Regulating the Innovators: Approval Costs and Innovation in Medical Technologies

Abstract

How does FDA regulation affect innovation and market concentration? I examine this question by exploiting FDA deregulation events that affected certain medical device types but not others. I use text analysis to gather comprehensive data on medical device innovation, device safety, firm entry, prices, and regulatory changes. My analysis of these data yields three core results. First, these deregulation events significantly increase the quantity and quality of new technologies in affected medical device types relative to control groups. These increases are particularly strong among small and inexperienced firms. Second, these events increase firm entry and lower the prices of medical procedures that use affected medical device types. Third, the rates of serious injuries and deaths attributable to defective devices do not increase measurably after these events. Perhaps counterintuitively, deregulating certain device types lowers adverse event rates significantly, consistent with firms increasing their emphasis on product safety as deregulation exposes them to more litigation.

Medical device risk (re)classification: lessons from the FDA’s 515 Program Initiative

“…FDA reclassified approximately 30 medical device types from 2013 to 2021, most of which were downclassified (ie, classified as lower-risk devices) 4. While concerns have been raised about potential risks to patients after device downclassification,5 others have advocated for greater downclassification as a potential means to facilitate further device development and ease market entry 6…”

“…4 While concerns have been raised about potential risks to patients after device downclassification, 5 others have advocated for greater downclassification as a potential means to facilitate further device development and ease market entry. 6 …”

“…4 While concerns have been raised about potential risks to patients after device downclassification, 5 others have advocated for greater downclassification as a potential means to facilitate further device development and ease market entry. 6 At the inception of FDA's medical device regulation programme in 1976, more than 170 high-risk device types were already on the market, ranging from artificial hip implants to cardiac defibrillators. To avoid disrupting patients' access to these devices, FDA elected to temporarily regulate these device categories under the 510(k) pathway, with the goal of eventually transitioning these devices to their final risk designation (either to highrisk devices that would require manufacturers to obtain PMA or to low-risk or moderate-risk 510(k) devices).…”