developments in policy at the European Community level and how they may influence the actions of national governments.

PUBLIC POLICY AND INNOVATION: A MODEL

Social Objectives

Defined in the most general terms, the objective of most societies is to improve the quality of life of its members. Quality of life has many dimensions, but it is increasingly recognized that health is an important one because of its influence on an individual's ability to enjoy the other aspects of life. The links between health and quality of life have been developed to the point where the benefits of health programs are now generally assessed in terms of their impact on patients' quality of life. A variety of instruments and methods have been used (1,2). Figure 9.1 sets out the relationships among health, quality of life, and economic growth that are relevant to the discussion of the benefits of medical device innovation.

The left-hand column describes the assumed relationship by which more medical technology leads to better health care, which in turn leads to better health and improved quality of life. The right-hand column describes, in equally simplistic terms, a series of economic relationships. Increased research generates more innovation, which increases industrial output thus leading to higher incomes. The improvement in standard of living will have an impact on quality of life for society in general, although the benefits may be spread unevenly.

In fact, the economic and health elements are inextricably linked by cross-relationships at different levels. For example, higher national income levels can improve health through the provision of better housing, education, and nutrition and therefore can influence the health-related aspects of quality of life. Increased industrial output may improve the capability to provide health care, but it may also increase the demand for health services because of industrially related injury and illness. The links between research and industrial innovation are essential for the production of new medical devices that cannot be taken beyond the prototype stage within the laboratory or hospital research environment.

Accept for the moment that the relationships outlined in Figure 9.1 hold. Before we can say that efforts to increase medical device innovation are desirable, we must look at the alternatives. If resources are drawn into the health sector to develop more medical technology, this may simply switch resources from other sectors of the economy, resulting in transfers of benefit without necessarily producing a net gain (Figure 9.2 ). To produce a net gain in social value, medical device innovation must either improve the cost effectiveness of health care by providing increased changes in quality of life per dollar spent or produce equally effective technology at lower cost.



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