Navigating Life Sciences Regulation: What Startups Must Know

The life sciences industry operates within a complex regulatory framework that significantly influences product development and market access. Startups, legal professionals, and investors must understand how regulations shape not only the approval process for new therapies and devices but also broader aspects such as fundraising and exit strategies. Regulatory compliance can be both a challenge and an asset in establishing credibility in this highly competitive field.

Regulatory Bodies and Global Standards

In the United States, the Food and Drug Administration (FDA) serves as the principal regulatory authority, overseeing a range of products through specialized centers. These include:

• CBER – Center for Biologics Evaluation and Research
• CDER – Center for Drug Evaluation and Research
• CDRH – Center for Devices and Radiological Health
• CTP – Center for Tobacco Products
• CVM – Center for Veterinary Medicine
• Human Foods Program

Startups must be aware that while collaboration among global health authorities is increasing, significant differences in regulatory standards and evidence requirements still exist. For instance, the FDA may accept surrogate endpoints in clinical trials for rare diseases, while the European Medicines Agency may require longer-term outcome data. Denise Esposito of Covington emphasizes, “Understanding not just FDA, but how the FDA interacts with global agencies, is essential for companies with international aspirations.”

Understanding Regulatory Frameworks

Not all health-related products fall under FDA scrutiny, yet the distinctions can be subtle. For instance, a cosmetic product becomes classified as a drug if marketed for disease prevention or treatment. Dietary supplements do not require pre-market approval but must adhere to strict labeling guidelines. Furthermore, a mobile app may be classified as a fitness tracker unless it claims to diagnose a medical condition, at which point it becomes a regulated medical device. Jay Reilly of Foley Hoag highlights the strategic benefit of regulation: “Sometimes being regulated gives you legitimacy in the eyes of investors and consumers, even if it means more paperwork.”

The drug development process is lengthy and often financially demanding. It typically progresses through three phases:

• Phase I: Involving approximately 20 to 100 participants, this phase primarily assesses safety and dosage.
• Phase II: Conducted with around 100 to 300 participants, focusing on efficacy and side effects.
• Phase III: Encompassing thousands of patients across multiple sites, this phase confirms effectiveness and monitors adverse reactions.

Challenges can arise in areas like precision medicine and rare diseases, where patient recruitment and biomarker validation may prove difficult. Delays in these stages can have severe financial implications for startups operating on tight budgets.

Once a drug secures approval, competitors can pursue either generic or biosimilar pathways. A generic drug is chemically identical to its brand-name counterpart, while a biosimilar is “highly similar” to a biologic product, with no significant clinical differences. Although these pathways improve access and reduce costs, they can lead to extensive litigation over patents and exclusivity. For example, “pay-for-delay” settlements, where brand-name companies financially incentivize generic manufacturers to postpone market entry, have become a notable antitrust issue. The timing of a generic drug’s launch can impact billions in annual revenue.

Medical devices also follow a structured regulatory process, categorized by risk levels:

• Class I: Low-risk devices (e.g., stethoscopes, bandages), generally exempt from pre-market review, yet not always.
• Class II: Moderate-risk devices (e.g., infusion pumps) requiring 510(k) clearance to demonstrate substantial equivalence to existing products.
• Class III: High-risk devices (e.g., pacemakers) necessitating extensive safety and effectiveness data for Premarket Approval (PMA).

The difference between clearance and approval is significant, both scientifically and financially. The 510(k) pathway may cost a few million dollars and take months, while a PMA can require hundreds of millions and several years. Howard Carolan of CoapTech points out, “Bringing a device to market often hinges on whether you can use the 510(k) pathway — it’s faster, cheaper, and can mean survival for a startup.”

Emerging Challenges and Policy Impacts

Some innovations do not fit neatly into established categories. Combination products, which may include drug-device pairs or hybrid formulations, present unique regulatory challenges. The FDA’s Office of Combination Products determines jurisdiction based on the primary mode of action. Consumer products can also intersect with regulation; for instance, a cotton swab marketed for medical use transitions from a cosmetic tool to a regulated device. Jonathan Havens of Saul Ewing LLP warns that “The line between consumer products and regulated medical devices is thinner than most entrepreneurs realize.”

This regulatory gray area is particularly pertinent in the realm of digital health and wearable technologies. Investors might underestimate the complexities of commercializing apps, discovering that FDA reviews can significantly extend timelines and budgets.

Policy changes can dramatically alter the regulatory landscape. Recent events highlight this vulnerability: in 2025, the FDA announced significant staff cuts, laying off over 3,500 employees, raising concerns about potential delays in product reviews. Additionally, a “Most-Favored-Nation” executive order mandates that U.S. patients receive the lowest global drug price, potentially jeopardizing pharmaceutical firm margins. Cuts to funding from the National Institutes of Health (NIH) have also left startups scrambling for alternative sources of financing. Mark Gardner of Gardner Law warns that such policy shifts can impact financial forecasts almost overnight, urging companies to remain vigilant regarding regulatory developments.

While navigating the regulatory maze can feel daunting, it is essential for ensuring that innovations are safely delivered to patients. Successful regulatory compliance not only serves as a barrier to entry for competitors but also enhances credibility with investors and consumers alike. For those seeking deeper insights, additional resources on life sciences regulation are available, providing further guidance for startups in this intricate field.