innovation. The key points made by conference speakers with regard to these themes are summarized in the next four sections.


Conference speakers made two important observations about the characteristics of medical innovation. First, innovation in diagnostics, therapeutics and devices are important but are not the whole story. Corresponding innovations in the health care delivery system have not taken place and are badly needed if the full benefits of innovations in diagnostics, therapeutics and devices are to be achieved. The broad range of these innovations since World War II has led to an enormous growth in the complexity of health care. However, the health care delivery system has not evolved to accommodate this complexity. Sophisticated delivery systems are lacking. There has been inadequate investment in information processing systems, and there has been insufficient emphasis on teamwork in care delivery. The inadequate investment in information processing systems led one speaker at the conference to say that there is a need for the federal government to take a leadership role in fostering a health care information infrastructure.

The second important observation was that innovation in implanted devices and drugs follow quite different paradigms. The former are much more likely to undergo improvements leading to significant cost-effectiveness improvements over time. For example, improvements in the technology of implantable cardioverter defibrillators (ICDs) and the way they are deployed have reduced the average cost of a life-year saved from about $50,000 in the mid-1980s to less than $20,000 in the early 1990s (Stanton et al., 2000). As a result of such improvements, early cost-effectiveness studies for devices are likely to present worst-case scenarios and could lead to premature abandonment.


With health care costs once again increasing faster than general inflation, attention has focused on medical innovation being a driver of health care costs. According to researchers at the Centers For Medicare and Medicaid Services (CMS),6 medical innovation has been the primary driver of health care costs over the second half of the 20th century. It has accounted for about half the real growth in health care spending over the period 1950–2000, with the other half being attributable to factors such as the


Formerly, the Health Care Financing Administration (HCFA).

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