MedTech & AI-SaMD in 2025: Growth, Regulation, and Confidence in Innovation

HealthTech Horizons

By Shannon Campbell, PhD, Principal Consultant, Frank Healthcare Advisors

As we close out 2025, a year of rapid transformation, investor recalibration, and regulatory evolution, it’s worth stepping back and assessing where MedTech, and in particular AI-enabled Software as a Medical Device (AI-SaMD), truly stands.

1) Funding: Healthy Growth — But Uneven

On the funding front, the narrative for MedTech in 2025 is nuanced rather than dramatic:

·       Total funding deployed increased modestly year-over-year. One industry analysis suggests a ~7% increase in total capital raised in 2025 compared with 2024, even as the number of deals declined significantly (~33%), a signal that investors are concentrating on larger, later-stage opportunities, leaving early-stage capital scarcer. (LinkedIn)

·       Digital health investment tied to AI soared. Separate reports show digital health funding climbed to roughly $14.2B in 2025 (vs. $10.5B in 2024), with AI-centered companies capturing a majority (54%) of dollars and commanding a 19% premium on deal size. (MedTech Dive)

This bifurcation, growth in total dollars but a shrinking deal count and concentration of capital, suggests a more sophisticated market: investors are still backing innovation, but with an emphasis on evidence of traction, commercial validation, and defensible differentiation.

Bottom line: The funding engine is running, but early-stage startups must navigate tighter scrutiny and greater expectations.

2) FDA AI-Enabled Medical Device List: Exponential Regulatory Activity

The FDA’s public AI-Enabled Medical Device List is now one of the most important living indicators of commercial activity in AI-SaMD.

Here’s what we know:

·       Rapid growth in authorized products. By mid-2025, the FDA’s public database listed over 1,250 AI-enabled medical devices authorized for marketing in the U.S., up from roughly 950 devices a year earlier. (Bipartisan Policy Center)

·       Clearance volume has accelerated. One industry tracker reported ~295 new 510(k) clearances in 2025 alone across ~221 manufacturers, with a median review time of ~142 days. Remarkable for a field still defining best practices for AI/ML safety and performance. (Innolitics)

·       Pathway dominance and application clustering. Over 97% of these AI devices are cleared via the 510(k) moderate-risk pathway, and radiology accounts for the majority (~75–80%) of listings, followed by cardiology, ophthalmology, and neurology applications. (U.S. Food and Drug Administration)

·       Year-over-year trend (2023→2025).

o   2023: Growth phase begins, but clearances still measured in the low hundreds annually.

o   2024: Record year for AI device submissions/clearances (~235–250+ devices according to contemporaneous reports). (MedTech Dive)

o   2025: Scale phase with nearly 300+ new AI products authorized with total authorized devices exceeding 1,200.

The regulatory momentum reflects not just increased submissions but also greater industry understanding of FDA expectations and readiness to navigate them.

3) Breakthrough Device Designation (BDD): Pipeline Support With Limits

Alongside 510(k) dynamics, the FDA’s Breakthrough Device Designation (BDD) program remains a vital mechanism intended to accelerate high-impact innovations. The program continues to clarify criteria and expand its footprint, particularly for devices that offer significant advances over existing technologies.

While BDD is a powerful tool for reducing time-to-market and aligning regulators and innovators early, its uptake remains selective, and industry feedback suggests it could be more accessible for AI-SaMD innovations, especially those outside traditional applications like imaging. (MedTech Dive).

For those lucky enough to be granted BDD, the FDA’s Total Product Life-Cycle Advisory Program (TAP) is emerging as one of the most meaningful ways innovators can navigate development and commercialization challenges. Rather than just accelerating review timelines, TAP gives eligible BDD grantees early, frequent, and tailored engagement with FDA advisors, helping teams identify risks, align evidence strategies, improve submission quality, and make strategic decisions on clinical design and regulatory pathways well before pivotal trials and market filings. These interactions extend beyond the agency to include stakeholders such as clinicians, patient advocates, and payers to help innovators build broader adoption strategies and de-risk the “valley of death” between concept and commercialization. While still a pilot, TAP’s expansion across multiple device areas reflects its growing role in reducing uncertainty and smoothing paths to safe, effective, and widely adopted medical technologies

4) What Does This Mean for Innovation & Commercialization Health?

Here’s how I see the composite picture:

·       Capital is flowing, especially into digital health + AI, and at larger rounds. Investors are not running away; they are getting more discerning.

·       Regulatory throughput for AI-SaMD is strong, with clearance numbers in 2025 outpacing prior years and total authorized devices exceeding 1,200. This is a clear indicator that innovation is translating to regulated products.

·       Regulatory frameworks are maturing, and FDA’s transparency with the AI device list helps industry benchmarking and market understanding.

but

·       Early-stage funding challenges pose a risk over the next 12–24 months. Fewer smaller deals could mean fewer future pipelines unless alternative capital sources step in.

·       Pathway concentration (510(k)) potentially limits radical innovation, especially for novel AI models that don’t squarely fit existing predicates.

·       BDD and adaptive regulatory tools still need broader clarity and expanded eligibility for software-native and adaptive ML devices that evolve post-market.

5) Actions to Support a Healthy Innovation Ecosystem

Based on the data trends and regulatory patterns, here are a few recommendations for stakeholders:

For startups & founders:

·       Build evidence early: clinical validation and real-world data matter more than ever.

·       Explore alternative funding mechanisms (strategic partnerships, grants, corporate VC) to offset tighter early-stage capital.

For investors:

·       Continue to refine evaluation frameworks for AI-SaMD. Consider regulatory pathway readiness and real customer adoption as key early signals.

For regulators & policymakers:

·       Expand guidance on adaptive AI post-market change control plans and clarify evidentiary expectations for novel AI architectures.

·       Broaden access and clarity for breakthrough designation support tailored to digital health and AI innovation.

Final Thought

The story of MedTech in 2025 isn’t about boom or bust, it’s about transition and maturation.

Funding isn’t disappearing, but it is evolving. Regulatory clearance volumes are climbing while frameworks are becoming more structured. Innovation is alive, but the ecosystem needs continual refinement to ensure the next generation of breakthroughs can be reliably financed and safely delivered to patients.

Let’s keep pushing forward.