Cytori Therapeutics took a hit when they and investors learned that their device to harvest autologous stem cells from fat for breast reconstruction would require more work, about $10M more. Cytori had been banking on a 510(k) route to market and instead, must submit a pre-market application (PMA), typical of Class III devices, which require controlled, prospective clinical trials, often referred to as Level I evidence. Historically, the 510(k) process was set up for rapid approval of (non-Class III) products with well-established precedent. To qualify, the device or material has to be substantially equivalent to what was already in use in the 1960′s. The FDA claimed that since the Cytori device has no historical equivalent, it must forge its own path. While we can fault the FDA for not informing Cytori a lot sooner, we can’t fault the logic. But while this is a definite near-term financial blow, could it be a blessing in the longer run, provided Cytori and its value investors can muster the staying power?
Making it to the market isn’t the same thing as making it in the market. If the cell selection process really works, then the company can consider clinical trial costs well spent. They will enter the market with proven efficacy, evidence that it should be reimbursed and data to show docs they are better off using the procedure than not. Without it, “advanced” 510(k) products (which seems like a contradiction based on the substantial equivalence claims) can struggle for decades gaining acceptance from doctors and payers. Rigorous clinic data becomes exponentially more difficult to get once a product is available. This is true for good and mediocre products, although for different reasons.
Companies that pursue a 510(k) route must think hard about the practical value of their product. New 510(k) products experience commercial success when they fulfill a practical need and create a cost savings to the medical system. For example, KCI’s V.A.C.® system, a negative pressure wound therapy, has gained broad acceptance and market share not based on Level I clinical data supporting its ability to speed healing in hard to heal wounds (the original therapeutic premise for the KCI device) but based on its benefit in helping hospital staff manage difficult, complex wounds. The device is modern and improves on negative pressure control and delivery, but the concept of negative pressure wound therapy was in medical practice for decades supporting a 510(k) route.
Even if Cytori was able to pursue a 510(k), establishing a clear benefit that justified the added cost of their stem cell processing in breast reconstruction could easily run $10M or more in post-marketing , while analysts scrutinized rate of adoption and reimbursement. It is unclear whether Cytori would be able to readily establish value of their procedure — without data.
Biological devices with not well-established mechanisms of action have a particularly difficult road, both to garner enough data of sufficient quality and prove their case without jeopardizing the equivalence claim. I once asked someone what impact their biological device had on inflammation and he replied that they couldn’t address it for fear of making claims beyond the scope of their 510(k) approval even though the product’s impact on inflammation was highly relevant and important information.
Collagen biomaterials is an area where the 510(k) route has helped many products get to market but in my view has contributed to the limited commercial impact of these products, even after years “on the market.” The use of the 510(k) route for advanced products, where the maker claims equivalence on one end while really wanting to claim substantially greater benefit on the other looks better on paper than it often really is. It seems to be a pay now or pay later situation for most. Invest up front, and while it may sting, it might prevent falling into the endless limbo of trying to convince clinicians and payers that your product truly does something and is worth the price — with one arm tied behind your back.
Cytori might find that there is a silver lining, and that their product (and company) will be worth much more in a few years time — if they can unequivocally demonstrate that the product really does deliver value, with FDA’s blessing.