A brief history of this loophole begins with the creation of a regulatory agency for the benefit of the United States Populace.

-Medical devices came under FDA regulation in 1938 when the FD&C Act was passed, however this only allowed regulation after devices were placed on market.
-After the Drug Amendments in 1962 pre-market approval requirements were introduced for drugs, but not medical devices.
-Finally in 1976 Congress established Medical Device Amendments (MDA)
-MDA established the 510k process as a by product of the 3-tier classification system.
The regulatory framework behind MDA grew out of a Study Group by the Department of Health, Education, and Welfare and Dr. Theodore Cooper was the group’s chairman.
-The main ideology behind the purpose of the MDA was to ensure safety and encourage innovation.
-Section 510k was created to address products that were on market prior to the enactment of MDA.
-Congress devised a scheme to phase the new MDA requirements into medical devices currently on market, this was done because of the past difficulties the FDA had in implementing the Drug Amendments to pre-1962 drugs.
-pre-1976 medical devices which were classified as Class I or II were not subject to pre-market approval as defined by MDA guidelines, however the key is that the Class III pre-1976 devices were also not subject to market approval which is contrary to the MDA guidelines and this action was taken because the FDA did not want to cause market disruption at the time.
-Now the loophole arises because all post-1976 Class III device are subject to full pre-market approval unless they are substantially equivalent to pre-1976 devices. This was done to prevent unfairness that results from allowing pre-1976 devices to remain on market while their counterparts would have to undergo stringent guidelines before entering the market.
-The practice of “piggybacking” was introduced in 1990 when Congress extended the limitations from pre-1976 devices to any legally marketed device, thus increasing the options.
-In 1995/1996 in Lohr vs Medtronic the U.S. Court of Appeals determined the standing alone, is not a finding of safety and effectiveness in regards to 510k and this was reaffirmed by the Supreme Court that substantial equivalence does not necessarily determine that it will protect the public.

References: https://dash.harvard.edu/bitstream/handle/1/11940233/ho_2012.pdf?sequence=1
http://www.pogo.org/our-work/reports/2009/ph-fda-20090218.html?referrer=https://www.google.com/