How much does it cost to launch a medical device company?

July 3, 2019
Andrew DiMeo

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.

Andrew DiMeo
Innovation & Design Coach

Dr. Andrew DiMeo is a 20 year seasoned expert in the Biomedical Engineering industry. He is founder and former executive director of the NC Medical Device Organization, which became an NC Biotech Center of Innovation. He also co-founded and became VP of Business Development for the design and manufacturing company EG-Gilero.


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