Have a Solution, Not Just an Idea, Expert Advises Medical Device StartupsHave a Solution, Not Just an Idea, Expert Advises Medical Device Startups

With 30-plus years of experience in the medical device and IVD sector, President and Founder of Medicept, F. David Rothkopf, has seen many startups come and go. Most of the time failures for startups aren’t for the lack of a great idea, he said, but rather because the companies don’t build strategies that account for the regulatory, clinical, and reimbursement requirements their products will encounter on the way to market.

“What I see very often are really great ideas,” Rothkopf said in an interview with MD+DI, “like a robot that can manipulate around corners and see things, or an IVD that can detect a super rare disease.”

“But a big problem with a lot of startup companies is that they don't have an actual solution,” said Rothkopf. “You're coming up with a really cool new idea that you can do research on and get your PhD on,” he explained. “But that doesn't actually solve an actual problem that the doctor is having.”

In an upcoming session at Silicon Valley MEDevice, Rothkopf will advise startups on how to make sure that their products are good solutions to real problems. He will also discuss how to strategically plan ahead for other things that startups might not be familiar with, especially if they are new to the medical device and IVD industry.

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Read on for a conversation MD+DI had with Rothkopf about his presentation, “The Do’s and Don’ts of Medical Device/IVD Sector Early Planning for Start-Ups.”

Can you tell our readers a little bit of what you intend to present at Silicon MEDevice?

Rothkopf: First, I’ll talk about having a solution, not just an idea. I'll give you an example of a medical company that’s been around for about 10 years or so. They’ve never made a profit. They’re a public company and they lose money every single year.

Why? They have an IVD that tests for sepsis. It seems like a really cool idea, but what is the solution? When someone is suspected of having sepsis, doctors just give them antibiotics right off the bat. But if you get the antibiotics, this IVD won't work.

So, the question is, what do you do? It's a really great idea. It costs a boatload of money—millions of dollars and then there's all the disposables. But the solution is, if you find out the person had sepsis in 20 minutes, fine we'll wait 20 minutes and then give you antibiotics anyway. But if I'm going to give you a test and you're not going to get a result for over five hours, well, then I'm going to give this person antibiotics now and I don't need your test anymore. So that's the difference between an idea and a solution.

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So, should startup companies talk to doctors, hospitals, or focus groups first to determine if there is an actual need for their idea?

Rothkopf: Exactly. You have to talk to the doctors. And you can't just talk to one doctor because one doctor might have a great idea also and think it's the greatest thing since sliced bread. You have to talk to several doctors.

In one of the companies that I have right now, we have seven key opinion leaders (KOLs) that we talked to and all of them have different opinions, but they all believe that what we have is a solution that can actually reduce their pain points. They think that we could do a tweak here, a tweak there, but in the grand scheme of things, all seven of them think that the current methodology is not great and our solution actually will solve the problem.

So, first there has to be a problem to solve. Once that is figured out, what is the next step?

Building a strategy for regulatory and clinical and reimbursement requirements, and then going for the pitch deck. It’s all of those things combined.

A strategy is not a plan. A plan gives you resources, a strategy gives you a set of choices to lead to a plan. And what happens a lot of times is companies quickly come up with a plan and then go straight to a pitch deck. And what I'm saying is that a lot of investors, don't actually know the resources, the speed, and the timeline that you're going to need for a plan.

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Are most medical device startup companies new to the industry?

Rothkopf: The majority of the NIH grant recipients and, and especially the ARPA-H individuals have never created a medical device company. They've done a ton of research, but they have no earthly idea about the regulatory environment or reimbursement.

Reimbursements are an enormous thing. We've got a client in Europe who came up with a really great prostate surgery product and they have no reimbursement. And thus, I think they sold four units last year because they can't get anybody to pay for it.

We had another client that came up with a pediatric EKG product, which is necessary, it actually is a solution. But the cost to make the product is way more than the reimbursement that a hospital would get, and there's a much cheaper way of getting the data. It's not a great solution, but it's cheaper. And thus, these guys can't even get out of the gate.

I've been in this industry for 30-plus years and I've seen a lot of great companies, a lot of great ideas, even some really good solutions never make it out the door because they didn't start with a strategy. They had a plan but the plan was not fully fleshed out. They didn't do the regulatory strategy, so they didn't know what testing they needed, they didn’t do a reimbursement strategy, so they didn't know who the customer was or if there was any reimbursement at all.

How would you suggest startups go about navigating the medical device world?

Rothkopf: They would attend the session that we're talking about! I would also say yes, a consultant is necessary, but you have to realize that a consultant, and I'm saying this as one, a consultant has knowledge but they don't necessarily have knowledge about everything.

If you talk to your investors, your investors are going to come back and say you’ve got to get this thing done yesterday. You got to get it out, get it out, get it out. If you talk to the regulatory people, they may say, ‘wait a minute, this may be a breakthrough designation and if you do that, you can get reimbursement much easier.’ You might talk to a clinical person and that clinical person might say ‘yes, you're going to have to run a clinical trial,’ but from a regulatory point of view you may not.

So, what you need is a band of advisors to ensure that you're getting accurate information and that all three of the strategies—regulatory, clinical, and reimbursement are cohesive and work together.

You don't necessarily need to hire people to get you this information, but you need to get the information and then be able to coalesce it into a strategy, which then can be moved to the plan. Again, the strategy is how are you going to do this or what are the choices I have and then that should lead to your plan.

You’ll also talk about mistakes to avoid. What are some of the “don’ts” you would advise companies against?

Rothkopf: Avoid overly complex designs. If you have a 510(k) me-too product, you're trying to say that your product is substantially equivalent to something that already exists. If you have too many bells and whistles—if you listen to seven different doctors and they all want seven different things (because they will) you're going to end up with this super complex product with a complex design, which is going to lead to a lot of cost overruns, a lot of additional testing, and a lot of difficulty to prove to FDA that your product is equivalent to the predicate.

Now, if you go for a very unique product, a Class 3 PMA product, or even a de novo device, the more complex you make your product outside of its core intended use, then the harder it's going to be for FDA to go over and prove it is safe and effective.

For example, a company I’m currently working with has a product that they kept listening to doctors about more and more and more, and now they have 98 alarms. 98 unique, individual type of alarms that can go off on their product. And FDA came back and said, ‘did you test all 98 of them individually?’ And no, they didn't. Because it would be really difficult for them to do it and it would cost them a lot of money and time. So, they have to go back and decide do we need all these alarms or do we test them all.

Also, a lot of times in order for companies to save money, they’ll go to a contract manufacturer or a contract design house. If you do this, it’s your responsibility to make sure that they do things correctly.

Another prime example is design houses. Many people, especially researchers, they'll take their idea, they'll put it on a napkin, so to speak, and send it to a design house. Well, many times that design person is not going to know all the regulatory requirements. They’re just an engineer and may not understand the whole ramifications of their product, of the design. So, it's the startup’s responsibility to make sure that the product is actually being designed correctly and consistently and to regulatory standards.

What are some holistic strategies that companies should bear in mind and how is this different from other industries?

Rothkopf: Start documenting a design early when dealing with a documentation-based agency like FDA. For example, we had a client that made video games and they wanted to gamify some health activities that would be considered a medical device. They didn't understand the medical software life cycle guidance document, which is how FDA determines if your software is acceptable. They were saying, ‘why can’t we just give FDA the software, let them play with it?’

The second thing that they didn't understand was that they couldn't just release a beta and let the world play with it. Find all the problems and then come back to them so they can make a final release of the product, which is something that high tech does all the time. It doesn't work that way with FDA. You can't do that because you're dealing with a human being.

Or they're in another industry and they realize they can make a lot of money in the medical industry and want to jump into it, but not understand the real regulatory costs that can be a barrier to entry.

Testing is expensive, regulatory is expensive, and design houses actively charge more money for medical device design than just designing a toy, even though the complexity of the toy might be exactly the same as a medical device. There's an additional cost that a company will charge you because of design controls or because they realize it's a medical device.

What’s the most important concept that you hope your attendees will come away with from your session?

Rothkopf: That they need a strategy. You can't just have a plan. Plans are good, but you really need a strategy before you even start with a plan. And you need this information before you work with your pitch deck.

Rothkopf will present his session, “The Do’s and Don’ts of Medical Device/IVD Sector Early Planning for Start Ups,” at Silicon Valley MEDevice on Wednesday, Nov. 20, from 10:00 to 10:45 a.m., in Great America Meeting Room 1. He encouraged his attendees to come prepared with their questions.