According to FDA documents something is to be classified as a medical device, for the purpose of regulation, if it is intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or other animals.
A fancy watch that can suggest a greater or lesser likelihood of apnea is most certainly such a diagnosis tool and thus subject to regulation. This would cause fees for publicly traded companies like Fitbit to start at $100K and rapidly goes up from there. The 2.3% Obamacare medical device fee has recently been repealed at least for now but may return with future administrations.
It is easy to underestimate the cost and difficulty of introducing a de novo product in such a regulated environment.
There is currently exemptions for "rare" diseases, but not applicable for common sleep disorder.
I guess it's up to the current and possibly future administrations to correct this and fix these shortcomings.
