June 8, 2011
Wall Street Journal - VC Dispatch
Medical Device Venture Capitalists Go to Washington
Health care-focused venture capitalists have long been telling anyone on Capitol Hill who will listen that problems at the Food and Drug Administration are stifling innovation and deal flow, as they say the agency is inconsistent and vague on the rules for approving new medical technologies.
But a recent trip to Washington by a group of top life sciences investors – which calls itself the Medical Device Venture Council – showed that some power brokers inside the Beltway might be taking up the battle cry.
Some lawmakers – especially those who represent areas of the country where large medical-device companies are headquartered – are catching on to the seriousness of the situation, in part because VCs can now document cases of American businesses going for approval and sales overseas, and shunning the uncertainty and long wait times in the U.S., said Mike Carusi, a partner at Advanced Technology Ventures and a member of the council. Carusi spoke to VentureWire this week.
Q: First of all, who makes up this council of investors, and when was it formed?
A: It’s an informal group that started in late 2008. We just had our first trip to D.C. It’s made up of a lot of firms that invest in life sciences. It’s one investor from each firm, and we have Three Arch Partners, Alta Partners, Prospect Venture Partners, Versant Ventures, Frazier Healthcare Ventures, Canaan Partners, DeNovo Ventures and others.
Q: Who did you meet with, and what specifically did the council ask for?
A: At the White House, we met with the Council of Economic Advisors and some other groups. We met with Senate committees. We are not asking for lower standards, just a more predictable, and clear path. We want consistency, predictability and transparency. We want to see reforms modeled after the reforms that were put into place at the patent office.
Q: A lot of investors have talked about making trips to D.C. to try to get more officials active on this issue. How was this trip different?
A: Well, we talked about deal flow. There has been a drop in new start-up activity around medical devices. We have data that shows this. Entrepreneurs are just shying away. Or, they are solely focusing on Europe, rather than just Europe-first. We’re seeing brain drain. There is a stent company [Biosensors International Group Ltd.] that is a U.S. company, but that launched in Singapore. They are only interested in Europe and Asia, and have no plan to launch in the U.S.
Q: Does this affect investing too?
A: Sure. Investors are also looking overseas. It’s not just our decision. Limited partners are asking ‘Why do it?’ So, even if we want to keep writing checks, companies are drying up, and limited partners are [growing impatient].
Q: Did you leave Washington with any firm promises from anyone?
A: Not really. But we got a fairly positive reception. People in D.C. are hearing a consistent story now. And we have data. Nobody disagrees, really. There’s a common recognition that things aren’t working as they should. But where things start to diverge is when people talk about lessening the standards, and safety. But we are not asking for lower standards. We want them to set the bar [for approval] and then don’t change it. We want them to seek external expertise, and be better informed.