For many medical device and biotech companies, their specialty is knowing how to develop and get their technologies ready for the marketplace. The problem is they’ve never produced and sold a medical device or technology. And that’s where they face one of the biggest risks in the medical device industry – product liability. In this situation, licensing is one of the best and most effective strategies for decreasing this risk.

When a clinical stage biotech company was ready to launch its inhaled nitric oxide treatment device, it turned to licensing as its go to market strategy. Nitric oxide is a very specialized treatment for patients with serious long infections and pulmonary hypertension. To successfully get it to market requires experience selling into a very select hospital market qualified to deliver these treatments, as well as the training know-how on the proper use of nitric oxide for treating lung infections and diseases.

In this case, the biotech company partnered with a pharmaceutical company who is an expert in this particular area of the health-care market selling other nitric oxide related devices. They have the right sales experience, training resources and support capabilities necessary to successfully market and sell a new treatment device into this highly specialized market.

For the biotech company, trying to get the ability and resources to do it on their own is very expensive and risky because it’s such a specialized type of treatment technology. Under the licensing agreement, they will get their device into two of the worlds largest health care markets (the US and China) and generate revenues faster than trying to do it on their own. More importantly, they’ll avoid the big liability pitfalls of selling a new high risk treatment device that requires effective training of health care providers on the proper use of their treatment technology.

Liability claims related to injuries from a medical device is becoming one of the biggest pitfalls in the medical device industry, especially as medical devices become more complex and more technical. Every year thousands of product liability lawsuits are filed against medical device manufacturers by patients allegedly injured by their products. And there’s the issue of connected medical devices, such as those that monitor patients and deliver doses of medication. Many devices today use software and algorithms. But what happens if the device or the software malfunctions and delivers an overdose of a medication?

Not only do you have to carry liability insurance for your medical device, but you’ll also need liability insurance for the use of your device on a patient. And this is a tricky area when you consider the different ways that your medical device could potentially be defective exposing you to big liability claims; if the device is manufactured incorrectly, if it’s designed poorly but made correctly, or if the device is marketed incorrectly, including poor training or the sales rep gives bad advice on how to use it.

Even after your device gets FDA regulatory clearance it’s still being monitored by the FDA for any liability issues. If one occurs, you face the potential for FDA regulatory action.

You can avoid this product liability landmine by using a licensing strategy. It creates a partnership with a company that’s got the ability and experience, especially if the market for your med device or technology is very specialized or it’s a high risk treatment device. Inside a licensing agreement is a product liability indemnification clause. It states that your licensing partner will defend you in the event there is a claim against you and your medical device as a result it being defective or not used properly. An established licensing partner has the sales force to get it into the market faster, the experienced support people to properly train, and most important, the resources to handle the required insurance and product liability claims.

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