Editor’s note: Congressional briefings are set for Friday at which the National Venture Capital Association and the Medical Innovation and Competitiveness Coalition will discuss their third “Patient Capital: Confronting the Crisis and Achieving the Promise of Venture-Backed Medical Innovation” report – the first since 2007 – that discusses what they see as the alarming state of investment in life science and medical device companies due to high costs, regulatory hurdles and other causes. Since North Carolina has the third largest life science industrial cluster in the U.S., WRALTechWire is publishing the executive summary of the report as written by Michael T. 

“Total investment in life sciences companies has been declining since 2007, when the report was last published,” the groups warn.

“First-time fundings have suffered in particular. In the first quarter of 2013, only 20 life sciences companies received start-up venture capital funding, the lowest number seen since Q2 of 1995. This trend threatens America’s medical innovation pipeline, leading to fewer new cures for deadly diseases and delaying access to life-saving and life-changing treatments for U.S. patients. Many drugs and devices discovered and developed in the U.S. are now available in Europe but not here due to these challenges.”

The summary follows:

WASHINGTON, D.C. – Venture capital plays a critical role in driving medical innovation in the United States. It spurred the creation and growth of our country’s biopharmaceutical, medical device, and diagnostics industries, and it remains one of the few sources of funding for the startup companies that bring life-saving and life-changing medical treatments and technologies to the marketplace.

Venture-backed medical breakthroughs cure diseases, provide new treatment options, produce better health outcomes for patients, and raise our overall quality of life in the U.S.

Such breakthroughs include new medicines for our most devastating diseases, as well as medical technologies, such as angioplasty and magnetic resonance imaging (MRI), that have transformed healthcare. In addition, venture-backed medical innovations help to decrease
overall healthcare costs over time and serve as a crucial part of the research and development (R&D) pipeline for large corporations.

Finally venture-backed medical startup companies spur U.S. economic growth through the jobs and revenues they generate.

Today, America’s medical innovation ecosystem is at risk.

Venture investment in biopharmaceutical, medical device, and diagnostics companies has declined at an alarming rate. The rapidly escalating time, cost and uncertainty now associated with medical innovation have prompted many limited-partner investors to pull
their capital out of life sciences venture capital in favor of other asset classes.

While there are many factors driving this trend, public policy – notably, the regulatory approval and the coverage and payment processes
– plays a key role.

In a recent survey of U.S. venture capitalists, more than 60 percent identified the cost and uncertainty of the review and approval process at the U.S. Food and Drug Administration (FDA) as having the highest impact on venture investment.

Nearly 40 percent of respondents pointed to concerns over coverage and payment policy for innovative products, which is shaped in significant part by the Centers for Medicare and Medicaid Services (CMS). As a result, many of these venture capitalists have been decreasing their investments in biopharmaceutical, medical device, and diagnostics companies.

They are also reducing their concentration in critical disease areas and shifting investment toward other industries. As a result, early-stage investment in promising new medical technolo-gies is now difficult to find, particularly for the most innovative technologies.

While conditions in the U.S. market have grown more challenging for innovative medical startups, other developed countries have begun to emulate the U.S. venture model. They have increased their funding of basic R&D; they have made their regulatory processes more
straightforward; and they have begun to offer lucrative financial incentives to entrepreneurs and venture investors to build companies there instead of here. If these efforts prove successful, the resulting shift will delay the availability of life-saving and life-sustaining treatments for Americans, decrease the number of jobs generated by this important sector, and threaten America’s global leadership in medical innovation.

Despite these challenges, America’s medical innovation ecosystem continues to offer tremendous promise.

Thanks to breakthroughs in fields such as human genetics, molecular biology and nanotechnology, U.S. venture capitalists have opportunities to invest in some of the most groundbreaking medical innovations the world has ever seen. Venture-backed medical  innovations also have the potential to increase our ability to control and reduce the costs of treating our most common chronic and deadly diseases. Such advances underscore the enormous benefits that venture-backed medical innovation delivers to patients and to our economy. And we must continue to fuel that innovation by promoting public policies that encourage and reward it – before it is too late.

The full report can be downloaded.