FDA Enforcement Discretion: A Strategic Path to Market for Digital Health and Digital Therapeutics Companies

Healthcare delivery is changing, and digital health is revolutionizing healthcare, creating a burgeoning market opportunity for software-as-a-medical-device (SaMD) and digital therapeutic (DTx) products. These innovations can improve patient outcomes while creating revenue potential through direct-to-consumer sales, contracts with health plans, and existing billing codes like the remote physiologic monitoring (RPM) and remote therapeutic monitoring (RTM) code sets. Although reliable reimbursement pathways for many digital health products are still evolving, leveraging current revenue opportunities can lead to market success.

Despite the potential of SaMD/DTx tools, navigating the FDA’s regulatory requirements can be daunting, especially for pre-revenue digital health developers with limited resources. Compliance can be time-consuming and resource-intensive, requiring specialized skills for clinical studies and evidence generation for validation. Furthermore, the ever-changing regulatory landscape adds to the challenge of maintaining compliance.

For low-risk SaMD/DTx devices, the FDA’s enforcement discretion offers an alternative regulatory pathway, expediting market entry and allowing a phased approach to the development of software with device functionality.

Leveraging Enforcement Discretion

What is Enforcement Discretion?

SaMD refers to software intended for one or more medical purposes that operates independently of a hardware device. DTx products, a subset of SaMD, use software to provide evidence-based therapeutic interventions to treat, manage, prevent, or mitigate a medical disorder or disease. The FDA regulates all medical devices, including SaMD and DTx, but recognizes that not all pose the same level of risk to patients. For low-risk software devices, the FDA may exercise enforcement discretion, choosing not to enforce certain regulatory requirements.

Unlike regulatory exemptions from the 510(k) pre-market notification process, which still require compliance with general controls like registration and quality management systems, enforcement discretion means the FDA does not intend to enforce these controls for qualifying low-risk devices.

Which SaMD Device Functions May Qualify for Enforcement Discretion?

Not every SaMD/DTx device will qualify for enforcement discretion. The FDA’s guidance highlights two main categories of low-risk software functions that may fall under enforcement discretion:

  • Software aiding patient self-management without providing specific treatment.

  • Software automating simple tasks for healthcare professionals.

Examples include:

  • Coaching or prompts for patient self-management

  • Behavioral techniques for managing conditions

  • Video games for home therapy motivation

  • Patient-specific screening, counseling, and preventive recommendations from well-known and established authorities

  • A checklist of common signs and symptoms

  • Medication reminders and adherence tools

  • Historical trending and comparison of vital signs

  • Aggregating and displaying health data trends

  • Health data collection for sharing with providers

It is important to note that, whether or not an SaMD/DTx product qualifies for enforcement discretion depends on specific device details, it’s intended use, and the implementation of the device function within the overall software platform. SaMD developers should consult with a qualified legal/regulatory expert to determine the applicability of enforcement discretion for their software.

An Alternative Pathway to Market

For qualifying devices, enforcement discretion can expedite market entry by bypassing the costly pre-market notification process. This lowers upfront costs and accelerates revenue generation, crucial for pre-revenue digital health companies. Even under enforcement discretion, SaMD devices remain “medical devices” under the FD&C Act and meet CPT code requirements for a medical device to be used for data transmission under the RPM and RTM code sets. (For more information, click here for our video series on how digital health companies can leverage the RTM code sets with virtual care management).

Limitations and Risks of Enforcement Discretion

Entering the market under enforcement discretion carries some risk, including:

Regulatory Compliance: Devices must still meet general safety and efficacy standards and comply with other federal and state laws such as:

  • The Federal Trade Commission’s (FTC) health breach notification rule and advertising/marketing regulations;

  • HIPAA regulations on the use and disclosure of protected health information;

  • Telemedicine regulations;

  • Cybersecurity laws and regulations; and

  • Consumer protection laws and regulations.

Market Acceptance: Perceived lower regulatory oversight may impact acceptance by some healthcare professionals, payors, and investors. A thorough legal analysis of the SaMD product that analyzes the device on a function-by-function basis and sets out the legal reasoning for why the device qualifies for the FDA’s enforcement discretion can mitigate concerns.

Nature of Discretion: The FDA may decide at some point to change its enforcement policy, requiring future compliance with regulatory requirements.

Building for the Future

If a legal/regulatory analysis indicates that an SaMD’s functionality does not qualify for enforcement discretion, a staged approach to product development may be appropriate. Launching an initial low-risk version of the device with limited functionality can generate revenue to fund further development and evidence gathering for subsequent FDA submission. This strategy allows earlier market entry, and the opportunity to generate revenue, customer feedback, and investor confidence.

Key Takeaways

  • Enforcement discretion provides a strategic regulatory pathway for low-risk SaMD/DTx devices, reducing market entry costs and timelines.

  • A staged approach to product development can support early revenue generation and fund further advancements.

  • Specific application depends on the device’s details; consult regulatory experts to determine the appropriate pathway.

Nixon Gwilt Law assists digital health and device companies in navigating complex regulatory landscapes. We integrate FDA regulatory strategy, reimbursement models, and business strategy for long-term success. Contact us to explore how enforcement discretion may be applicable for your SaMD product.

DTx, FDA, Reimbursement, SaMDMichael SchellhousDTx, SaMD, FDA, medical device, reimbursement