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The Crisis in Investment in U.S. Medical Innovation and the Imperative of FDA Reform
Summary
A 2011 study found that U.S. venture capitalists have been and will continue to: Decrease their investment in biotechnology and medical device start-ups Reduce their concentration in critical therapeutic areas, and Shift focus away from the United States towards Europe and Asia FDA regulatory challenges were identified as having the highest impact on these investment decisions. We must act now or lose our leadership position in medical innovation, job creation and access to life-saving treatments in the United States.
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Study Methodology
Online survey conducted JulySeptember 2011
156 firm responses = 60% response rate = 92% of NVCA invested capital (2008-2010)
Survey respondents accounted for $10 billion of VC investment in healthcare companies in the past 3 years.
NIH
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$$ $$
Funds Invested and Returned
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U.S. Universities
Tech Transfer
Jobs
Innovation
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39% of VC firms reported decreases in their healthcare investment in the past 3 years.
Past 3 Years - Change in Healthcare Investments
% of Respondents
17%
Increased
Nearly twice as many VC firms expect to decrease their healthcare investment in the next 3 years.
Next 3 Years - Expected Change in Healthcare Investments
% of Respondents
21%
39%
Increase
Within healthcare, venture investment has already shifted away from Biopharma and Medical Devices.
Past 3 Years - Change in Investments in Healthcare Sectors
% of Respondents
80% 60% 40% 20% 0% -20% -40% -60% 41%
Biopharma
Increased
Decreased
14%
22%
27%
31% 19%
34%
17% 40%
Medical Devices Diagnostics
11%
9%
10%
Healthcare IT
Increase
Decrease
9%
8%
FDA regulatory challenges are having the greatest impact on VC investment decisions.
Factors Cited as Having the Highest Impact on VC Investment
% of Respondents
Regulatory Reimbursement Financial Capital Challenges Concerns Markets / Requirements (FDA) Availability of Capital to Invest
VCs expect to decrease healthcare investment in the U.S. in favor of Asia and Europe.
Next 3 Years - Expected Change in Healthcare Investment by Region
% of Respondents
Increase Decrease
60% 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50%
44%
36%
13%
0%
7%
31%
North America
Asia / Pacific
Europe
10
FDA regulatory challenges have the highest impact on VC firm decisions to shift investment overseas.
Factors Cited as Having the Highest Impact on Decision to Move Investment Outside of U.S.
% of Respondents
11
% of Respondents
Seek Regulatory Approval Outside the U.S. First
85%
86%
80%
0%
20%
40%
60%
80%
100%
12
High Impact
Moderate Impact
71%
58%
0% 20% 40% 60%
25%
80% 100%
13
Significant investment decreases in highly prevalent diseases with increases in orphan diseases expected.
Next 3 Years Percent of Respondents Expecting to Decrease/Increase Investment Prevalence *
Decrease Increase
(millions) >50 23 72 12
Diabetes/Endocrinology
53%
Cancer
Orphan Diseases **
<0.2
0%
10%
20%
30%
40%
50%
60%
*Source: CDC; NIH; American Heart Association; American Diabetes Association; Surgeon General; American Academy of Neurology; American Lung Association; US Health & Human Services; National Cancer Institute
** See Report to Congress, Improving the Prevention, Diagnosis, and Treatment of Rare and Neglected Diseases in response to Public Law 11180, Section 740
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Implications
If the current situation is left unaddressed, the implications to U.S. patients and the economy are significant:
Many promising medical therapies and technologies will not be funded and therefore will not reach the patients that need them. Those that are funded may not be brought to market in the United States first, or at all. An estimated funding loss of half a billion dollars over the next three years will cost America jobs at a time when we desperately need employment growth. The U.S. leadership position in medical innovation will be placed in further danger and economic growth with suffer.
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