Medical Device Innovation can be tough.

In my experience, it is possible for the total investment to launch a medical device company can be $2 million to $5 million from proof-of-concept to FDA clearance. This assumes the device pathway is limited to a US-only launch for a straightforward Class 2 device with 510(k) pathway. An exempt, Class 1 device can be done for less, and it can skyrocket from $5MM on up if looking at any demand for clinical study.

A 2010 Stanford study surveyed medical device startups and found that the average total cost to bring a low- to moderate-risk 510(k) product from proof-of-concept to FDA clearance is $31 million, with $24 million spent on FDA dependent and/or related activities. It is worth noting that the average cost of $31 million does not include obtaining reimbursement or sales/marketing-related activities.

Sure, a Class 3 device (or a Class 2) that requires a PMA will need clinical study to support a regulatory submission. However, one trap to keep an eye out for is data to support reimbursement. It may be from a regulatory perspective that no clinical data is needed for a clearance. However, payors may require it.

The biggest barrier to entry today in the US today is the Triple Aim based on CMS’ value-based programs calling for improved health outcomes, reduced cost of care, and a better clinical experience. Making that case might be your biggest cash need.

Medical Device commercialization is a multibody test of diligence that includes market size, technology risk, regulatory pathway, intellectual property, and medical economics. If you are interested in more on that topic, take a look at this free resource: Design History File Ready Ideation

Bottom line, with everything that goes into launching a medical device company, from corporate formation, IP strategy, and setting up a quality system to design for manufacturing, verification and validation testing, regulatory pathway, and reimbursement; even the most straightforward product is not coming in at under $2 million.