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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
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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.
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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
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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.
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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
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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
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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-
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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-
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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
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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
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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.  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-
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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
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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. REFERENCES Altman, L. K. March 22, 1983. How safe are pre- scription drugs? New York Times. American Association for the Advancement of Sci- ence Intersociety Working Group. 1984. AAAS Re- port IX: Research & Development, FY 1985. Wash- ington, D.C. American Medical Association. 1983. Diagnostic and therapeutic technology assessment (DATTA):
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Representative terms from entire chapter: