It's not a pretty picture for investors or companies across much of the economy, at least not since the financial crisis in 2008. So we would expect one of the riskiest class of investments, venture capital funding for medical device and biotech start-ups, to be down - and it is.
But what we're also hearing from the VC community is that excessive regulatory risk from the FDA in the wake of Vioxx has sharply impacted investors willingness to invest in very early stage companies, which represent the riskiest but also potentially most innovative parts of the health care "ecosystem". As result, we're seeing a shift out of investment in these sectors and into other less risky investments (like IT or social media platforms) with faster and more reliable "exits" - and no regulatory barriers to entry for new companies.
For more detail, see this slide from a recent report from the California Healthcare Institute and Boston Consulting Group.
The impact of FDA on innovation also came up recently in a BioCentury TV debate between Jonathan Leff, managing director at Warburg Pincus and Janet Woodcock, Director of the FDA's Center for Drug Evaluation and Research. Leff argued that changing agency standards had sharply increased the hurdles for biotech companies, specifically in certain disease areas like diabetes, which he says investors now refer to as a "no fly zone."
Watch the whole thing.