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OCR for page 32
The Scope of U.S. Medical
Technology Assessment
The pressing need for medical technol-
ogy assessment information is evident
throughout the health care industry in the
United States. This chapter provides a pro-
file of medical technology assessment in the
United States today. An introductory over-
view is followed by descriptions of the di-
mensions of medical technology assess-
ment, which indicate the great diversity of
current assessment activities as well as un-
met assessment needs. Estimates are given
for the relative magnitude of expenditures
made for medical technology assessment,
biomedical research and development, and
national health care. Major assessment
programs in the federal government, the
drug industry, the medical device indus-
try, and other sectors are described. Fi-
nally, conclusions have been drawn re-
garding the adequacy of our current
assessment capabilities and recommenda-
tions have been made concerning invest-
ment in and conduct of medical technology
assessment so as to improve those capabili-
ties.
Prepared by Clifford S. Goodman.
32
The detailed profiles of 20 American as-
sessment programs in the private and pub-
lic sectors, found in Appendix A, provided
much of the basis for preparing this chap-
ter. Those profiles systematically describe
the purpose, technologies assessed, meth-
ods, funding, and other aspects of each
program.
AN OVERVIEW
Heightened interest in medical technol-
ogy assessment has prompted a wide vari-
ety of responses in recent years as one or
another organization tries to meet its needs
for assessment information. For instance,
since late 1977, the National Institutes of
Health (NIH) has conducted 50 widely re-
ported consensus development conferences
on a variety of biomedical problems and
technologies. The American College of
Cardiology, the American Hospital Associ-
ation, and the American Medical Associa-
tion are among professional and provider
associations that have instituted new as-
sessment programs. Implementation of the
Medicare prospective payment system,
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THE SCOPE OF U.S. MEDICAL TECHNOLOGY ASSESSMENT
growth in multi-institutional health care
organizations, competition, and related
factors have prompted health maintenance
organizations, hospital corporations, and
other major providers to institute new pro-
grams or expand existing ones for evaluat-
ing their delivery of health services and the
cost-effectiveness of adoption and use of
medical technologies. More drug compa-
nies are instituting permanent drug sur-
veillance and cost analysis programs. The
independent medical device evaluator
ECRI (formerly the Emergency Care Re-
search Institute) is responding to an ex-
panded market for assessment information
with new publications, an implant regis-
try, a widened device-experience reporting
network, and other services.
Many organizations arrange for the ex-
change of assessment information. Blue
Cross and Blue Shield Association and
other major insurers increasingly seek assis-
tance from medical associations such as the
American College of Physicians, the Amer-
ican College of Radiology, the American
College of Surgeons, and the Council of
Medical Specialty Societies in formulating
coverage policies. At congressional re-
quest, the Office of Technology Assessment
(OTA) has in recent years produced more
than 60 reports and case studies of medical
technology that have been widely circu-
lated and cited throughout government,
industry, and the public. The Department
of Health and Human Services (DHHS),
NIH, and the Veterans Administration
(VA) are among the agencies that have re-
cently instituted coordinating committees
to enhance the exchange of information
about technology assessment and to make
recommendations regarding their assess-
ment policies. The Stevenson-Wydler
Technology Innovation Act of 1980 (P.L.
96-480) requires DHHS to report annually
to the Department of Commerce regarding
its health technology assessment and trans-
fer activities (see Office of Medical Appli-
cations of Research tOMAR], 1984~.
33
Several noteworthy developments re-
cently have been made regarding establish-
ment of new assessment entities. The Pro-
spective Payment Assessment Commission
(ProPAC) was first appointed in 1983 to
make recommendations to the DHHS Sec-
retary about adjustments in the Diagnosis-
Related Groups (DRGs) used in the Medi-
care prospective payment system. An In-
stitute of Medicine (IOM) report
recommends the establishment of a pri-
vate-public medical technology assessment
consortium (IOM, 1983~. In 1984, Con-
gress set aside funds for the expansion of
medical technology assessment functions of
the National Center for Health Services
Research and earmarked a portion of these
as matching funds for a National Academy
of Sciences council on health care technol-
ogy similar to that proposed by the IOM
(P.L. 98-5513.
But the recent flurry of attention to as-
sessment has not been accompanied by a
fitting increase in new assessment informa-
tion. Notwithstanding the national invest-
ment in health care and the diversity and
scope of assessment needs, current assess-
ment activities are patchy and poorly
funded. Organizations are scrambling for
limited available information and are rely-
ing heavily on expert opinion to fill wide
gaps in the data. The bulk of all resources
allocated for technology assessment is for
premarketing testing of drugs for safety
and efficacy. Although current premarket-
ing assessment of drugs and devices ap-
pears adequate, insufficient attention is
given to postmarketing study (Joint Com-
mission on Prescription Drug Use, 1980;
OTA, 1982b). Inadequate attention is paid
to evaluating medical and surgical proce-
dures for safety and effectiveness (Bunker
et al., 1982; Eddy, 1983; OTA, 1982a,
1983b; Relman, 1980~. Among all technol-
ogies, existing assessment activities are con-
centrated on the new and not on the widely
accepted and possibly outmoded. Assess-
ments of cost-effectiveness and cost-benefit
OCR for page 34
34
are few; assessments for ethical, legal, and
other social implications are rare.
VARIETIES OF MEDICAL
TECHNOLOGY ASSESSMENT
Medical technology assessment can be
described according to many attributes. As
expanded in Table 2-1, these may include
the type of technology assessed and its ap-
plication, the stage of diffusion, the prop-
erties or concerns of assessment, the meth-
ods of assessment, and assessors. Various
combinations of these attributes can be
used to portray the activities of particular
technology assessment programs and the
great diversity among programs. Table 2-2
lists the types of technologies assessed by
some of the programs discussed in this
chapter. Some programs devote most of
their assessment resources to one type of
technology, such as ECRI for medical de-
vices; others may address a variety of tech-
nologies, as does the congressional Office
of Technology Assessment. Table 2-3 por-
trays 150 combinations of three attributes
of assessment: technologies, concerns, and
assessors. Of the 25 selected programs, 16
conduct some assessment of medical or sur-
gical procedures for efficacy or effective-
ness. However, as discussed in the remain-
der of this chapter, the distribution of
types of assessment activity shown in Table
2-3 is indicative neither of the relative
comprehensiveness of assessment nor of the
relative investment made in these assess-
ments. Figure 2-1 illustrates the relative
comprehensiveness of U.S. technology as-
sessment efforts for the various classes of
technology and concerns of assessment.
It is again emphasized that a broad net is
cast broader than most by use of the
term technology assessment, as is evident
from Tables 2-1 through 2-3 and Figure 2-
1. Primary data gathering as well as vari-
ous synthesis methods are included. Assess-
ment concerns range from the very
circumscribed, such as evaluation of safety
and efficacy in support of a new drug's la-
ASSESSING MEDICAL TECHNOLOGY
TABLE 2-1 Selected Attributes of Medical
Technology Assessment
Technologies
Drugs
Devices
Medical and surgical
procedures
Support systems
Organizational
systems
Application
Screening
Prevention
Diagnosis
Treatment
Rehabilitation
Stage of diffusion
Experimental
Investigative
New to practice
In accepted use
Outmoded
Properties/ concerns
Technical perfor-
mance
Safety
Efficacy/ effectiveness
Cost/ cost- benefit/
cost-effectiveness
Ethical implications
Legal implications
Social implications
Assessment methods
Laboratory testing
Randomized clinical trials
Epidemiologic methods
~ .
belles
Case studies
Registries and data bases
Sample surveys
Surveillance
Quantitative syntheses
Cost-effectiveness/
cost-benefit analyses
Mathematical modeling
Group judgment methods
Literature syntheses
Assessors/sponsors
Biomedical and health
services researchers
Hospitals, HMOs, and other
health care institutions
Providers/provider
organizations
Third-party payers
Drug and medical device
manufacturers
Legislators
Regulators
Policy research groups
Voluntary agencies
Employers
Grin ~' ~ m Are
beling claims, to the most comprehensive,
such as a multidisciplinary effort which
"systematically examines the effects on so-
ciety that may occur when a technology is
introduced, extended, or modified with
special emphasis on those consequences
that are unintended, indirect, or delayed"
(Coates, 1974; see also Arnstein, 1977;
U. S. Congress, 1966~. In addition to drugs,
medical devices, and medical and surgical
procedures, we include study of support
systems and organizational, delivery, and
administrative systems generally known as
health services research. Thus, in the dis-
cussion of various organizations engaged in
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THE SCOPE OF U.S. MEDICAL TECHNOLOGY ASSESSMENT
TABLE 2-2 Principal Technologies Assessed by 25 Programs
35
Technologies
Evaluation Programs
American College of Cardiology/American Heart
Association Assessment of Cardiovascular Procedures
American College of Physicians Clinical
Efficacy Assessment Project
American Hospital Association Hospital
Technology Series
American Medical Association Diagnostic and
Therapeutic Technology Assessment
Battelle Health and Population Study Center X X X
_ _ _
Blue Cross and Blue Shield Medical Necessity Program X
Blue Cross and Blue Shield Technology
Evaluation and Coverage Program
ECRI X X
Food and Drug Administration Center for
Devices and Radiological Health
Food and Drug Administration Center for
Drugs and Biologics
Hastings Center Institute of Society, Ethics
and the Life Sciences
Medical
Devices/ Medical/ Organi-
Equipment/ Surgical Support national
Drugs Supplies Procedures Systems Systems
X
X
X
X
X
X
X
X X
X
X
X
Medtronic, Inc. X
National Cancer Institute (NIH)
National Center for Health Services Research
(excluding OHTA)
X X
X
X X
X
X X
National Heart, Lung, and Blood Institute (NIH) X X X X
National Library of Medicine (NIH)
Office of Health Technology Assessment
(National Center for Health Services Research)
X
X X
Office of Medical Applications of Research (NIH) X X X X
Office of Technology Assessment (Congress)
Permanente Medical Group, Inc., Division of
Health Services Research
Prospective Payment Assessment Commission X X X X X
Prudential Insurance Co. of America
Smith Kline & French Cost Benefit Studies Program X
University of California, San Diego, Institute
for Health Policy Studies
X X
X X X
X X X X
X
X X X
Veterans Administration Cooperative Studies Program X X X
X X
technology assessment, agencies such as the cited that are primarily involved in health
National Center for Health Services Be- services research. This broader view recog-
search and Health Care Technology As- nizes the interdependence of health care
sessment (NCHSRHCTA, formerly known technologies and that making policies to
as NCHSR) and university-based health address one type of technology may have
services and policy research groups are important implications for others.
OCR for page 36
36
ASSESSING MEDICAL TECHNOLOGY
TABLE 2-3 Principal Technology Assessment Concerns of Selected Organizations
Concerns
Technology
Drugs
Medical Devices/Equipment/Supplies
Medical/Surgical Procedures
Support Systems
Organizational/Administrative |n,s,t,u,x |n,s,t,u,x
NOTE: Letters in the body of the table correspond to the organizations listed below.
Safety
d,j,m,o,r,s,u,y
d,e,g,h,i,l,m,o,
q,r,s,u,y
a7b,d,e,g,m,o,
q,r,s,u,y
-
h,m,o,r,s,u
Efficacy/
Effectiveness
d,e,j,m,o,r,s,u,
x,y
.
c,d,e,g,h,i,l,m,o,
q,r,s,t,u,x,y
a,b,d,e,f,g,m,o,
q,r,s,t,u,v,x,y
c,h,m,n,o,p,r,s,t,
u,x,
n,s,t,u,x
Cost/Cost-Effect/
Cost-Benefit
e,s,u,w,x,y
c,e,h,l,s,t,u,x,y
e,s,t,u,v,x,y
c,h,n,p7s7t,u,x
c.
d.
e.
f.
Technology
Drugs
Medical Devices/Equipment/Supplies
Medical/Surgical Procedures
Support Systems
O rganizational / Adm inistrative
Most coverage
Ethical/Legal/
Social
=,s,u,x
~,h,o,s,u,x
=,k,o,s,u,x
h,k,s7u7x
k7s,u,x
a. American College of Cardiology/American
Heart Association Assessment of Cardiovascular
Procedures
b. American College of Physicians Clinical
Efficacy Assessment Project
American Hospital Association Hospital
Technology Series
American Medical Association Diagnostic and
Therapeutic Technology Assessment Service
Battelle Health and Population Study Center
Blue Cross and Blue Shield Medical Necessity
Program
g. Blue Cross and Blue Shield Technology
Evaluation and Coverage Program
h. ECRI
i. Food and Drug Administration Center for
Devices and Radiological Health
j. Food and Drug Administration Center for
Drugs and Biologics
k. Hastings Center Institute of Society, Ethics and
the Life Sciences
1. Medtronic, Inc.
|Concerns
~Safety
m. National Cancer Institute (NIH)
n. National Center for Health Services Research
iother than OHTA)
o. National Heart, Lung, and Blood Institute
(NIH)
p. National Library of Medicine (NIH)
q. Office of Health Technology Assessment
(NCHSRHCTA)
r. Office of Medical Applications of Research
(NIH)
s. Office of Technology Assessment (Congress)
t. Permanente Medical Group, Inc., Division of
Health Services Research
u. Prospective Payment Assessment Commission
v. Prudential Insurance Co. of America
w. Smith Kline & French Cost Benefit Studies
Program
x. University of California, San Diego, Institute
for Health Policy Studies
y. Veterans Administration Cooperative Studies
Program
Efficacy/
Effectiveness
Cost/Cost-Effect/
Cost-Benefit
Ethical/Legal/
Social
FIGURE 2-1 Comprehensiveness of U. S. technology assessment.
Little or no
Inconststent llill
_ coverage
OCR for page 37
THE SCOPE OF U.S. MEDICAL TECHNOLOGY ASSESSMENT
NATIONAL EXPENDITURES FOR
HEALTH RESEARCH AND
DEVELOPMENT, CLINICAL TRIALS,
AND TECHNOLOGY ASSESSMENT
The total dollar level of effort in technol-
ogy assessment including clinical trials,
health services research, and synthesis ac-
tivities such as consensus development con-
ferences, state-of-the-art workshops, and
formulation of coverage decisions—is
small compared with the national effort in
research and development of technologies,
and can be lost in the rounding error for
national health expenditures, as is evident
in the relative magnitudes of the following
estimates for 1984.
National health care $384.3 billion
(HCFA, 1984a)
11.8 billion
(NIH, 1984a)
Health R&D
All health technology
assessment
Clinical trials
Health services research
Other technology
assessment
1.3 billion
1.1 billion
under 0.2 billion
under 0.05 billion
A brief look at national health research
and development (R&D) expenditures will
provide a context for later appreciation of
expenditures for medical technology assess-
ment. It is noted that health care products
and services are of varying technological
intensity requiring different levels of in-
vestment in R&D. Services include "hotel"
and food services as well as microsurgery
and neonatal intensive care; products in-
clude tongue depressors and bandages as
well as magnetic resonance imagers and
genetically engineered agents for cancer
immunotherapy.
Spending for health R&D in the years
since 1972 has not kept pace either with
the nation's entire R&D spending or with
total national health spending. In 1983,
when spending for all R&D was almost $88
billion (National Science Foundation
37
[NSF], 1984), health R&D came to $10.4
billion, or 11.8 percent, down from 12.4
percent in 1972 (NIH, 1984a).
As a proportion of the $3S5.4- billion in
total 1983 national health expenditures
(Gibson et al., 1984), health R&D
amounted to 2.9 percent, down from 3.9
percent in 1972. That is a little higher than
the average for all United States industry-
estimated at 2.7 percent of the 1984 GNP,
up from 2.3 percent in the 1970s (NSF,
1984) but low compared with other tech-
nologically dependent industries. Those
have R&D (including federal contribu-
tions) as a percentage of sales ranging from
4.2 percent for the chemical industry to
12.2 for computers and office machines to
18.3 percent for aircraft and missiles (NSF,
1984~. Even the defense establishment pegs
R&D at 11 percent of estimated fiscal year
(FY) 1984 outlays ($231 billion), which in-
clude pay and pensions, housing, mainte-
nance, and other items of little technologi-
cal content (U.S. Office of Management
and Budget, 1984~. The pharmaceutical
industry, separately from the rest of
health, spends nearly 12 percent of sales on
R&D.
When we come to expenditures for med-
ical technology assessment, the estimates
indeed become rough. At the outside they
amounted to $1.3 billion in 1984. By far
the biggest item is $1.1 billion for clinical
trials. Health services research expendi-
tures hardly amount to $200 million.
Spending for all the rest of medical tech-
nology assessment will not reach $50 mil-
lion for 1985. Some of the details in these
categories are explained below.
The $1.1 billion figure for clinical trial
expenditures represents 0.3 percent of 1984
national health expenditures. The drug in-
dustry is the largest spender for clinical
trials perhaps $750 million in 1984-
constituting over one-fifth of that indus-
try's R&D expenditures (using Pharmaceu-
tical Manufacturers Association estimates
of allocation of pharmaceutical R&D ex-
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38
penditures; see section below on the drug
industry). The next largest contributor is
NIH with $23S million in FY 1984 obliga-
tions (NIH, 1985), or 5 percent of its
budget. The third largest contributor may
be the medical device industry, with ap-
proximately $35 million in 1984 (4 percent
of that industry's R&D expenditures).
Other contributors are the VA (approxi-
mately $20 million); the Alcohol, Drug
Abuse, and Mental Health Administration
(ADAMHA) ($12 million; OMAR, 1983~;
and the Department of Defense (DOD)
(under $10 million; H. Dangerfield, U.S.
Army Medical Research and Development
Command, personal communication,
1984~. Clearly, the roles of the drug indus-
try and NIH are dominant; a 5 percent er-
ror in the drug industry estimate would
likely exceed the contributions of any of the
others except NIH.
Research and evaluation of organiza-
tional and support systems technologies
(e.g., health services delivery modes, pay-
ment systems, data bases, and manpower)
are generally grouped under health ser-
vices research. Total annual expenditures
for health services research are probably
under $200 million, including some ex-
penditures for demonstration projects. The
bulk of health services research support
comes from the Health Care Financing Ad-
ministration (HCFA), the National Insti-
tutes of Health (NIH), the National Center
for Health Services Research and Health
Care Technology Assessment (NCH-
SRHCTA), and private foundations. ~
Other sources include ADAMHA, the Of-
fice of the Secretary, DHHS, the Health
Resources and Services Administration
(HRSA), the VA, Agency for International
Development, and major private providers
such as hospital corporations and health
maintenance organizations (HMOs).
Total estimated expenditures in 1984 for
medical technology assessment activities
other than clinical trials and health ser-
vices research are well under $S0 mil-
ASSESSING MEDICAL TECHNOLOGY
lion. This includes assessment expendi-
tures* for HCFA ($3 million, FY 1984) and
NCHSRHCTA (under $4 million, includ-
ing the $0.7 million Office of Health Tech-
nology Assessment budget, FY 1985) and
medical technology assessment activities of
the Food and Drug Administration (FDA)
($5 million) and the Centers for Disease
Control (CDC) ($4 million, FY 1982~. Also
included are the entire budgets of such
prominent technology assessment activities
as the NIH Office of Medical Applications
of Research, coordinator of the NIH Con-
sensus Development Program ($1.8 mil-
lion, FY 1985), the Prospective Payment
Assessment Commission ($3.1 million, FY
1985~; the congressional Office of Technol-
ogy Assessment (OTA) Health Program
($1.6 million, li'Y 1985~; the larger medical
and industry association programs for
technology assessment such as the Ameri-
can College of Physicians Clinical Efficacy
Assessment Project ($0.16 million, 1985),
the American Medical Association Diag-
nostic and Therapeutic Technology Assess-
ment program ($0.38 million, 1985), and
the American Hospital Association Hospi-
tal Technology Series program ($0.25 mil-
lion, 1985), nonprofit research groups such
as the independent medical device evalua-
tor ECRI ($5 million, 1985) and the Elast-
ings Center Institute of Society, Ethics,
and the Life Sciences ($0.25 million,
1985~; and the investment in coverage and
reimbursement assessment activities by
major third-party payers such as the Blue
Cross and Blue Shield Association ($0.35
million, 1984) in support of its plans.
The following four sections of this chap-
ter describe technology assessment activi-
ties in the federal government, the drug in-
dustry, the medical device industry, and
,
* Estimates of recent program expenditures and
applicable year are shown in parentheses. Rough esti-
mates are used where budget line items are unavail-
able. Sources for these estimates are cited later in the
text, with the discussions of assessment programs.
OCR for page 39
THE SCOPE OF U.S. MEDICAL TECHNOLOGY ASSESSMENT
other types of organizations in the private
sector. Where available, estimates of pro-
gram expenditures for R&D and for clini-
cal trials and other assessment activities are
provided. Estimates are subject to varia-
tions in terminology and budgeting prac-
tices and are necessarily rough in certain
cases. Expenditures for technology assess-
ment activities usually are included in
R&D budgets but may not be identifiable
as separate line items. Among organiza-
tions that do not generally conduct R&D,
such as insurers and medical associations,
technology assessment expenditures may
be included in administrative budgets but
not identified as such. For certain organi-
zations, it is difficult to make estimates of
the cost (or value) of personnel time de-
voted to technology assessment. Examples
are the value of unpaid participants in
medical association assessment programs
and the cost of personnel time devoted by
NIH and FDA personnel in response to in-
quiries made by the NCHSRHCTA Office
of Health Technology Assessment (OHTA)
in assessments conducted for HCFA. Avail-
able figures for clinical trial expenditures
may include all costs of patient care (hosp;-
talization, physician services, etc.), or, as
is the case for the VA, they may be con-
fined to the additional costs of conducting
a trial over routine patient care costs. By
reimbursing for hospital and physician ser-
vices, private and public third-party payers
provide an indeterminate amount of indi-
rect support for some clinical trials, series,
case studies, and other observations.
FEDERAL GOVERNMENT
The federal government conducts and
supports medical technology assessment to
serve its roles in medical research; health
services research; health care delivery,
payment, regulation, and legislation; and
defense. Federal government expenditures
for medical technology assessment were
approximately $450 million in 1984. This
39
included $280 million for clinical trials
(primarily NIH support), roughly $100
million to $150 million for health services
research, and $30 million for other assess-
ment activities including consensus devel-
opment conferences and other synthe-
ses and special studies by NIH, HCFA,
NCHSRHCTA, FDA, CDC, OTA, and
other agencies as described below. Federal
expenditures for medical technology assess-
ment including health services research
expenditures constitute about 7 percent
of federal health R&D expenditures and
0.4 percent of federal health care expendi-
tures.
Federal government emphasis on the
various types of medical technologies and
the properties for which they are assessed
(safety, efficacy, etc.) are uneven. Consis-
tent with FDA requirements, the assess-
ment of new drugs and certain medical de-
vices (new class III devices; see discussion
below) for safety and efficacy prior to mar-
keting for use as specified in their labeling
is comprehensive. However, as described
later in this chapter, FDA assessments do
not adequately address the broader scope
of evaluations beyond safety and efficacy
and deal only minimally with these tech-
nologies once they are marketed. The bulk
of the nation's efforts in evaluating medical
and surgical procedures is supplied by the
federal government in the form of certain
clinical trials and synthesis activities sup-
ported by NIH, the VA, ADAMHA,
HCFA, and NCHSRHCTA. These are not
overseen or otherwise coordinated by any
one agency. The Health Care Financing
Administration, the nation's single largest
payer for medical and surgical procedures,
relies heavily for its coverage decisions on
the NCHSRHCTA Office of Health Tech-
nolon~ Assessment (OHTA) a $0. 7 mil-
lion per year program and less formal
linkages with other federal agencies and
private sector sources.
Recognizing the need for improved coor-
dination, several federal agencies have
OCR for page 40
40
formed technology assessment coordinat-
ing bodies. For instance, the DHHS Tech-
nology Coordinating Committee serves as
a forum for information exchange and co-
ordination of assessment activities.
Chaired by the Director of OHTA, the
committee includes representatives of
DHHS agencies such as NIH, FDA, CDC,
ADAMHA, NCHSRHCTA, National Cen-
ter for Health Statistics (NCHS), Health
Resources and Services Administration
(HRSA), and HCFA; OTA, ProPAC,
DOD, and others of the legislative and ex-
ecutive branches; and nongovernmental
organizations such as Blue Cross and Blue
Shield and medical and industry associa-
tions.
The following are brief descriptions of
selected major technology assessment activi-
ties in the federal government, including
those of NIH, FDA, OTA, ProPAC, HCFA,
NCHSRHCTA, OHTA, NCHS, VA,
CDC, and DOD. Other federal agencies
that conduct and support evaluations of
health care technology include other agen-
cies in the Office of the Assistant Secretary
for Health (OASH), ADAMHA, HRSA,
and the Office of the Secretary, DHHS.
National Institutes of Health
The National Institutes of Health is the
principal biomedical research agency of
the- federal government. Consistent with
its mission of improving the health of the
people of the United States by increasing
our understanding of processes underlying
human health and acquisition of new
knowledge (NIH, 1982), R&D activities
take 94 percent of the entire NIH budget
and are weighted to basic research, which
accounts for nearly 60 percent of the R&D
budget. Another 32 percent goes to applied
research and 9 percent goes to develop-
ment (NSF, 1984~. As the nation's main en-
gine for basic and applied biomedical re-
search, NIH does not particularly set its
priorities to address current issues of medi-
cal practice.
ASSESSING MEDICAL TECHNOLOGY
Resources devoted by NIH to clinical
trials and other technology assessment
comprise a small portion of its total
budget. Even so, NIH is the nation's largest
supporter of clinical trials outside the com-
bined efforts of the drug industry. NIH
currently obligates about 5 percent of its
total budget to clinical trials $235.4 mil-
lion in FY 1984 and $275.7 million in FY
1985 (NIH, 1985~. The institutes' invest-
ment in clinical trials varies; the National
Cancer Institute (NCI) alone accounts for
59 percent of 1985 NIH clinical trial obli-
gations. NCI clinical trial expenditures ac-
count for about 13 percent of that insti-
tute's budget; clinical trial expenditures
average 3 percent of other institutes' bud-
gets. NIH is considering the reinstatement
in 1985 of a detailed inventory of clinical
trials, using standardized information cat-
egories across the institutes, bureaus, and
divisions of NIH.
At NIH, technology assessment refers to
assessing the results of clinical trials and
creating state-of-the-art reports on medical
technologies.
[T]echnology assessment . . . consists of syn-
thesizing complex scientific information in such
a way that the reports are useful for decision-
making by practitioners or policy makers (NIH,
1983~.
NIH "synthesis" activity includes work-
shops, symposia, and conferences, notably
the NIH Consensus Development confer-
ences coordinated by the Office of Medical
Applications of Research and responding
to Public Health Service (PHS) requests for
expert opinions regarding the safety and
efficacy/effectiveness of drugs, devices,
and procedures. Including the OMAR
budget, NIH expenditures for such synthe-
sis activities probably are less than $10 mil-
lion annually, about 0.2 percent of the
$4.5 billion 1984 NIH budget. Precise fig-
ures for NIH technology assessment ex-
penditures are unavailable, largely be-
cause of differences among NIH bureaus,
institutes, and divisions in drawing up
OCR for page 41
THE SCOPE OF U.S. MEDICAL TECHNOLOGY ASSESSMENT
budget categories and defining terms. 2
NIH reports that it devotes $40 million to
health services research, however, this
may be a high estimated
Office of Medical Applications of Re-
search The Office of Medical Applica-
tions of Research is the NIH focal point for
coordinating, improving, and promoting
NIH technology assessment and transfer
activities. The FY 1985 OMAR budget was
approximately $1.8 million (I. Jacoby,
OMAR, personal communication, 1985~.
OMAR jointly sponsors and administers
with the NIH bureaus, institutes, and divi-
sions (BIDs) the NIH Consensus Develop-
ment conferences, over 50 of which will
have been held by the end of 1985. The
cost of conducting a Consensus Develop-
ment conference in 1985 was $145,000, in-
cluding contractor costs, NIH staff time,
and information dissemination (I. Jacoby,
OMAR, personal communication, 1985~.
OMAR also acts as a clearinghouse for NIH
patent-related activities, coordinates NIH
medical and scientific review of HCFA
Medicare coverage issues referred to NIH
by the Office of Health Technology Assess-
ment, and supports studies to evaluate and
improve assessment efforts. The OMAR di-
rector serves as chairman of the NIH Coor-
dinating Committee on Assessment and
Transfer of Technology. The committee
includes representatives from the NIH
BIDs and liaison representatives from
ADAMHA, FDA, CDC, OHTA,
NCHSRHCTA, and the Occupational
Safety and Health Administration
(OSHA).
Food and Drug Administration
The Food and Drug Administration is
primarily a scientific regulatory agency for
the development of regulations and prod-
uct standards; development of methodolo-
gies and protocols for evaluation of prod-
uct safety and efficacy; and approval of
drugs, medical devices, and other products
prior to marketing. Although the FDA re-
41
views evidence accumulated in assessments
directed by product sponsors, the agency
does not conduct clinical trials of medical
products. FDA assessment requirements
address safety and efficacy but not cost,
cost-effectiveness, or broader social issues.
Sponsors must show that their products are
safe and efficacious as claimed in their la-
beling, but they are not required to show
safety and efficacy relative to similar prod-
ucts. Thus, FDA-required assessments do
not generally produce comparative safety,
efficacy, or cost-effectiveness information
that may be useful to providers for choos-
ing among alternative products, e.g., dif-
ferent drug treatments, or alternative tech-
nologies, e. g., treatment with drugs versus
surgical treatment.
In 1984 the FDA spent about $2 million
to conduct and support postmarketing sur-
veillance of drugs and roughly $1 million
to support its network for reporting prob-
lems with medical devices. The FDA par-
ticipates in OHTA assessments of medical
devices and drugs conducted for HCFA.
The agency does conduct applied R&D,
e.g., the development of methods and de-
vices for measuring the quality of diagnos-
tic devices and emissions of radiological
products and the storage and transmittal of
radiographic information. In FRY 1984 the
FDA spent an estimated $79.3 million on
applied R&D and $3.9 million on technol-
ogy transfer (OMAR, 1984~. The agency's
regulatory role in drug and device assess-
ment is described in the sections of this
chapter on the drug and device industries.
Office of Technology Assessment
The Office of Technology Assessment is
an analytical support agency of Congress.
The Health Program of the Health and
Life Sciences Division of OTA has con-
ducted many health care technology assess-
ments and has issued other reports directly
related to health care technology assess-
ment issues. OTA staff integrates informa-
tion from the literature with the help of ex-
OCR for page 42
42
pert advisers from industry, academia,
public interest groups, and other govern-
ment agencies. OTA focuses its evaluation
efforts either on generic technological is-
sues or on case studies from which further
research questions or generalizable lessons
can be gained. Subjects of case studies have
included drugs, devices, procedures, and
organizational and support technologies.
In order to identify the policy implications
of technologies, OTA assessments consider
economic implications, cost, and cost-
effectiveness of technologies, as well as evi-
dence of safety, effectiveness, and efficacy.
OTA is one of a few assessment organiza-
tions that addresses social, legal, and ethi-
cal aspects of technologies when they are
relevant issues. By 1985 the OTA Health
Program had generated 24 main reports on
technology assessment issues, 34 case stud-
ies, and other related technical memo-
randa and background papers. The 1985
OTA Health Program budget is approxi-
mately $1.6 million (C. J. Behney, Office
of Technology Assessment, personal com-
munication, 1985~. Other agencies of the
legislative branch such as the General Ac-
counting Office (GAO), the Congressional
Budget Office, and the Congressional Re-
search Service have issued reports regard-
ing technology assessment issues. Under its
auditing authority, the GAO has made rec-
ommendations to Congress for greater
economy, efficiency, and effectiveness of
federal health programs (see, e.g., U.S.
Congress GAO, 1982, 1983, 1985~.
Prospective Payment Assessment
Commission
The Prospective Payment Assessment
Commission was established by Congress
under the Social Security Act Amendments
of 1983 (P.L. 98-21), when the new Medi-
care prospective payment system was en-
acted. ProPAC was established as an inde-
pendent commission to advise and assist
Congress and the DHHS secretary in main-
taining and updating the Medicare pro-
ASSESSING MEDICAL TECHNOLOGY
spective payment system administered by
HCFA. ProPAC will address itself initially
to two primary responsibilities: (1) recom-
mending annually to the DHHS secretary
the appropriate percentage change in the
payments made under Medicare for inpa-
tient hospital care and (2) consulting with
and recommending to the secretary and re-
porting to Congress necessary changes in
the Diagnosis-Related Groups (DRGs)
used in the prospective payment system
and their relative weights. The first report
of ProPAC on these subjects was submitted
April 1, 1985. ProPAC has the authority to
assess safety, efficacy, and cost-effective-
ness of new and accepted medical and sur-
gical procedures. In collecting and assess-
ing information, ProPAC must use existing
information when possible. If existing in-
formation is inadequate, the commission
may support original research and experi-
mentation, including clinical research.
However, in order to carry out such activi-
ties, ProPAC will require substantially
more money than was budgeted in each of
its first 2 years: approximately $1.5 million
for FY 1984 and $2.4 million in FY 1985.
(ProPAC operated on $3.1 million in FY
1985, using funds carried over from FY
1984.) Support of ProPAC, both financial
and in the form of close cooperation with
other public and private health organiza-
tions, is especially important to the viabil-
ity of prospective payment. The use of
DRGs has yet to be adequately evaluated
for its validity as an indicator of patient re-
source needs or for its impact on medical
technology under prospective per-case
payment. Furthermore, the periodic DRG
adjustment process requires sufficient sup-
porting mechanisms for identifying and as-
sessing new hospital cost-raising technolo-
gies and will rely on accurate and timely
data collection (OTA, 1983a).
Health Care Financing Administration
The Health Care Financing Administra-
tion is responsible for the Medicare pro-
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THE SCOPE OF U.S. MEDICAL TECHNOLOGY ASSESSMENT
Employers
Employer contributions for employee
health insurance benefits were an esti-
mated $70.7 billion in 1983 (Federation of
American Hospitals Review, 1984~. The
portion of production and service costs at-
tributable to health benefits has increased
with the expansion of employee and retiree
health care benefits. Across all U.S. indus-
tries, employer-paid benefits for hospital,
surgical, medical, and dental care aver-
aged nearly $1,400 per employee in 1983,
accounting for approximately 7 percent of
the total payroll (U.S. Chamber of Com-
merce, 1985~. Although a few companies
are taking harder looks at proposed addi-
tions of technological innovations to health
benefits plan coverage, many employers
are taking other measures to decrease their
health care costs. These include sponsoring
HMOs, increasing employee health plan
copayments and deductibles, requiring
second opinions for certain types of sur-
gery, providing incentives for outpatient
instead of inpatient care, providing reim-
bursement for the cost of generic drugs
only, and instituting wellness and fitness
programs.
CONCLUSIONS
The estimate that public and private
spending on technology assessment totals
over $1 billion yearly makes it seem like a
big and costly enterprise. Yet this is a gen-
erous estimate for a broadly defined cate-
gory embracing controlled and uncon-
trolled clinical trials, epidemiologic and
other observational studies, health services
research, and a wide variety of synthesis
activities. Even so, it is a nearly vanishing
0.3 percent of the money that is spent for
health care.
Whether that proportion of investment
in medical technology assessment is in
rough agreement with the spending by
other sectors of industry for technology as-
59
sessment is difficult to tell, because esti-
mates of expenditures for that purpose are
nearly impossible to assemble with confi-
dence. However, figures are available for
R&D investments by many enterprises.
Health R&D takes 3 percent of total health
spending, which is low compared with
other technology-intensive or -dependent
industries, such as the chemical industry,
information industries, and the defense es-
tablishment. Another indication that
health R&D is lagging comes from figures
that show a decline in the proportion of
spending for R&D since 1972.
A particular shortcoming is seen in clini-
cal trials for medical and surgical proce-
dures. OTA (1983b) estimates that ran-
domized clinical trials have been applied
to 10 or 20 percent of medical practices.
The NCHSRHCTA Office of Health Tech-
nology Assessment has had to base its rec-
ommendations to HCFA regarding cover-
age issues on evidence sorely lacking in
rigorous experimental findings. Of the 26
assessments conducted by OHTA for
HCFA in 1982, results from randomized
clinical trials were available for only two
(OTA, 1983b; see NCHSR, 1984a). NIH
support for clinical trials (an estimated
$276 million in FY 1985 obligations) is pro-
vided for only a portion of the clinical trials
that have been identified as worthy of sup-
port. Due to uncertainties in future fund-
ing and competing priorities, the National
Heart, Lung, and Blood Institute (NHLBI)
has had difficulty in initiating any new
large-scale clinical trials since 1978; its
support of clinical trials overall has
dropped from the $40 million to $60 mil-
lion range of the mid- to late 1970s to an
estimated $25 million in FY 1985 (current
dollars not adjusted for inflation; NIH,
1985~.
Less than $50 million is spent on tech-
nology assessment devoted to synthesis and
interpretation of primary evaluation data
for determining how best to apply in prac-
tice new and currently available technolo-
OCR for page 60
60
gies. Examples are consensus development
conferences, coverage decisions by third-
party payers, medical and industry associ-
ation assessment programs, congressional
studies, and policy institute studies.
Despite its oft-cited shortcomings-
including the absence of comparative stud-
ies of medical products the premarket
approval processes for drugs and medical
devices regulated by the FDA is the only
coherent, coordinated systems for medical
technology assessment. Premarketing noti-
fication requirements for these products
are sufficient for identifying and classify-
ing new technologies for assessment ac-
cording to levels of risk posed to the public.
Current provisions for drug and device as-
sessments are less concerned with post-
marketing assessment and with matters be-
yond safety and efficacy. Whereas pre-
marketing reporting of drug safety and ef-
ficacy is mandatory, most of the available
data on postmarketing adverse reactions to
drugs is derived from voluntary reporting.
Funding for drug assessment accounts for
the bulk of all medical technology assess-
ment funding. In 1984, roughly $700 mil-
lion to $750 million of $3.3 billion in hu-
man use drug industry R&D expenditures
was devoted to clinical evaluation of
drugs, including an estimated $100 million
for postmarketing study. Although the
amount devoted to premarketing drug as-
sessment may be adequate, greater atten-
tion needs to be devoted to postmarketing
study of drugs.
Because of their more standard treat-
ment under FDA assessment requirements
and the time since passage of the 1962
amendments to the Food, Drug, and Cos-
metic Act, assessment procedures for drugs
are more widely understood and consis-
tently carried out by industry and govern-
ment than are those for medical devices.
Certain important aspects of medical de-
vice assessment are still being clarified pur-
suant to the 1976 Medical Device Amend-
ments, which address many thousands of
ASSESSING MEDICAL TECHNOLOGY
diverse products. Most medical devices do
not require rigorous clinical evaluation;
roughly $35 million was spent in 1984 on
clinical evaluation of medical devices,
much of which was devoted to the rela-
tively few class III devices subject to FDA
premarketing approval requirements. Re-
sources for postmarketing study of medical
devices are limited, as are those for getting
information about comparative technical
performance, cost, and other information
useful in the procurement and mainte-
nance of devices. The demand for such in-
formation will continue to increase.
Much less formal than premarketing
drug and device assessment is the loose net-
work of relationships among public and
private third-party payers, medical associ-
ations, private physicians, and the bio-
medical research community that charac-
terize the assessment of medical and surgi-
cal procedures. Although the FDA is the
gatekeeper to the marketing of new drugs
and medical devices and has the authority
to recall products presenting "imminent
hazard to the public health," the agency
holds little sway in the application of drugs
and devices in medical practice. It is left to
the loose network to determine whether
medical and surgical procedures meet the
subjective criterion of "standard and ac-
cepted practice."
Other nodes and strands of the network
arise ad hoc; e. g., an NIH consensus devel-
opment conference on liver transplanta-
tion; publication of results of an NHLBI
study on coronary artery bypass surgery; a
special HCFA study on end-sta~e renal dis-
ease; the issuance of voluntary mam-
mography guidelines by the American Col-
lege of Radiology; or OHTA's pulling to-
gether of literature, opinions, and other re-
sources from medical associations, NIH,
and the FDA to synthesize recommenda-
tions for a HCFA coverage decision. As-
sessments of new, accepted, or possibly
outmoded medical and surgical procedures
are not undertaken systematically. Rather,
~7
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THE SCOPE OF U.S. MEDICAL TECHNOLOGY ASSESSMENT
they are often prompted by new or unusual
insurance claims, by inquiries made to
medical associations, and occasionally by
political pressure. The rigor of assessment
methods varies widely, from a landmark
NHLBI randomized controlled clinical
trial to a medical association staff litera-
ture search informally reviewed and ap-
proved by a small committee of physicians.
Where assessments require group judg-
ments, methods may be used which are
methodologically unsound, and decision
rationale and literature sources may go un-
documented. The NIH Consensus Devel-
opment Program is one of few ongoing
group judgment efforts that has been sub-
ject to serious evaluation.
RECOMMENDATIONS
Five interrelated recommendations are
offered covering assessment concerns, co-
ordination of assessment information, re-
sponsibility for conduct of assessments,
evaluation of assessment programs, and in-
creased financial support for medical tech-
nology assessment.
Assessment Concerns
We recommend increased commitment
to technology assessment, especially for the
following:
.
· generation of primary data on the
safety and efficacy of nest:, accepted, and
possibly outmoded medical and surgical
procedures, with emphasis on information
useful in making medical practice deci-
sions and coverage decisions, especially
comparative data on the safety and effi-
cacy of alternative technologies;
· determination of cost-effectiveness
and public policy implications of adopting
selected drugs, medical devices, and medi-
cal and surgical procedures; and
· postmarketing surveillance of drugs
and medical devices.
61
Coordination of Assessment
Information
We recommend the implementation of a
coordinative capacity for monitoring, syn-
thesizing, and disseminating technology
assessment information. To some extent, a
number of organizations already serve cer-
tain constituencies in this way. Examples
are ECRI for medical device users; the
Health Industry Manufacturers Associa-
tion, the Pharmaceutical Manufacturers
Association, and the American Hospital
Association for their respective and some-
what overlapping constituencies; and the
NIH Office of Medical Applications of Re-
search for the PHS and NIH in particular.
Clearly, much new assessment information
is of interest to wide constituencies; for ex-
ample, within 1 year the American Medi-
cal Association (AMA; 1983), ECRI
(1982), and OHTA (NCHSR, 1984b) each
assessed automatic implantable infusion
pumps. The effects of instituting prospec-
tive payment and developments in such
technologies as magnetic resonance imag-
ing, monoclonal antibodies, and com-
puter-aided decision support systems
sweep across much of the health care com-
munity. A coordinative capacity placed in
one or more clearinghouses would serve as
a central directory and source for current
assessment information. To be responsive
to both government and the private sector,
yet not directed by either, this capacity
should be vested in one or more jointly sup-
ported private-public organization. Once
it has firmly established this capacity, such
an organization may be a logical agent for
coordinating the development of an
agenda to address unmet assessment needs.
Responsibility for Conduct of
Assessments
The committee is in favor of vesting ex-
panded assessment activity in multiple or-
ganizations, to best serve the diverse needs
OCR for page 62
62
for assessment. Increased federal commit-
ment should be devoted especially to
greater NIH clinical trial support, consen-
sus development activities, PHS advisory
capacity to HCFA, fulfilling ProPAC re-
sponsibilities, and FDA-coordinated post-
marketing surveillance of drugs and medi-
cal devices. Designation of increased
private funds for assessment should be
made by private sources; funds should be
devoted to support clinical trials, medical
association assessment programs, and pri-
vate payers' own assessment activities.
Both federal and private support should be
made available to independent assessors
such as ECRI and various policy research
institutes. An independent, private-public
assessment entity such as was proposed by
the Institute of Medicine (1983) and Bun-
ker et al. (1982) could be supported by bal-
anced federal and private contributions. agency.
Evaluation of Assessment Programs
We recommend that assessment pro-
grams make formal provisions for their
own evaluation and improvement, with
special emphasis on the effectiveness of as-
sessments used (e.g., clinical trials, epide-
miological methods, consensus develop-
ment) and the dissemination of results.
Examples of programs that have under-
taken such evaluation are the NIH Consen-
sus Development Program and the Ameri-
can College of Physicians Clinical Efficacy
Assessment Project.
Financial Support for Medical
Technology Assessment
Amount of Support The committee
recommends a prompt increase in medical
technology assessment activities and the re-
sources devoted to them. We believe that
support for medical technology assessment
should rise over an appropriate period to
reach an annual level $300 million greater
(in 1984 dollars) than at present. This rep-
ASSESSING MEDICAL TECHNOLOGY
resents a modest increase, perhaps 25 per-
cent more than the estimate cited herein,
of current assessment expenditures. The
bulk of this new funding would be devoted
to generating primary data for assessing
medical and surgical procedures, with re-
maining funds allocated to assessments for
assisting payers in administering plans and
making coverage and reimbursement deci-
sions, postmarketing study of drugs and
medical devices, health services research,
medical information system assessments,
group judgment efforts, training, and
clearinghouse activity. A substantial effort
is needed to find the costs of various kinds
of research in efficacy and effectiveness.
These costs probably vary considerably
from one kind of technology to another.
Finding out about these costs would be an
appropriate task for a priority-setting
the ~ncreasecl support might be allo-
cated somewhat as follows. The amounts
cited are not meant to be prescriptive, but
are intended to illustrate approximate
magnitudes of investments that can be ef-
fectively allocated.
· $150 million to $250 million for clini-
cal trials. $200 million per year would pay
for 30 ongoing large-scale clinical trials re-
quiring an average of $5 million in annual
support, plus 200 smaller-scale trials re-
quiring an average of $0.25 million in an-
nual support.9
· $30 million to $50 million in increased
support for health services research. In the
face of accelerating changes in the organi-
zation, delivery, and financing of health
services, funding for health services re-
search is at a low ebb following years of
budget cuts. This report projects that 1984
national expenditures for health services
research will be less than $200 million. The
total NCHSR budget dropped from $65
million in 1972 to $17.5 million in 1985
(current dollars).
$10 million to $20 million in increased
.
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THE SCOPE OF U.S. MEDICAL TECHNOLOGY ASSESSMENT
support for assessment activities intended
to assist HCFA in administering the Medi-
care prospective payment system and mak-
ing coverage and reimbursement policy,
including support for assistance from the
Public Health Service (OHTA, NIH,
ADAMHA, FDA, etc. ); special HCFA
ORD assessments of drugs, devices, and
procedures; and increased support for Pro-
PAC.
· $10 million to $20 million in increased
support for assessment activities intended
to assist private payers in administering
plans and making coverage and reimburse-
ment policy, including, e.g., studies of al-
ternative benefits plans, determining ap-
propriate reimbursement levels for tech-
nologies, and support of medical associa-
tion group judgment efforts.
· $5 million to $15 million in increased
support for postmarketing study and sur-
veillance of drugs and medical devices, to
be coordinated by the FDA.
· $5 million to $10 million in increased
support for assessments of medical infor-
mation technologies. Included are technol-
ogies for medical information processing,
storage, retrieval, and transfer, which pro-
vide the foundation of technology assess-
ment efforts as well as other biomedical en-
deavors. Also included are such emerging
technologies as computer-assisted diagno-
sis and treatment and research on and eval-
uation of the dissemination and diffusion
of medical technology assessment findings.
· $2 million to $5 million in increased
support for group judgment and other syn-
thesis efforts and workshops, symposia,
and conferences conducted by federal
agencies and medical, professional, and in-
dustry associations. A portion of these
funds should be allocated to consensus de-
velopment conferences such as those co-
sponsored by OMAR at NIH. Currently,
O MAR cosponsors about seven NIH con-
sensus development conferences annually
at a cost of $145,000 each. Ten additional
such conferences would amount to less
63
than $1.5 million. Over the 3-year period
1981-1983 with a total budget of approxi-
mately $650,000, the Clinical Efficacy As-
sessment Project of the American College
of Physicians generated recommendations
regarding some 50 technologies. Programs
such as these can be most useful in focusing
interest on assessment issues, establishing
the extent of available information on
technologies, calling attention to further
needs, and broad dissemination of find-
~ngs.
· $2 million to $5 million per year in
medical technology assessment training
fellowships to provide for academic train-
ing and on-site participation in assessment
activities undertaken by a sponsoring orga-
nization. It is important that leaders in
health care appreciate and understand the
role of assessment in health care. Candi-
dates for these fellowships would include
persons with backgrounds in such fields as
medicine, epidemiology, biostatistics, al-
lied health, engineering (e.g., electronic,
materials, mechanical, and bioengineer-
ing), hospital administration, policy analy-
sis, economics, law, risk management, and
information management. Fellows would
be supported by both private and public
sources. Government sponsors might in-
clude NIH, FDA, NCHSRHCTA, HCFA,
OTA, VA, CDC, and NLM (the National
Library of Medicine); private sector spon-
sors might include drug and medical de-
vice manufacturers, insurers, and indepen-
dent assessment organizations such as
ECRI, Battelle, and Hastings Center.
These might be 2-year fellowships, for ex-
ample, in which the first year would be
spent at an academic institution and the
second on site. In a given year, 50 fellow-
ships at an average cost of $50,000 each
(including stipend, tuition, expenses, indi-
rect costs, varying according to source of
support, sponsor, and fellows' previous
training) would amount to $2.5 million.
These could be apportioned, for instance,
in 6-year training grants of $1.5 million
OCR for page 64
64
each, to 10 academic institutions, each
providing for 15 2-year fellowships.
· $2 million to $5 million for a medical
technology assessment clearinghouse.~°
Sources of Support Support for in-
creased technology assessment should
come from the health care dollar. A num-
ber of mechanisms have been proposed, in-
cluding percentage-of-payment (or pre-
mium) set-asides by payers, per capita
levies from provider organizations, grants
and contracts from payers and providers,
and charges for membership in and sub-
scription to research findings of assessment
institutes. (Third-party set-asides for tech-
nology assessment and biomedical research
based on percentages of expenditures have
been suggested by, e.g., Relman t1980,
1982] and Kahn t1984~.) Further work is
needed to formulate alternatives for tap-
ping the health care dollar, and prompt
political action will be required to imple-
ment one or more of them.
One alternative would be for all private
and public third-party payers to set aside a
fraction of a percent of their benefit pay-
ments, e.g., 0.2 percent tRelman (1980~.
In 1984, this would have amounted to
about $490 million $200 million from
federal payers, primarily HCFA; $70 mil-
lion from state and local payers; and $220
million from the private health insurance
industry and other private third-party pay-
ers. To generate $300 million under such a
plan would require a lesser investment
Across-the-boarcl participation by private
third-party payers, including self-insured
plans, would deflect the "free-rider" prob-
lem.~i A portion of these contributions
could take the form of selective coverage
for experimental technologies in exchange
for evaluation data. (Blue Shield of Cali-
fornia is using selective coverage for a few
technologies [Schaffarzick, California Blue
Shield, personal communication, 19853.
See, e.g., Bunker et al. [1982] for discus-
sion of selective coverage.)
ASSESSING MEDICAL TECHNOLOGY
A Worthy Investment Expenditures
for unproven or unnecessarily used medi-
cal technologies are certainly in the tens of
billions of dollars annually. Although in-
consequential as a percentage of health
care expenditures, a $300 million annual
investment would pay for itself many times
over if it resulted in justified nonreim-
bursement for even a handful of unneces-
sary technologies, aside from gains made in
quality of care. Savings from nonreim-
bursement of only several of the technolo-
gies recommended for nonreimbursement
by the National Center for Health Care
Technology (NCHCT) (which operated on
a $4 million budget in its final year) have
been estimated to be in the hundreds of
millions of dollars annually. The results
of the NHLBI coronary artery surgery
study, a large-scale clinical trial, are also
instructive. It is estimated that 159,000 pa-
tients in the United States had bypass sur-
gery in 1981 at a cost to the nation of $2.5
billion to $3 billion. Results of the NHLBI
coronary artery surgery study, a large-
scale randomized clinical trial, suggest
that 25,000 potential bypass patients per
year should not have the surgery (Kolata,
1983~. The study was conducted over a 14-
year period at a cost of $26.3 million (cur-
rent dollars), or approximately $37 million
in 1984 dollars. It will have paid for itself if
it results in decreasing unnecessary surgery
for only 2,000 patients.
NOTES
~ HCFA spent approximately $28 million of its $31
million 1984 Office of Research and Demonstrations
budget on health services research (HCFA, 1983,
1984b). The bulk of NCHSR's $15 million FY 1984 re-
search budget was for health services research; some
was for assessment activities involving other medical
technologies (J. E. Marshall, National Center for
Health Services Research, personal communication,
1984). The FY 1984 budget of the VA Health Services
Research and Development Service was $5 million
(VA, 1985~. Expenditures by foundations in 1980 for
health services research were estimated at $25 million
by Dooley et al. (1983~. A review of Foundation Cen-
OCR for page 65
THE SCOPE OF U.S. MEDICAL TECHNOLOGY ASSESSMENT
ter (1984) data indicates that a total of approximately
$20 million was contributed for health services re-
search in 1-year budget periods spanning 1982-1983
by the following major contributors (listed alphabeti-
cally): Commonwealth Fund, John A. Hartford
Foundation, Robert Wood Johnson Foundation,
Henry J. Kaiser Family Foundation, W.K. Kellogg
Foundation, John D. and Catherine T. MacArthur
Foundation, and the Pew Memorial Trust.
An NIH estimate for total 1983 federal obligations
for health services research is $169.9 million (NIH,
Analysis Branch, Department of Planning and Evalu-
ation, Office of Program Planning and Evaluation,
Biannual Report of Federal Obligations for Health
Research and Development, unpublished, 1984~.
However, this may be a high estimate, including cer-
tain expenditures made for biomedical research and
other activities outside health services research as the
term is used in this report. Included in that estimate is
$39.7 million for NIH health services research, nearly
half of which is devoted to NIH health promotion and
disease prevention activities which may be more ori-
ented to biomedical research than to health services
research. Also included is the entire $29.3 million
R&D budget of the National Institute for Handi-
capped Research (in the Department of Education),
which conducts a wide range of rehabilitation-related
activities, including services delivery, training, and
R&D of rehabilitative devices. The estimate by NIH
includes amounts for the following agencies: NIH
($39.7 million), ADAMHA ($17.3 million), HRSA
($12.5 million), Office of the Assistant Secretary for
Health ($16.6 million, primarily NCHSRHCTA),
HCFA ($30.2 million), Office of the Secretary
(DHHS) ($12.4 million), Department of Education
($29.3 million), and other agencies ($12 million).
~ OMAR (1983) indicates that NIH budgeted $560
million for technology assessment and technology
transfer in 1982. Taken alone, however, this may be
misleading. First, OMAR was unable to get consistent
itemizations of expenditures from the NIH bureaus,
institutes, and divisions (BIDs). Second, estimates for
technology assessment encompassed support for (1)
clinical trials, (2) specialized centers, (3) state-of-the-
art workshops and conferences, (4) various clearing-
houses, (5) development and dissemination of publi-
cations, and (6) evaluation of biomedical inventions
and monitoring of patent and licensing activities. Of
these six activities, the latter three are technology
transfer activities, amounting to approximately $148
million in 1982, according to the report. Another $230
million of the $560 million is for specialized centers.
Although the use of specialized centers support varies
among NIH BIDs, most of it is for resource develop-
ment; virtually all of the over $75 million provided to
specialized centers by the National Cancer Institute
(the largest supporter among the BIDs of specialized
65
centers) was for resource development (salaries of pro-
fessional and administrative personnel, equipment,
facilities, renovations, etc.~. Specialized centers do get
funds for basic research, clinical trials, and related ac-
tivities, but these funds are for the most part listed un-
der other categories. Approximately $176 million of
the 1982 technology assessment and transfer budget
was for clinical trials. This leaves $7 million for tech-
nology assessment activities such as consensus devel-
opment conferences, workshops, seminars, and re-
lated activities, including the $2 million OMAR
budget and nearly $4 million for National Eye Insti-
tute technology assessment research grants. Using
similar categories of activities, the OMAR report esti-
mated that ADAMHA expenditures for technology as-
sessment and transfer amounted to $38.44 million.
3 This figure excludes expenditures for environ-
mental health and occupational safety and health as-
sessment activities.
4 This figure is based on an estimate made by Han-
sen (1979) and has been updated by the Pharmaceuti-
cal Manufacturers Association in cooperation with
Dr. Hansen to account for inflation in R&D costs. The
figure includes the cost of new chemical entities
(NCEs) that enter clinical testing but are not carried
to the point of FDA approval for marketing. Thus, the
figure—$91 million in 1983—should be interpreted as
the average expected cost of discovering and develop-
ing a marketable NCE (Grabowski, 1982~. Others
have made similar types of estimates; see Hutt (1982)
for further discussion.
5 According to the PMA survey data for 1982, 3.2
percent of U.S. R&D expenditures for pharmaceuti-
cals were allocated to phase IV studies. Applied to a
total 1984 human use drug R&D budget of $3.3 bil-
lion, this would amount to more than $100 million
(included in the estimate of clinical evaluation ex-
penditures). However, this is probably an overesti-
mate, as the larger ethical pharmaceutical makers
surveyed by PMA may be more likely than other drug
makers to invest in nonrequired, expensive post-
marketing trials. In 1984, FDA spent under $1 million
on intramural postmarketing surveillance activities
and another $1.1 million in support of extramural
programs such as the Boston Collaborative Drug Sur-
veillance Program, the Drug Epidemiology Unit of
Boston University, the Medicaid postmarketing sur-
veillance programs in Michigan and Minnesota, and
the Drug Product Problem Reporting Program ad-
ministered by the United States Pharmacopeial Con-
vention, Inc. (J. K. Jones, FDA National Center for
Drugs and Biologics, personal communication, 1984~.
6 Product shipments in 1984 for x-ray and electro-
medical equipment, surgical and medical instru-
ments, surgical appliances and supplies, and dental
equipment totaled an estimated $18.6 billion
(USDOC, 1985). In 1977, the last year for which data
OCR for page 66
66
are available, ophthalmic goods product shipments
were $0.84 billion (USDOC, 1981).
~ One reasonable approximation of industry-wide
R&D commitment may be made using the figures for
the USDOC optical, surgical, photographic, and
other instruments industry group, which includes sur-
gical and medical instruments, surgical appliances
and supplies, dental equipment and supplies, and
ophthalmic goods. Including federal contributions,
total R&D for that industry group was 6.9 percent in
1980 (NSF, 1984). According to a 1981 poll of more
than 500 medical device manufacturers, one-quarter
of them reported R&D expenditures of less than 1 per-
cent of sales, one-third reported 1 to 5 percent, and
one-third reported spending 6 percent or more. (Oth-
ers did not know or did not respond.) Thirteen per-
cent spent fifteen percent or more (Louis Harris,
1982). This distribution is not inconsistent with the 5
percent estimate. Finally, a recent OTA report cites a
special survey of limited available USDOC data that
indicates industry R&D expenditures were 3 percent
of medical device shipments in 1980, but the report
concedes that this is probably an underestimate
(OTA, 1984). As is the case in the drug industry, many
medical device concerns are part of large, multi-
product firms which manufacture low it&D-intensive
products in addition to medical devices.
~ According to an FDA survey of 20 medical device
manufacturers (Blozan and Tucker, 1984), the cost of
clinical evaluation reported in PMAAs differs greatly
for implantable and other devices. Reported costs for
clinical trials (including protocol development, con-
duct of studies, payments for physician time, equip-
ment, evaluation, printing costs, etc.) of ophthalmic
devices range from $5,000 to $270,000 (averaging
$144,000), implantable nonophthalmic devices range
from $100,000 to $1,440,000 (averaging $813,000),
and other nonophthalmic devices range from $40,000
to $200,000 (averaging $109,000~. (These figures
should be considered approximations in light of the
survey's small sample size.) If we apply these cost esti-
mates for PMAA clinical trials to a group of 88 PMAAs
(the number submitted in 1982, the most in any year
thus far) having characteristics of PMAAs submitted
thus far (50 percent ophthalmic, 18 percent implant-
able nonophthalmic, 32 percent other nonoph-
thalmic), then associated clinical trial costs would be
on the order of $20 million annually.
9 Large-scale trials referred to here might be com-
parable to the eight large-scale NHLBI trials, con-
ducted primarily in the 1970s, for prevention and
treatment of heart and vascular diseases. These trials
ranged from $17 million to $150 million in total costs
over periods ranging from 6 to 18 years (including in-
tervention and follow-up), with average annual costs
ranging from $2 million to $10 million per trial. The
overall average cost of these eight trials was $5 million
ASSESSING MEDICAL TECHNOLOGY
per trial per year. The average cost for all 20 NHLBI
clinical trials ongoing in 1979 was $2.8 million. The
average cost for all trials supported by NIH in 1979
was $0.16 million.
is The formation of a clearinghouse for informa-
tion on medical technology assessment has been rec-
ommended by the Institute of Medicine (1983). An-
nual budgets for other types of clearinghouses in NIH,
CDC, and ADAMHA range from $0.15 million to $6
million. Examples (with FY 1982 budgets) are the
High Blood Pressure Information Center ($0.150 mil-
lion), National Diabetes Information Clearinghouse
($0.208 million), Clearinghouse for Occupational
Safety and Health ($1.03 million), National Clearing-
house for Alcohol Information ($3.41 million), and
International Cancer Research Data Bank Program
($6 million) (OMAR, 1983i.
ii The free-rider problem here refers to the ability
of nonparticipating, private, third-party payers to
take advantage, at no cost and with potential for com-
petitive advantage, of evaluative information gained
through the investment of others.
]2 A Harvard School of Public Health (1981;
Braun, 1981) study gave low, middle, and high esti-
mates for 10-year savings expected from nonreim-
bursement of four medical procedures. Estimates
were given for the savings to Medicare (for the popu-
lation 65 and over) and to the nation (for all ages).
Middle estimates of 10-year national savings for the
four technologies were as follows (in 1980 dollars): en-
dothelial cell photography, $130 million; dialysis for
schizophrenia, $146 million; hyperthermia for can-
cer, $272 million; and radial keratotomy for myopia,
$477 million. Among the assumptions used in arriving
at the savings estimates is that two of the procedures
(radial keratotomy and hyperthermia for cancer)
would eventually be reimbursed.
A UCLA School of Public Health (1981) study gave
low and high estimates for annual savings to Medicare
from restricted reimbursement of three procedures (in
1980 dollars): home use of oxygen, $6 million to $20
million; telephonic monitoring of cardiac pace-
makers, $87 million to $97 million; and plasmaphere-
sis for rheumatoid arthritis, $10,000 million to
$15,000 million.
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Representative terms from entire chapter:
services research
