MEDICAL INNOVATION AT THE CROSSROADS

VOLUME V

Sources of Medical Technology: Universities and Industry

Nathan Rosenberg, Annetine C. Gelijns, and Holly Dawkins, Editors

Committee on Technological Innovation in Medicine

INSTITUTE OF MEDICINE

NATIONAL ACADEMY PRESS
Washington, D.C. 1995



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Sources of Medical Technology: Universities and Industry MEDICAL INNOVATION AT THE CROSSROADS VOLUME V Sources of Medical Technology: Universities and Industry Nathan Rosenberg, Annetine C. Gelijns, and Holly Dawkins, Editors Committee on Technological Innovation in Medicine INSTITUTE OF MEDICINE NATIONAL ACADEMY PRESS Washington, D.C. 1995

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Sources of Medical Technology: Universities and Industry NATIONAL ACADEMY PRESS 2101 Constitution Avenue, N.W. Washington, D.C. 20418 The Institute of Medicine was chartered in 1970 by the National Academy of Sciences to enlist distinguished members of the appropriate professions in the examination of policy matters pertaining to the health of the public. In this the Institute acts under both the Academy's 1863 congressional charter responsibility to be an advisor to the federal government and its own initiative in identifying issues of medical care, research, and education. Dr. Kenneth I. Shine is president of the Institute of Medicine. The Committee on Technological Innovation in Medicine was established in 1988 by the Institute of Medicine to design a series of workshops that would (a) provide more fundamental knowledge of the process by which biomedical research findings are translated into clinical practice and (b) address opportunities for improving the rationality and efficiency of the process. This volume consists of the proceedings of the fifth workshop in the series, "The University-Industry Interface and Medical Innovation," held in Stanford, California, on February 21–23, 1993. This workshop and its proceedings were supported by the Howard Hughes Medical Institute and Pfizer. The opinions and conclusions expressed here are those of the authors and do not necessarily represent the views of the National Academy of Sciences, any of its constituent parts, or the organizations providing support. Library of Congress Cataloging-in-Publication Data Sources of medical technology: universities and industry / Annetine C. Gelijns and Nathan Rosenberg, editors; Committee on Technological Innovation in Medicine, Institute of Medicine. p. cm. — (Medical innovation at the crossroads; v. 5) Includes bibliographical references and index. ISBN 0-309-05189-4 1. Medical innovations. 2. Medicine—Research. I. Gelijns, Annetine. II. Rosenberg, Nathan. III. Institute of Medicine (U.S.). Committee on Technological Innovation in Medicine. IV. Series. [DNLM: 1. Diffusion of Innovation. 2. Technology, Medical. 3. Research Support—United States. W1 ME342f v. 5 1994 / W 20.5 S724 1994] RA418.5.M4S68 1994 610'.72—dc20 DNLM/DLC for Library of Congress 94-43303 CIP Copyright 1995 by the National Academy of Sciences. All rights reserved. Printed in the United States of America The serpent has been a symbol of long life, healing, and knowledge among almost all cultures and religions since the beginning of recorded history. The image adopted as a logotype by the Institute of Medicine is based on a relief carving from ancient Greece, now held at the Staatlichemuseen in Berlin.

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Sources of Medical Technology: Universities and Industry Committee on Technological Innovation in Medicine GERALD D. LAUBACH, Chair, Former President, Pfizer, Inc. SUSAN BARTLETT FOOTE, Health Advisor, Office of Senator Dave Durenberger, U.S. Senate BEN L. HOLMES, Vice President and General Manager, Medical Products Group, Hewlett-Packard Company WILLIAM N. HUBBARD, JR., Former President, the Upjohn Company LUCIAN L. LEAPE, Lecturer on Health Policy, Harvard School of Public Health KENNETH L. MELMON, Professor of Medicine and of Pharmacology, Department of Medicine, Stanford University School of Medicine H. RICHARD NESSON, President, Brigham and Women's Hospital UWE E. REINHARDT, James Madison Professor of Political Economy, Woodrow Wilson School of Public and International Affairs, Princeton University NATHAN ROSENBERG, Professor of Economics, Stanford University MICHAEL R. SOPER, Former National Medical Director, CIGNA JOHN E. WENNBERG, Professor of Epidemiology, Department of Community and Family Medicine, Dartmouth Medical School Project Staff Program on Technological Innovation in Medicine ANNETINE C. GELIJNS, Program Director (until February, 1993) HOLLY DAWKINS, Research Assistant HELEN C. ROGERS, Senior Project Assistant

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Sources of Medical Technology: Universities and Industry H. DON TILLER, Administrative Assistant NINA SPRUILL, Financial Associate Division of Health Care Services KARL D. YORDY, Director (until October, 1993) KATHLEEN N. LOHR, Director (from October, 1993) and Deputy Director (until October, 1993) H. DON TILLER, Administrative Assistant

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Sources of Medical Technology: Universities and Industry Acknowledgments The Committee on Technological Innovation in Medicine wishes to acknowledge and thank the many individuals and organizations who contributed their time, knowledge, and energy to the production of this volume. First and foremost, the committee thanks the authors of the chapters in this book; early drafts of these chapters were originally presented at the Institute of Medicine (IOM) workshop entitled "The University-Industry Interface" (see Appendix A for the agenda of this meeting) but much thought and effort went into their further development. The committee also expresses its gratitude to the meeting moderators, discussants, and participants. Great appreciation is also due to Dana O'Neil, who worked hard to coordinate the on-site workshop logistics, and Kenneth Melmon and Nathan Rosenberg, the "local" committee members, on whom we imposed with various demands, of varied urgency, both before and during the workshop. The intellectual origins of this volume are found in the interests of Kenneth Melmon and Nathan Rosenberg in examining the interdisciplinary and interinstitutional aspects of medical innovation, to whom the committee is deeply indebted. The committee also expresses its gratitude to Annetine C. Gelijns, who, as the past program director, dedicated much time, thought, and energy to developing and refining the volume's focus. Others, however, were also critical: Kathleen N. Lohr, director of the Division of Health Care Services; Enriqueta Bond, the IOM's executive director until mid-1994; Karl D. Yordy, previous director of the Division; and the current and past IOM Presidents Kenneth I. Shine and

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Sources of Medical Technology: Universities and Industry Samuel O. Thier all spring to mind for their generous and steady support of the program. Among the IOM project staff who worked on this volume, the committee particularly recognizes Holly Dawkins, whose commitment and contributions to the series since its inception have been a vital factor in its production, and Helen Rogers, recognized for her superb management of the workshop logistics and her skilled support of the committee's work. Other staff members to be thanked are Don Tiller, who added the administrative tasks of this volume to his already heaped pile of tasks and put in weekend hours to assure its timely delivery to the press; Mike Edington, honored as the Institute of Medicine's managing editor, who swept away or diminished the various obstacles in the staffs' path; Nina Spruill, who has managed the complicated financial aspects of Medical Innovation at the Crossroads with good will and extraordinary ability for nigh on five years; and Susan Knasiak and Jay Ball, both of whom provided able and critical secretarial assistance during production of this book. The committee thanks various organizations for their financial support of the workshop and of the Medical Innovation at the Crossroads series. This volume would not exist without the continued support of the Howard Hughes Medical Institute and Pfizer. In closing, the committee recognizes that today's rapid changes in the financing and delivery of U.S. health care may well have a significant effect on the incentives for universities and industrial firms to generate new medical technologies. This volume examines the changing roles and interactions of these two critical participants in technological change. It is this committee's hope that this book provides a starting point for further research on these critical, but often neglected, institutional interactions in the innovation process. Gerald D. Laubach Chair Committee on Technological Innovation in Medicine

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Sources of Medical Technology: Universities and Industry Contents LIST OF TABLES AND FIGURES   ix LIST OF ABBREVIATIONS   xi PART I: SETTING THE STAGE 1.   THE CHANGING NATURE OF MEDICAL TECHNOLOGY DEVELOPMENT Annetine C. Gelijns and Nathan Rosenberg   3 2.   RECENT TRENDS IN SUPPORT FOR BIOMEDICAL RESEARCH AND DEVELOPMENT Enriqueta C. Bond and Simon Glynn   15 PART II: MEDICAL DEVICE INNOVATION 3.   PHYSICIANS AND PHYSICISTS: THE INTERDISCIPLINARY INTRODUCTION OF THE LASER TO MEDICINE Joanne Spetz   41

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Sources of Medical Technology: Universities and Industry 4.   FROM THE SCALPEL TO THE SCOPE: ENDOSCOPIC INNOVATIONS IN GASTROENTEROLOGY, GYNECOLOGY, AND SURGERY Annetine C. Gelijns and Nathan Rosenberg   67 5.   COCHLEAR IMPLANTATION: ESTABLISHING CLINICAL FEASIBILITY, 1957-1982 Stuart S. Blume   97 6.   INNOVATION IN CARDIAC IMAGING Stan N. Finkelstein, Kevin Neels, and Gregory K. Bell   125 PART III: BIOTECHNOLOGY INNOVATION 7.   INCENTIVES AND FOCUS IN UNIVERSITY AND INDUSTRIAL RESEARCH: THE CASE OF SYNTHETIC INSULIN Scott Stern>   157 8.   THE DIVISION OF INNOVATIVE LABOR IN BIOTECHNOLOGY Ashish Arora and Alfonso Gambardella   188 PART IV: CONCLUDING OBSERVATIONS 9.   PERSPECTIVES ON INDUSTRIAL R&D MANAGEMENT Gerald D. Laubach   209 10.   THE INTERTWINING OF PUBLIC AND PROPRIETARY IN MEDICAL TECHNOLOGY Richard R. Nelson   219 APPENDIXES     A.   WORKSHOP AGENDA   223 B.   CONTRIBUTORS   227 INDEX   233

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Sources of Medical Technology: Universities and Industry List of Tables and Figures TABLES 2-1   Estimated R&D in the National Institutes of Health (in million dollars)     2-2   Estimated Federal Spending for Medical Device-related R&D (in million dollars)     2-3   Biotechnology Drugs Currently in Development     2-4   Biotechnology Medicines or Vaccines Approved by the Food and Drug Administration, 1993     2-5   Selected Large-scale Relationships Between Universities/Academic Health Centers and Industry in Biomedical Research (in million dollars)     3-1   Rate of Laser Penetration by Specialty, 1985-1990     3-2   Judgments of Effectiveness of Medical Applications of Lasers     3-3   Laser Sales (in million dollars)     4-1   Top 12 Laparoscopic or Endoscopic Procedures by Volume, 1991     6-1   Selected Innovations in Cardiac Imaging     6-2   Innovation Lifecycle     8-1   Composition of the Biotechnology Industry     9-1   Major Acquisitions and Mergers of U.S. Pharmaceutical and Biotechnology Companies 1993 (in million dollars)     FIGURES 1-1   Example of the interdisciplinary foundations of innovation     2-1   Health R&D funding by source, 1993     2-2   National and federal funds for health R&D, 1940-1992    

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Sources of Medical Technology: Universities and Industry 2-3   Trends in sources of funding for biomedical R&D as a percent of total R&D funds, 1983-1993     2-4   Distribution of federal health R&d funding by performer, 1992     2-5   Distribution of industry health R&D funding by performer, 1992     2-6   Total R&D spending, Pharmaceutical Manufacturers Association member companies, 1990-1993     2-7   Average number of clinical trials per New Drug Application to the Food and Drug Administration     2-8   Average number of patients per clinical trial     3-A1   Molecular absorption and emission processes     3-A2   ''Colors" of light produced by lasers with different wavelengths     6-1   Institutional drivers of the innovation process    

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Sources of Medical Technology: Universities and Industry List of Abbreviations ACP American College of Physicians ACMI American Cystoscope Makers, Inc. AIRs Academy Industry Relations AO American Optical AQ acoustic quantification beta-gal beta-galactosidase CCD charge couple device cDNA complementary deoxyribonucleic acid CO2 carbon dioxide CRADAs cooperative research and development agreements CSFs colony stimulating factors CT computerized tomography DHSS British Department of Health DOA Department of Agriculture ENT ear, nose, and throat EPO erythropoietin ERCP endoscopic retrograde cholangiopancreatography FDA Food and Drug Administration GI gastrointestinal HCFA Health Care Financing Administration HIMA Health Industry Manufacturers Association HP Hewlett-Packard HPLC high-performance liquid chromatography IBA Industrial Biotechnology Association IEEE Institute of Electronics and Electrical Engineers

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Sources of Medical Technology: Universities and Industry JSEP Joint Services Electronics Program LASER light amplification by stimulated emission of radiation MIS minimally invasive surgery MIT Massachusetts Institute of Technology MRC Medical Research Council MRI magnetic resonance imaging mRNA messenger ribonucleic acid NBFs new biotechnology firms ND3 deuterated ammonia Nd:YAG neodymium-doped yttrium-aluminum-garnet NEN New England Nuclear NIH National Institutes of Health NIST National Institute of Standards and Technology NSF National Science Foundation NTIS National Technical Information Service OSTP Office of Science and Technology Policy PET positron emission tomography PPS Prospective Payment System R&D research and development RAC Recombinant DNA Advisory Committee rDNA recombinant deoxyribonucleic acid SBA Small Business Administration SPECT single photon emission computerized tomography Tc technetium-99 TC tissue characterization TEE transesophageal echocardiography t-PA tissue plasminogen activator TRG technical research group UCSF University of California, San Francisco

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Sources of Medical Technology: Universities and Industry Sources of Medical Technology: Universities and Industry

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