Scouting For Approval: Lessons on Medical Device Regulation in an Era of Crowdfunding from Scanadu's "Scout".

Abstract

Internet crowdfunding, a new and increasingly popular method of raising capital to develop products and businesses, has recently come into conflict with the Food and Drug Administration's (FDA's) regulation of medical devices. This Article examines the issues that arise when companies pre-sell medical devices via crowdfunding campaigns before gaining FDA approval of the devices. Because Internet crowdfunding has only been in use for a few years, little has been written about it academically, particularly about its interaction with FDA regulations. The rising interest in crowdfunding, coupled with the downturn in investment in the American medical device industry, make this a salient issue that is ripe for FDA review. This Article uses the crowdfunding campaign Scanadu, a medical device company, conducted in 2013 to raise money to develop its in-home diagnostic device, the "Scout," as a starting point for this analysis. Because it is extremely costly to develop a device and obtain FDA approval, medical device companies should be able to utilize crowdfunding to raise the necessary capital. However, because of the possible dangers medical devices pose, FDA needs to review the risks created by allowing companies to crowdfund medical devices and should issue guidance to help companies comply with FDA regulations while still allowing them to take advantage of the benefits of crowdfunding. This guidance should ensure the continued commitment to consumer safety that is at the core of FDA regulation.