How to obtain FDA buy-in and unlock more funding for your health tech startup

Many years ago, oil from Chinese water snakes was successfully used to treat joint pain until peddlers made “snake oil” synonymous with fraud. Times have changed, but the medical industry continues to walk a fine line between optical illusions and real solutions.

Now, as venture capital funding within health tech has fallen 41.2% compared to the same time last year, it’s even more important for emerging technologies to present more than promises.

By reaching for the highest standards and obtaining regulatory certification from institutions like the U.S. Food and Drug Administration (FDA), startups can show investors and clients that they’ve gone through the necessary checks for safe use in healthcare, creating more opportunity to drive long-term success.

FDA breakthrough device designation

The influx of artificial intelligence in healthcare is exciting but often met with skepticism from the public, and rightfully so. The stakes for a poorly designed digital health product are higher than any other industry, and the costs of failure much more serious.

There are many regulatory organizations that offer credibility and validation to incoming healthcare solutions, but the FDA is the best place to start. Why? The large U.S. market and its reputation for a rigorous framework around approvals will make it easier to expand down the road. Also, the FDA is one of the few agencies that has created a distinct path for software as a medical device (SaMD) to gain approval.

Startups should view privacy, safety and clinical validation not as nice-to-haves but as key components of the user persona they are building for.

The FDA’s breakthrough device program focuses on technology that will meaningfully help an overly taxed system. It’s an increasingly well-supported pathway that makes it easier for innovators to bring products to market faster, and it’s one of the best examples across the world of how regulators are responding to and working with innovators.

Devices must meet two criteria to be eligible for breakthrough device designation. First, the device must provide effective treatment or diagnosis of a life-threatening or irreversibly debilitating human disease or condition. Second, the device must meet at least one of the following: The device represents breakthrough technology; no approved or cleared alternatives exist; the device offers significant advantages over existing approved or cleared alternatives; and the device availability is in the best interest of patients.

While the FDA will give you an opportunity, it is up to your startup to test rigorously for efficacy and meet the highest standards when the time comes. The first criteria will be the most difficult bar to clear, as you must show clinical efficacy. The breakthrough device designation program is based on pilot studies done on the technology.

How to prove clinical efficacy

Recently, the Journal of Medical Internet Research analyzed over 224 venture-backed digital health startups that have raised more than $2 million in funding. The study rated each company on a scale of 0 to 10 for “clinical robustness,” 10 being the highest possible score. Of all the startups, 43.8% scored a zero. It’s no wonder venture capitalists are pulling back.

Startups hoping to secure regulatory buy-in from the FDA must test to ensure the device is more effective at treatment or diagnosis for a serious illness. This means testing not just for a device’s efficacy but conducting studies that compare it to existing, approved treatments.

The particular clinical trial that allowed Wysa to receive FDA Breakthrough Device designation (BDD) was done with Washington University in St. Louis and tested the app’s efficacy in reducing symptoms of depression and anxiety, which commonly co-exist with musculoskeletal chronic pain. The study had to prove that Wysa is more effective than standard orthopedic treatment.

How to request designation

Companies can send a breakthrough designation request to the FDA anytime before sending a marketing submission — during pre-market approval (PMA), pre-market notification (510(k)) or a De Novo Classification request. In some cases, the FDA might find a company and recommend they apply for the program, but it’s not necessary to wait.

After applying, it typically takes two months to receive the designation. Once granted, a company can work with the FDA in a variety of ways to continue development. One of the biggest benefits, besides investor relations, is that a breakthrough device will have priority review on future regulatory submissions, accelerating subsequent processes. It also positions the company as part of an elite group that is viewed as best-in-class by investors, in demand with partners and trusted by users.

After receiving the device designation, and undoubtedly helped by the way this signals quality around the world, Wysa has raised a Series B round, commissioned within the U.K. National Health Service (NHS) and has been invited to participate in clinical trials with leading research institutions.

Distribution of this designation grew steadily from 11 in 2015 to 206 in 2021, but it is a very challenging task to qualify, and the success rates are low. The specific areas of health that receive the largest number of breakthrough device designations are cardiovascular, neurology and orthopedic, followed by gastroenterology and urology, general and plastic surgery, and immunology. The least designated areas are obstetrics, dental and clinical toxicology. For additional insight, you can search the FDA’s website to see which companies are receiving designations.

The guidance for this designation and other certificates from the FDA can be complex, to say the least. The good news is you can call and talk to regulatory authorities directly if you need to; they actually want to help you. You can also hire experts who have worked directly with regulatory authorities. Consultants can help at the primer stage and provide key points around the guidance.

Beyond the FDA

In addition to the FDA, startups can work with many other organizations to certify compliance and further build investor and consumer trust. Some best-in-class examples include:

  • ISO: Institute an information security and privacy management system from the beginning to ensure your data protection program complies with ISO standards. Have an independent expert audit and certify the organization, systems and processes.
  • ORCHA: Involve this globally recognized digital app safety rating agency to independently review and rate your apps in terms of data protection, user experience, clinical safety and clinical efficacy.
  • NHS: Establish and comply with the clinical risk management standards recommended by the NHS to ensure an app meets clinical safety and hazard management standards.
  • Digital Technology Assessment Criteria (DTAC): This gives U.K.-based healthcare providers, patients and citizens the confidence that the digital health tools they use meet National Health Service (NHS) clinical safety, data protection, technical security, interoperability and usability and accessibility standards.
  • Cyber Essentials: Undertake independent cybersecurity audits by getting audited and certified by Cyber Essentials.

True success in this industry comes from proving that your technology performs as well as, if not better than, the current standard of care. Startups should view privacy, safety and clinical validation not as nice-to-haves but as key components of the user persona they are building for.

Adhere to privacy and transparency standards

New technologies must be built with current and future global privacy standards in mind. It will always be a company’s responsibility to make sure consumers are protected while using any new technology as a health benefit.

General Data Protection Regulation (GDPR) in the EU/U.K., and the California Consumer Privacy Act (CCPA) in the U.S. are some of the most robust privacy regulations existing today, but it’s not enough to know these — be alert for future standards coming down the pipe.

For example, the U.S. is working on a bipartisan American Data Privacy and Protection Act which, though based on CCPA, could have some unique policies that impact how software can be designed or sold.

Looking ahead

Regulatory agencies like the MHRA, BfARM and FDA have taken steps to establish clean and fast pathways for digital health apps or devices to become a part of the healthcare landscape. They incentivize digital health with adaptive regulatory frameworks and fast-track approvals for adherence to common global standards such as the ISO. This is allowing more digital health innovators to offer products through visible public health pathways.

Many countries are now working together to align on guidelines that companies can adhere to. For example, the International Medical Device Regulators Forum (IMDRF) is a group of volunteer medical device regulators from around the world who have come together to form a consensus on medical device regulation to help better address the challenges with SaMD. This group is worth keeping an eye on over the next 10 years and will likely play a growing role in digital health. Their opinions on guidance could become the standard in years to come, which will make it easy for developers to meet criteria across borders and leave the laborious and time-consuming processes of today in the past.

By thinking about complex issues and unique aspects of safety, efficacy and privacy right from the beginning, startups can build something that truly makes a difference, impressing investors along the way. Regulatory buy-in can be tough to apply for and even more difficult to achieve, but any digital health technology with these distinctions will have more success in their market.

The biggest mistake a startup can make is trying to take a shortcut through or around these agencies. Any loophole just means the product falls short of critical health frameworks, with much higher costs — for themselves and others — that make it harder for the technology to be adopted and actually help people. If you take this path, what you’re building may end up like snake oil.