For Booming Medtech Startups, Liability Remains A Concern


Medtech startups are big money in today’s marketplace, producing high-value solutions for healthcare, ranging from health records software to genetic testing and diabetes management devices. But medtech isn’t all money and innovation – it’s also an industry that’s responsible for people’s lives, and when things go wrong, startups can be liable, with serious legal and financial consequences.

In fact, this conflict between profit and product function is so serious that when things go wrong, many consumers are left wondering whether the profit motive pushed startups to release products too soon.

The Regulatory Gap.

To understand how medtech products come to market, it’s important to understand that there are actually two separate sectors involved. First, there are medical devices and tools; these need to be thoroughly tested and approved by the FDA in order to be sold. Then, there are software solutions and other non-clinical devices, like fitness trackers, that may face some industry regulations, but don’t have to meet specific medical standards. It’s the latter category that’s especially vulnerable to premature marketing, but evolving technology, particularly security issues linked to the Internet of Things (IoT), can create post-market risks for both groups.

Medical devices that include IoT technology have to comply with HIPAA privacy requirements, as do medical records software, clinical communications technology, and other industry tools. Your fitness tracker, on the other hand, doesn’t have to follow HIPAA data guidelines, even if increased privacy protections would appeal to and benefit users.

Regardless of formal regulation, though, cybersecurity risks often don’t emerge or aren’t detected until a product comes to market. In 2017, for example, the FDA recalled over 450,000 pacemakers that were vulnerable to hacking. The manufacturer was able to fix the problem using firmware updates, but the solution isn’t always that easy. And for non-FDA track products, there’s no requirement that companies fix technology vulnerabilities.

The Problem Of Prevention.

With several different routes to market, we’re left to wonder who is ultimately responsible for medtech product safety. For products that take the traditional route to market – the ones that aren’t FDA approved – medtech companies can be held liable for product issues under several different circumstances. In particular, a manufacturer may face a lawsuit if they have acted negligently, provided false product information, or violated their warranty. In the case of non-FDA approved supplements and wellness products, companies can also receive fines and repercussions through the FTC.

When an FDA approved device or medication is recalled or found faulty, the process for determining liability is different. For these products, lawsuits may be directed at the FDA due to their approval of an improper product, or towards the manufacturer if it can be shown that they falsified data or otherwise misled the FDA to acquire product approval.

Funding Safety.

Pharmaceutical companies with deep pockets have no trouble dropping millions of dollars into research for promising drugs and devices, but for medtech startups trying to get their big break, money can be tight. That’s why small companies try to keep product development budgets lean – then if something doesn’t work, there’s still money to go back to the drawing board. But that can mean compromising quality of the final product.

One way that medtech startups can stay on budget while properly vetting new goods by outsourcing the testing process. Medical product testers not only have the tools to properly test a range of devices; more importantly, they have the regulatory knowledge. They know what software needs to do to meet HIPAA requirements or what claims you can and can’t put on your packaging. Contracting with such companies can save your business a lot of time, money, and specialized staffing efforts.

The medtech industry is full of pioneers, people with big ideas and the ability to attract investors. If they can continue creating high-value products and ensure that every product’s quality is equal to its potential, these startups are virtually guaranteed to succeed.

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