help you with this.  

Finally, remember that your CE Mark only speaks to safety, and not efficacy.  EU physicians will thus want YOU to provide them with comfort that your product is more than just safe, but that it actually works in the clinical setting.  The best way to do this is through a careful, disciplined introduction of the product in just a few selected institutions, and in the hands of only carefully screened, specially trained physicians (key opinion leaders in their field).  After these users have established a track record in demonstrating the effectiveness of your product, they can be the ones to help you promote your new product, through journal articles, podium talks at conferences, one-on-one interactions with other EU docs, etc.  They can even be very influencial with reimbursement authorities.  So if you manage your first year of marketing carefully, and your product provides the true clinical benefit that you believe it will, then you'll be on your way toward substantial revenues in the very large EU marketplace starting as soon as two years out.

Today's NYT article warns the American general public and our government just where device innovation is heading . . . to Europe.  Let's hope that the EU remains as attractive an opportunity for our young companies as it is now.  Multinational regulatory harmonization cuts both ways, and things could get tougher in the EU with time.  But for now, the EU offers a far more attractive environment for our young companies than does the US, so consider giving this approach serious consideration.

You can send your comments to me at Reed@MackinawBio.com