A Business Model Framework for Software as a Medical Device Startups in the European Union: Mixed Methods Study.

Abstract

Background: With the introduction of Regulation (EU) 2017/745, also known as the Medical Device Regulation (MDR), startups aiming to develop software as a medical device (SaMD) in the European Union are confronted with stringent and complex regulations, and many of them struggle with them. Complying with the MDR is a costly, time-consuming endeavor requiring expertise and substantial financial resources. However, it opens the door for new revenue models, such as reimbursement pathways. Consequently, the MDR significantly shapes the business model of startups. Early on, the regulation needs to be considered for business modeling to survive the conformity assessment process financially. Business model frameworks are tools that reduce complexity by focusing on the key aspects of a business model. Thereby, the risk of overlooking essential elements can be minimized. A framework directly integrating the MDR could alleviate the intricate circumstances in which SaMD startups are entangled.

Objective: This study focused on deriving a business model framework for startups aiming to develop SaMD under the MDR. With the framework, we strived to facilitate business modeling for SaMD startups.

Methods: The study is based on a 3-step approach. First, a systematic literature review was carried out, resulting in a concept matrix and an overview of business model frameworks developed and applied in the digital health sector. Subsequently, 13 interviews were conducted with experts and startups in the SaMD industry. On the basis of the literature analysis and expert interviews, along with the MDR requirements for SaMD, we developed the SaMD business model framework.

Results: The SaMD business model framework consists of 13 interrelated components, with the MDR being a pivotal component. The centerpiece of the framework is the "regulatory value arc," which is the trio of intended purpose, value propositions, and customer segments. For each component, valuable input is provided, making the framework tailored to startups aiming to develop SaMD.

Conclusions: The findings highlight the crucial role of regulations in business modeling. Notably, the MDR is a central regulation for startups aiming to develop SaMD. The study uncovers the impact of the MDR on business modeling for SaMD startups. Our research provides a framework that integrates this regulation, thereby reducing its complexity and facilitating startups in deriving a sustainable business model. Concurrently, this research integrates the domains of business modeling and the MDR. Therefore, it contributes to the academic discourse in both fields and addresses a notable gap in the existing literature.