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Appendix A Comparing the Development of Drugs, Devices, and Clinical Procedures ANNETINE C. GELIJNS This chapter, initially published as a background document for the workshop discussions that underlie this volume, has three objectives. It provides an initial conceptualization of the medical technology development process within the broader innovation spectrum. It subsequently compares the evaluative strate- gies currently used in the development of new drugs, medical devices, and clini- cal procedures. Finally, it considers the implications of these strategies for the rationality and efficiency by which biomedical research findings are translated into clinical practice, and identifies some opportunities for change. AN INITIAL CONCEPTUALIZATION OF THE DEVELOPMENT PROCESS One of the essential and perhaps defining characteristics of Homo sapiens has always been the development and use of tools, often in response to environ- mental demands and challenges.! In this respect, the development and use of instruments to catch, collect, transport, and prepare food and to make clothing can be traced back to the very origins of human societies. Whereas environ- mental conditions have influenced the development of specific technologies, it can equally be observed that technology has influenced the human environment, thereby changing its underlying conditions. For example, it has been argued that the efficiency of late Paleolithic hunting technology may have caused the disappearance of large animals; the resulting difficulties in finding food stimu- lated development of the technologies of agriculture (1~. *This paper was partially supported by the Querido Award from the Netherlands Praeventiefonds (Dutch Fund for Disease Prevention). 147

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148 ANNETINE C. GELIJNS Throughout history, one can observe this complex interrelationship between the development of technology and the physical, social, and economic environ- ment. For example, making a quantum leap through time from Paleolithic tools to the emergence of modern technology during the Enlightenment, the develop- ment and large-scale introduction of John Kay's shuttled transformed the textile industry fundamentally and, together with James Watt's steam engine some decades later, was one of the major forces shaping the industrial revolution (2~. Since then, technological change has had enormous economic consequences; in modern industrialized societies it has become the critical factor in long-term economic growth (3~. In addition, it has also contributed to the transformation of social relations, such as patterns of work and leisure, procreation, and com- munication. But, as Landau and Rosenberg observe, technological change "functions successfully only within a larger social and economic environment that provides incentives and complementary inputs into the innovation process" (4~. Both cultural and economic forces (a society's intellectual baggage and tol- erance for new ideas, investment in capital fo~ation, savings quotas, etc.), and the government policies reflecting them, have greatly influenced technological development. In comparison to the cybernetical relationship between techno- logical change and environmental factors (going back all the way to the origin of human societies3), the relationship between "science" and "the development of technology" is much younger. For many centuries the development of tech- nology was largely based on empirical knowledge arrived at by trial and error and was essentially independent of scientific understanding. However, the nature of technology development has changed considerably over time. A cru- cial period in the relation between science and technology occurred in the sev- enteenth and eighteenth centuries, when through the work of such scientists as Rene Descartes, Francis Bacon, Isaac Newton, and in medicine, Claude Bernard, the concept of nature was changed and the basis of a mechanistic worldview was laid. This new paradigm of the existence of mankind and its world based on the objectification of nature and the establishment of the experimental investigational method fueled scientific advances and increased the pace of technological change. In the nineteenth and twentieth centuries, sci- ence and technology became truly interdependent, as illustrated by the growth in industrial technology related to scientific advances in such fields as mechan- ics, electrodynamics, and chemistry (5) and more recently by the rapid expan- sion in professionally managed institutions for research and development. This change in the science-technology relationship gave rise to the so-called linear model of technological innovation (see Figure A.1), i.e., results were per- ceived to flow from basic research to applied research, targeted development, . ~ Basic ~ Applied ~ Targeted Research Research Development I [IGURE A.1 A linear model of the innovation chain. ~ Manufactunng ~ Ad option r Use

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COMPARING DEVELOPMENT OF TECHNOLOGIES 149 manufacturing and marketing, adoption, and use. With the rapid expansion in biomedical research since World War II, this model has also become the popular representation of the process by which biomedical research findings are trans- lated into clinical practice. In medicine, this translation process can be catego- rized into three components: the development of new drugs and biologicals, that of medical devices, and that of clinical procedures. In other sectors of the economy, this linear-sequential representation has been found to impose a number of important conceptual limitations for the pur- pose of analyzing the development process. First, it implies that technological innovation is much more systematic than it really is. The stages of the innova- tive process are highly interactive with many feedback loops. For example, a strong reciprocal relationship exists between research and development: although both scientific and engineering research findings stimulate technology development, the availability of highly advanced technological products and processes stimulates and facilitates research. With regard to medical devices, for instance, the introduction of non-invasive imaging techniques made the cen- tral nervous system accessible to direct investigation of the anatomical corre- lates of function, opening up new vistas for research in neurophysiology. Furthermore, the linkage between research and development exists not only at the beginning of development, but also continues throughout the development process. In principle, the research and development stages are concurrent; for example, to solve problems encountered in the development of a new technolo- gy one may revert to the existing body of knowledge as accumulated in research or one may initiate new research (6~. The second limitation of the linear model is that not only research but also the broader environment as expressed through market forces influences each stage of the development process. For years the literature on technological innovation could be divided into "technology or science-push" theories (empha- sizing the importance of advances in research and technology as the main impe- tus to innovation) or "demand-pull" theories (stressing the importance of market demand as the main force in innovation). Mowery and Rosenberg, however, have demonstrated that technological development is an iterative process, in which both an underlying and evolving scientific and engineering knowledge base and market demand interact to achieve a particular innovation (7~. In a general sense, this observation also holds for innovation in medicine, and Figure A.2 depicts the medical technology development process as influ- enced by both supply and demand factors. Health care technology development can then be defined as a multi-stage process through which a new biological or chemical agent, medical device prototype, or clinical procedure is modified and tested until it is ready for regular production and utilization in the health care market. This development process can be divided into two closely related series of activities: technical modification and refinement (with pharmaceuticals and devices this includes scaling-up for production) and clinical evaluation of a potential innovations (see Figure A.2~.

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150 ANNETINE C. GELIJNS Flow 1: Research, Discovery, and Invention 1 \ Flow 111: Health Care Market Diffusion ~ r FIGURE A.2 An interactive model of research, development, and diffusion streams. Whereas it is fairly obvious that current scientific and engineering knowl- edge (and its accessibility) determines the overall feasibility of specific techno- logical developments, the influence of market demand factors is more difficult to determine. The notion of a "market" in health care is different from the mar- ket concept in other sectors of the economy, where in principle the consumer determines what product he or she wants and then subsequently purchases it. The following major differences can be discerned: The market demand concept implies autonomous choice and a knowledge of available alternatives by consumers and patients. However, both autonomous choice and a realistic knowledge of the alternatives are often severely limited, and therefore health care professionals usually decide the kind and volume of technological interventions needed (8~. In a sense, these professionals are the consumers in the health care market, although their demand is derived from that of patients. ~ Furthermore, new medical technologies in addition to their benefits near- ly always entail a certain element of risk. The beneficial or adverse effects of a medical technology are considered to be quintessentially different from those of many other technologies because, as Renee Fox observes, they affect "basic and transcendent axes of the human condition: life, conception and birth, body and mind, . . . and ultimately mortality and death" (9~. During development, the benefits and risks of a new technology are highly uncertain. To reduce this uncertainty, a new technology is subjected to continuous clinical evaluation. Finally, health care professionals are usually reimbursed for their services not by patients but by third-party payers. Because patients and professionals traditionally have been insulated from the financial consequences of their deci- sions, there have been no strong incentives to consider cost in their decision making. In the present-day environment of cost containment this situation is in the process of changing.

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COMPARING DEVELOPMENT OF TECHNOLOGIES 15

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152 ANNETINE C. GELIJNS decision making. As mentioned in Chapter 1, concerns have emerged as to the quality of the clinical evidence that forms the basis for decision making. This appendix will therefore address the following questions: 1. What kinds of clinical evidence play a role in decision making during the development of a potential innovation? What endpoints are assessed during the different stages of development? 2. What are the methods by which these endpoints are assessed during the development of a potential innovation? 3. What are the implications of these evaluative strategies for the effective- ness and efficiency of the process by which research findings are translated into clinical practice? THE DEVELOPMENT OF DRUGS The number and kinds of new molecular entities entering development are, to a large extent, a direct result of the activities undertaken and the judgments made in the drug discovery phase. In view of the close relationship between research and development, let us consider some characteristics of drug research and discovery before going into the development process. Drug Discovery Although research in various biomedical disciplines relevant to drug discov- ery takes place in academic, governmental and industrial laboratories, the devel- opment process is largely industry sponsored and takes place in industrial divi- sions and in clinical research settings, often in academic institutions. Historically, close relationships between industry, academia, and government have been crucial to drug discovery and development (131. During the twenti- eth century the interdependence of industrial, academic, and governmental research has intensified (14,15~.8 On the one hand, industrial laboratories exploit basic biomedical and clinical knowledge accumulated in academic and governmental settings, including the discovery of biologically active com- pounds (16~. On the other hand, basic research findings are also made in indus- trial laboratories, and the availability of new drugs often permits advances in basic, non-industrial research to be made (17~. This reciprocal relationship refutes the popular perception that equates basic research with academia, and subsequently, in a linear fashion, equates applied research and drug develop- ment with industry. With the emergence of the biotechnology industry, the real- ity of this complex interdependence has received new prominence. Since the origin of the pharmaceutical industry in the nineteenth century, the nature of the drug discovery process has changed substantially. In the second half of this century drug discovery has, to a large extent, moved away from the random screening of thousands of compoundsthe prevalent mode of operation

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COMPARING DEVELOPMENT OF TECHNOLOGIES i, 153 in Paul Ehrlich's days to the more rational design of drugs. This transition was made possible by a burgeoning number of research tools (such as electron microscopes, x-ray crystallography, and molecular modeling), advances in bio- chemical theory, and an increasing knowledge of physiological processes in health and disease. However, both serendipity and empirical processes of trial and error remain important elements of drug discovery today (18~. According to Maxwell (19), four drug discovery approaches can be identified at present: 1. The basic approach This approach entails studies to elucidate new bio- chemical leads or biomedical hypotheses, which may result in the synthesis of new compounds. 2. Screening of compounds This screening is usually targeted, i.e., based on a distinct rationale, for instance, blocking of a particular receptor. Because compounds may show unexpected therapeutic activity in other areas, it can also be valuable to perform some general screening. 3. Molecular modification Because the first candidate in a therapeutic class s rarely optimal, the objective of molecular modification is to discover improved agents from a "lead compound" with, for instance, a longer duration of action and/or greater selectivity. Maxwell distinguishes between "enlightened opportunism" and "unenlightened opportunism." The former refers to the molecular modification of pharmacological compounds, identified at an early stage of their development, in order to develop an improved agent. The latter refers to making a close chemical variation of a specific drug, which often is already widely diffused on the market. This distinction, however, is not always easy to make (see below), since much of this research seeks to overcome shortcomings of the marketed drug. 4. Clinical observations The final source of new drugs can be the clinical observation that a compound, new or old, has unexpected therapeutic actions in patients.9 That these strategies are not mutually exclusive can be illustrated by the discovery and development of beta-blockers (see Box below). Over time, the drug discovery and research process has become increasingly complex and sophisticated. Interesting compounds are extensively screened both in vitro and in viva for pharmacological and toxicological effects.12 There has been a rapid increase in the number and kinds of toxicological tests (27,28,29~. Following short-term animal tests, long-term animal studies are ini- tiated to detect possible mutagenicity, carcinogenicity, and teratogenicity. These studies often continue for a number of years concurrent with initial human trials. For testing biotechnology-based drugs, however, toxicology studies in animals do not always make sense when the new biologicals are products of human genes and are functionally species specific. More in general, animal tests sometimes have variable relevance for predicting the effects of an agent in humans. The changes in preclinical testing are reflected in the time spent in this stage of the research process and the costs incurred. While the duration of preclinical

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154 ANNETINE C. GELlJNS In the late 1 940s, clinical research on nerves revealed that the stimulation of one set of nerve pathways, producing epinephrine and norepinephrine, made the heart beat faster and increased the need for oxygen. This research also suggested the existence of To types of receptors in the human body, alpha and beta receptors, that mediate the effects of nore- pinephrine and epinephrine (21~. This work resulted in the hypothesis by Black, one of the 1988 Nobel laureates for physiology or medicine, that blocking one of these receptors would diminish the heart's demand for oxygen, possibly providing relief to angina sufferers. Black and his col- leagues at Imperial Chemical Industries (ICI) tried to develop analogues of an earlier discovered compound dichloroisoproterenol (22~. This com- pound had been found to induce beta-adrenergic blockade activity, but also had partial agonist (sympathomimetic) activity. They first developed pronethalol (23), which was found to induce considerable human side effects, such as nausea, vomiting, and light-headedness. They then developed propranolol (24), first marketed as Inderal, which was free of the agonist activity of dichloroisoproterenol and the side effects of pronethalol. The discovery and development of beta-blockers thus demonstrate the importance of the "basic approach" and the interaction with strategies 2 and 3. In the words of the Nobel committee's citation, 'while drug development had earlier mainly been built on chemical modifi- cation of natural products, they (the laureates) introduced a more rational approach based on the understanding of basic biochemical and physio- logical processes" (25~. Following the introduction of beta-blockers into clinical practice, it was observed that beta-blockers also played a role in lowering blood pressure and preventing heart attack and coronary death. Finally, the proliferation of various beta-blockers has resulted in a number of more selective drugs as well as some so-called "me-too" drugs (26~.10 (animal) tests was approximately one year in the mid 1960s, it increased to approximately three and a half years in the early 1980s, with a concomitant increase in costs (30,31~. Yet, uncertainty remains a crucial element in drug dis- covery and preclinical research: the attrition rate traditionally has been such that, of roughly each 10,000 compounds synthesized, 1,000 will go into animal research and only 10 will initiate human testing (32~. Drug Development In the United States, the decision to proceed with the development of a com- pound, including its clinical evaluation, initially involves a drug company and the FDA. Subsequently it engages clinical investigators, Institutional Review Boards (IRBs), and the research subjects themselves. The 1962 amendments to the Food, Drug, and Cosmetics Act require a sponsor to apply to the FDA for permission to initiate human testing with an Investigational New Drug (IND).

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COMPARING DEVELOPMENT OF TECHNOLOGIES 155 The purpose of such an IND application is to protect human subjects, in part by making sure that the proposed clinical investigations are as efficient as possible to minimize the numbers of patients exposed to the risks of such trials. An IND application must contain essentially all of the information then known (the mean size of an IND is 1,250 pages) on the nature of the new compound, for- mulation and identification methodologies, stability information, manufacturing methods, the methods and results of preclinical animal studies, the proposed clinical development plan for trials, and the identity and qualifications of clini- cal investigators.13 The FDA classifies IND applications according to a compound's chemical We and its potential benefit, to determine priority for review. In principle, clin- ical trials can start 30 days after the FDA receives an IND application, unless the agency orders a "clinical hold." After an IND application has been approved, a multi-stage process of clinical investigation starts; the demarcation lines between the various phases are somewhat fluid. Human testing is initiated with Phase I studies, which ordinarily last between six months and one year. These studies usually involve 20 to 100 healthy human volunteers, except in the case of drugs with potentially high toxicity lev- els such as neoplastic or AIDS drugs where it is considered unethical to sub- ject healthy humans to the risk of these side effects, and thus patients are involved from the beginning. The objective of Phase I studies is to provide information on the dose of an experimental drug that might be used, how often, and especially on potential side effects. While drug absorption, metabolism, excretion, and some effects on tissues and organs are measured, a major concern is acute side effects in humans. Drug administration begins at very low single doses (for instance, one-eighth of the lowest dose that has caused a measurable effect in the most sensitive animal species), followed by multiple doses if no adverse effects are encountered as the dose is increased (351. Safety concerns in this phase may include acute cardiovascular reactions, gastrointestinal distur- bances, central nervous system disturbances, bronchopulmonary reactions, and anaphylactic reactions (291. These studies generally involve both laboratory testing and clinical observation. Development was discontinued during Phase I studies of 20 percent of the drugs that initiated human testing (361.14 The reasons for these discontinuations are safety (8 percent of the 20 percent), efficacy (6 percent of the 20 percent), and lack of commercial interest (6 percent of the 20 percent). Not uncommonly, chemical and pharmacological research on back-up compounds is pursued in case the compound undergoing development is discontinued due to side effects or lack of efficacy. For example, the anti-arthritic drug, piroxicam, was the third member of a new chemical series (the oxicams), but the first one to make it to the market. Simultaneous with Phase I clinical studies, technical development activities take place to improve a particular compound's formulation. In developing a suitable tablet or capsule formulation, a number of physical, chemical, and

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156 AN'NETINE C. GELIJNS pharmacology issues need to be resolved, such as the use of stabilizing agents (e.g., anti-oxidants), micro-encapsulation, or the development of slow-release forms to achieve the optimum rate of absorption. Phase II clinical studies involve a few hundred patients and usually take sev- eral months to two years. The main emphasis in Phase II studies is to examine the efficacy of a compound in treating the clinical problem for which it is intended.15 At this point, the endpoints are selected that will be pursued both in Phase II and in Phase III studies. A major issue is the choice of endpoint; should one focus solely on intermediate endpoints, such as changes in biochem- ical, physiological, and anatomical parameters, or should one also include clini- cal endpoints, such as effect on mortality, morbidity, or quality of life. These decisions involve complex considerations regarding the disease, the time frame of treatment, and the scientific and regulatory acceptability of the relationship between intermediate endpoints and disease treatment. They can have a consid- erable impact on the scope of the development process. Traditionally, a number of intermediate endpoints, such as lowering blood sugar in diabetes or lowering blood pressure in severe hypertension, have been accepted as valid by the various parties involved in drug development. In other, more recent cases involving intermediate endpoints, such as clot lysis in myocardial re-infarction or the increase of hematocrit levels in anemic dialysis patients, there has been considerable disagreement about their value. For instance, in the development of recombinant erythropoietin, a stimulator of red blood cell development, a nine-center, 300-patient efficacy trial demonstrated significant increase of hematocrit levels, while none of the patients developed antibodies to erythropoietin. The FDA found hematocrit increase alone insuff~- cient proof of efficacy and required additional evidence of clinical benefit. The company was able to demonstrate a reduction in the number of transfusions and improvements in exercise tolerance and patient well-being. The license applica- tion is being reviewed (38~. A number of factors may influence the acceptabili- ty of the kind of endpoints to pursue. For example, in hyper-cholesterolemia clinical endpoints such as death from myocardial infarction may take a long time to develop, and thus practical reasons dictate the use of intermediate end- points such as reduction of low-density lipoprotein-cholesterol. In this case the acceptability of intermediate endpoints is heightened because the association between the intermediate endpoint and the clinical problem is perceived to be strong (39~. The crucial question, however, often is not whether to pursue intermediate or clinical endpoints, but which endpoint should be pursued at which stage in the development process (especially pre- or post-approval). This question is impor- tant because the traditional notion of what constitutes valid clinical endpoints is evolving. Since many therapeutic agents for today's chronic degenerative dis- eases only treat symptoms, the focus in clinical evaluations is shifting toward measuring long-term benefits and risks. Furthermore, it is increasingly apparent

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COMPARING DEVELOPMENT OF TECHNOLOGIES 157 that risks and benefits should be measured not only in terms of reducing mortal- ity but also in terms of improving functional status and quality of life. Such quality of life studies are becoming more important in the pharmaceutical area. Recent examples are provided by quality of life evaluations of auranofin and captopril (40~. Phase II studies also attempt to detect short-term side effects. The safety concerns in Phase II and in Phase III studies include cumulative organ toxicity, hypersensitivity reactions, metabolic abnormalities, endocrine disturbances, and if women of childbearing age are involved, teratogenicity (29~. The Food, Drug, and Cosmetics Act requires "substantial evidence . . . of safety and effectiveness . . . consisting of adequate and well-controlled investi- gations." Most Phase II studies are double-blinded, randomized controlled clin- ical trials. While placebo control is the design of choice, the agency will accept no-treatment controls, standard treatment, and even historical controls (37~. The well-designed randomized controlled trial (RCT) is generally regarded as the statistically most powerful method to determine efficacy (42~.16 The essence of an RCT is that patients are randomly assigned to a treatment group which receives the experimental drug or to a control group which receives a placebo, standard treatment, or no treatment. According to Chalmers (43), a clinical trial is ideally quadruple-blinded: the therapy is disguised to physicians and patients (double-blinded), as are the randomization process and the ongoing results. Both randomization and blinding reduce bias17; the differences in health outcome can thus be attributed to the intervention, within the limits of statistical methodology. In a well-designed trial, the numbers of patients and the end- points are chosen to obtain clinically important and statistically significant results.18 The degree of complexity in determining efficacy and safety depends on the therapeutic class to which the experimental drug belongs. At one end of the spectrum are the anti-infectives. Efficacy testing of these compounds is a rela- tively straightforward assessment of whether the compound kills the microor- ganism at the site of infection. Due to the acute nature of most infections, there may be less need for chronic toxicity testing. At the other end of the spectrum are psychopharmacological drugs. Determination of efficacy in psychiatric dis- eases, with a complex interplay of neurobiological, environmental, and psycho- logical factors, is difficult. There are fewer objective tests for psychiatric disor- ders and one often deals with "soft" measures, making it necessary to subject these drugs to a wider range of tests. As these drugs may often be taken for long periods, chronic toxicity tests are needed. These varying degrees of com- plexity are reflected in the duration of the development process; for example, the development of psychopharmacological agents takes 3.1 years longer than for cardiovascular drugs, and 7.3 years longer than for anti-infective agents (30~. Within the total clinical development spectrum the highest dropout rate for

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COMPARING DEVELOPMENT OF TECHNOLOGIES 191 31. Bioengineering research will be defined as the application of engineering knowl- edge and concepts to the understanding of the human body and its interactions with machines, and to the development of new and improved medical devices. This definition is very similar to a definition provided in a recent National Research Council report (62), except that the scaling-up and production of new products derived from advances in biology (i.e., the engineering aspects of biotechnology) are excluded. Those aspects of engineering are discussed in the previous section. 32. In view of the heterogeneity of medical devices, the type of device determines if animal research will be undertaken before a device prototype is evaluated in humans. 33. Shaw found that half of the initial prototypes were produced by users. 34. Allen (73) established the importance of intra-organizational (e.g., between R&D and manufacturing divisions) and inter-organizational communication for R&D performance. With regard to the latter, a recent analysis of the development of devices demon- strated that half of the device firms considered used a formal financial analysis of the expected returns on investment or at least some form of market survey. Many firms, however, relied on informal decision making processes, usually based on a firm's experience in the market for the product (76~. 36. According to Kennedy (79), the term medical devices includes all of the items readily identified as devices as well as in vitro diagnostic devices used in clinical laboratories and some products previously regulated by the FDA Bureau of Drugs, such as IUDs, or by the Bureau of Biologics, such as arterial grafts. 37. A "significant risk" device is legally defined as an implant and presents a poten- tial for serious risk to the health and safety or welfare of a subject; is purported or represented to be for use in supporting or sustaining human life and presents a potential for serious risk to the health and safety or welfare of a subject; is for use of substantial importance in diagnosing, curing, mitigating, or treating disease and presents a potential for serious risk to the health and safety or welfare of a subject; or otherwise presents a potential for serious risk. 38. In some cases an IDE application is not necessary but clinical trials are con- ducted. 39. Determining technical performance involves replicability and reliability as impor- tant criteria. 40. The ROC analysis allows one to compare the technical performance of diagnostic tests over a range of different cutoff points or reference values that denote a posi- tive test result. This test displays the true positive ratios and the false positive ratios for these different cutoff points. See McNeil et al. (87~. 41. One needs to distinguish between critical and non-critical devices. Most rigorous GMP regulations apply only to critical devices. 42. On average the FDA takes a year to approve a PMA (81~. 43. As mentioned before, the economic environment in general and cost analyses of devices in particular are outside the scope of this paper. 44. The statutory provision indicates that this decision should be based on whether a device is considered "reasonable and necessary," which has been translated to mean "accepted by the medical community as a safe and efficacious treatment for a particular condition." Based on 13 technologies that completed the full

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192 ANNETINE C. GELIJNS Medicare coverage process (including technology assessments by the Office for Health Technology Assessment) from the 1983-1988 period, it took 2.4 years from the time that HCFA received the initial inquiry to the final disposition date. 45. A condition of the approval for new Class m devices is that information received by manufacturers on device defects or adverse reactions should be reported to the FDA within 10 days. 46. In absolute terms, the United States invests heavily in biomedical research and development. Shepard and Durch (98), for example, indicate that the United States accounts for 45 percent of funds spent in the Organization for Economic Cooperation and Development countries, and the top five countries United States, Japan, The Federal Republic of Germany, France, The United Kingdom account for 84 percent of all biomedical R&D expenditures. If con- sidering per capita spending, however, Switzerland and Sweden head the list. 47. It is within this context that medical societies are increasingly issuing guidelines regarding the use of a particular new procedure; however, usually these guidelines emerge after a new procedure has already diffused more widely into clinical practice. The NIH consensus development conferences may issue similar recommendations regarding the appropriate use and effectiveness of a new procedures in clinical use. 48. The heated debate in the American Association of Neurological Surgeons and the New England Journal of Medicine illustrates the difficulties a number of promi- nent physicians had accepting the EC/IC bypass trial results (112,113), as well as the importance of ensuring "clear definition and relative homogeneity of the patients to be randomized." 49. Inherent in his proposal is a fluid protocol that allows incremental changes in techniques. 50. Alternatively, Buxtonin a three-year evaluation of heart transplants in the United Kingdom uses cross-sectional analyses to estimate changes in benefit and cost parameters over a longer time period than the study period directly allows (115~. 51. The few clinical trials using sham operations clearly demonstrated that a strong placebo effect can be associated with these surgical interventions, thus underlin- ing the importance of controls (119~. 52. The OECD in general defines industrial companies with 11 percent of their turnover in R&D already as "research intensive" (111~. 53. One furthermore should keep in mind that, whereas the success rates of NCEs are higher for 1970 cohorts than for earlier cohorts, at present 73 percent of NCEs initiating human testing are still discontinued before an NDA is submitted (63~. 54. The number of drugs approved for the U.S. market averaged 36 NCEs per year between 1950 and 1960. A decline of 54 percent occurred in the early 1960s, after which the numbers fluctuated, averaging 14 NCEs per year through the end of the 1970s. Since the end of the 1970s, approval rates recovered somewhat (26 in 1985, 20 in 1986), though this recovery did not specifically take place in U.S.- originated but in foreign-owned approvals (30,31,1251. 55. Notably, such benefits include the structural prevention of potentially unsafe and/or ineffective drugs; these basic premises on which the regulatory system is based are generally considered valuable. However, it is interesting thatin con- trast to the medical device amendmentsthere is no legal mandate to encourage development and innovation, but only to assure the marketing of"safe and effec- tive" drugs (124~.

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COMPARING DEVELOPMENT OF TECHNOLOGIES 193 56. For example, getting a drug on the market one year earlier would reduce the aver- age break-even point economically (i.e., where R&D costs equal revenues) by three to four years (128~. 57. Grabowski (128) has determined that it would take 12 years of projected revenues at the present rate to achieve a real return on capital of 8 percent. A 10 percent real return would require 19 years of projected revenues at the present rate. 58. Furthermore, while the advantages for generic drugs can be reaped immediately, the advantages inherent in the law for innovative products can only be reaped fur- ther in the future (i.e., at the point where the patent term would have expired without the law). 59. Although a drug may continue to earn positive profits after the patent expiration date, under the pressure of generic competition the sales of a patent-expired prod- uct currently fall by 50 percent or more in the two or three years after patent expiry. 60. Furthermore, hospital formularies favor the lowest cost products, and the "Maximum Allowable Cost Program" reimburses Medicare patients only for the lowest cost product. In addition, international competition from Japan and Europe has increased. Recently the European Economic Community (EEC) intro- duced "the protection of the exclusive rights of the company that submits a file for regulatory approval. Files of new products, irrespective of the patent situa- tion, will remain inaccessible to others for up to 10 years from the time the first EEC approval has been granted" (129~. 61. "It is the purpose to encourage, to the extent consistent with the protection of the public health and safety and with ethical standards, the discovery and develop- ment of useful devices intended for human use and to that end to maintain opti- mum freedom for scientific investigators in their pursuit of that purpose" (Medical Device Ammendments 520, galls. 62. IDEs are devices under development which require FDA approval to initiate clin- ical evaluation in humans. 63. Consider, for example, the management of angina. The development of coronary artery bypass surgery and of beta-blockers were initiated at roughly the same time. The imbalance in assessment strategies, however, implies that the surgical option could undergo much more rapid diffusion than the pharmacological option, as beta-blockers were not as rapidly available to practicing physicians. 64. A subsequent study by Grabowski et al. (133) used a more sophisticated model, and found roughly similar results. As a measure of regulation they considered the average amount of NDA review time. Regarding research opportunities, they used changes in the productivity of pharmaceutical R&D in the United Kingdom during the 1960s as a control measure for changes in non-regulatory factors in the United States. 65. However, one should keep in mind that the four largest drug categories in the early 1960s anti-infectives, analgesics, cardiovasculars, and psychopharmacologic~still remained the largest therapeutic categories in the early 1980s. 66. While, as mentioned above, assessing efficacy and safety may be more complex with psychopharmacological products, this is certainly not the case with anti- infectives. Furthermore, the NDA review. times within the regulatory agency for these two categories were rather similar with regard to drugs in other therapeutic classes. In addition, the percentage of psychopharmacological drugs and anti- infectives first marketed abroad (under a different regulatory system) were also

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194 ANNETINE C. GELIJNS roughly similar to the percentage first marketed abroad in other therapeutic class- es. According to these measures, it appears that neither psychopharmacological products nor anti-infectives were regulated more stringently. The additional decline in these two categories, above other categories, therefore should be relat- ed to a number of non-regulatory factors, such as a potential decrease in research opportunities, or a potential increase in perceived risk of developing drugs in a specific area (for instance, a relationship between the decrease in tranquilizers and the thalidomide tragedy). REFERENCES 1. Bernal ID. Science in History. Volume I-IV. Illustrated edition. Gretna, La.: Pelican Books, 1969. 2. Freeman C, Clark J. Soete L. Unemployment and Technical Innovation. London, 1982. 3. Rosenberg N. Inside the Black Box: Technology and Economics. New York: Cambridge University Press, 1982. 4. Landau R. Rosenberg N. The Positive Sum Strategy. Washington, D.C.: National Academy Press, 1986. 5. Casimir HBG. Haphazard Reality, Half a Century of Science. New York: Harper & Row Publishers, 1983. 6. Kline SJ, Rosenberg N. An overview of innovation. In Landau R. Rosenberg N feds). The Positive Sum Strategy. Washington, D.C.: National Academy Press, 1986:275-306. 7. Mowery D, Rosenberg N. The influence of market demand upon innovation: A critical review of some recent empirical studies. Research Policy 1979;8:102-153. 8. Hillman BJ. Government health policy and the diffusion of new medical devices. Health Services Research 1986;21:681-711. 9. Fox RC. The cultural shaping of biomedical science and technology. A preface. International Journal of Technology Assessment in Health Care 1986;2:189-194. 10. Nelson RR, Winter SG. In search of useful theory of innovation. Research Policy 1977;6:36-76. 11. Greer AL. Adoption of medical technology: The hospital's three decision-systems. International Journal of Technology Assessment in Health Care 1985;1:669-680. 12. Cody E. France orders sale of new pill. Washington Post, 1988. 13. Liebenau J. Innovation in pharmaceuticals: Industrial R&D in the early 20th centu- ry. Research Policy 1985;14:179-187. 14. Felig P. Biomedical research in the industrial setting: Contrasts and similarities to academia. Journal of the American Medical Association 1987;258:2407-2409. 15. Thier SO. Public policy and private sector innovation. Keynote Address at the Pharmaceutical Manufacturers Association Meeting on America's Medical Research, Washington, D.C., November 1987. 16. Mansfield E, Rapoport J. Wagner S. Hamburger M. Research and innovation in the modern corporation. New York: W.W. Norton, 1971. 17. Cuatrecasas P. Contemporary Drug Development - Dilemmas. The Center for the Study of Drug Development Publication Series. New York: University of Rochester, 1983.

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