Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.
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,
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
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
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.
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
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 decisionsis 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-
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.
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
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
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-
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-
THE SCOPE OFU.S.MEDICALTECHNOLOGY ASSESSMENT gram and federal participation in the Medicaid program and is the nation's larg- est third-party payer. Estimated federal outlays for health care services and sup- plies by Medicare ($68.1 billion) and Medi- caid ($20.2 billion) totaled an estimated $88.3 billion in FY 1984 (HCFA Bureau of Data Management and Strategy, unpub- lished data, 1984~. HCFA has two major types of assessment efforts: the process it uses to make coverage decisions and re- search, evaluation, and demonstration projects directed by the HCFA Office of Research and Demonstrations. HCFA coverage decisions are especially far-reaching, because they apply not only to Medicare coverage but often are fol- lowed by other third-party payers. HCFA coverage questions generally arise when a Medicare carrier or intermediary receives a claim for a new or unfamiliar service or when there is some other reason to question whether a procedure is reasonable and necessary. When these questions are of na- tional importance and cannot be resolved locally or by the HCFA regional offices, HCFA's central office is asked to make a decision, with the assistance of HCFA's physician panel where medical judgment is needed. If HCFA does not have sufficient information on which to base a decision, it refers the question to the Public Health Service, where the Office of Health Tech- nology Assessment conducts an assessment, as described below. In a few cases, such as heart transplantation and treatment of end-stage renal disease, the HCFA Office of Research and Demonstrations will spon- sor a special study to assist the agency in making a coverage decision. (See DHHS Office of the Assistant Secretary for Plan- ning and Evaluation tOASPE; 1984] for a detailed description of the HCFA coverage decision process.) The HCFA Office of Research and Dem- onstrations (ORD) directs over 200 intra- mural and extramural research, evalua- tion, and demonstration projects to im- prove the effectiveness of the Medicare and 43 Medicaid programs (HCFA, 1983~. The FY 1984 budget of HCFA ORD was about $31 million. With the decrease in funding for NCHSRHCTA, HCFA has become the federal leader in supporting health services research. But HCFA seldom provides di- rect support of assessments of clinical tech- nologies. Only about $3 million of the 1984 HCFA ORD budget was devoted to assess- ments of cost, safety, efficacy/effective- ness, and other concerns regarding medical technologies such as heart transplantation, kidney dialysis and transplantation, mag- netic resonance imaging, and implantable devices (HCFA ORD, unpublished data, 1984~. Given the magnitude of Medicare's con- tribution to U.S. health care and the nu- merous requests for coverage determina- tions made to HCFA, the agency's investment in technology assessment is miniscule. Expenditures for HCFA tech- nology assessment activities, including the $31 million ORD budget (devoted largely to health services research and demonstra- tions rather than clinical technologies) and the indeterminate but certainly minor cost of the HCFA coverage decision process, are imperceptible in the estimated $88.3 bil- lion paid by HCFA for health care in 1984. This is the case even if we take into account the additional investment in assessment ac- tivities made not by but on behalf of HCFAprimarily the $0. 7 million for OHTA and related advice from other agencies, and the few million dollars for ProPAC, which evaluates and makes rec- ommendations regarding the Medicare prospective payment system administered by HCFA. National Center for Health Services Research and Health Care Technology Assessment The National Center for Health Services Research and Health Care Technology As- sessment (formerly the National Center for Health Services Research) has extramural
44 and intramural programs primarily de- voted to health services research topics such as health services financing, organiza- tion, quality, and utilization; health infor- mation systems; the role of market forces in health care delivery; and health promotion and disease prevention. Whereas HCFA R&D activities are addressed to improving the Medicare and Medicaid programs, NCHSRHCTA efforts reach more widely and are intended to add to a broader un- derstanding of health services delivery in all sectors. The agency's budget has de- creased steadily from the 1972 high of $65 million to approximately $17.5 million in FY 1985 (current dollars not corrected for inflation), including about $1 million from the Medicare Trust Fund. This drop limits investigator-initiated health services re- search and may erode the basis for making national policy changes in health care de- livery. Office of Health Technology Assess- ment The NCHSRHCTA Office of Health Technology Assessment has the re- sponsibility for preparing assessments and recommendations regarding Medicare cov- erage issues referred to the Public Health Service by HCFA. OHTA assumed these responsibilities following the dissolution of the National Center for Health Care Tech- nology in 1981. OHTA assessments are concerned with the safety and effectiveness of diagnostic and therapeutic procedures or techniques and normally address a pro- cedure's acceptability and appropriateness and requisite facilities and support sys- tems. OHTA assessments currently do not entail the generation of primary evaluative data but are based on literature searches and consultation with medical specialty so- cieties and federal agencies such as NIH and FDA. (See Finkelstein et al. t1984] for analysis and comparison of coverage deci- sion processes of OHTA and a Blue Shield plan.) Since 1981, OHTA has prepared over 100 assessments for HCFA. Virtually all of the HCFA coverage decisions made ASSESSING MEDICAL TECHNOLOGY on issues referred to OHTA have been con- sistent with OHTA recommendations. OHTA activities, supported primarily by the Medicare Trust Fund, were budgeted for $0.7 million in FY 1984 and again in FY 1985. Most of the FY 1985 NCHSRHCTA research budget of $15.5 million is for in- tramural and extramural health services research, with perhaps a few million dol- lars for other technology assessment activi- ties, including the OHTA budget. In the Health Promotion and Disease Prevention Amendments of 1984 (P.L. 98- 551), Congress renamed the agency the National Center for Health Services Re- search and Health Care Technology As- sessment and set aside $3 million of its FY 1985 budget (and $3.5 million in FY 1986 and $4 million in FY 1987) specifically for technology assessment. This increased sup- port is intended primarily to strengthen the agency's ability to make recommendations regarding Medicare coverage of medical technologies and to undertake and support studies of technology diffusion, assessment methods, and specific technologies. Con- gress earmarked a portion of these set-aside funds ($0.5 million in FY 1985, $0.75 mil- lion in FY 1986, and $0.75 million in FY 1987) as matching funds for the planning, development, establishment, and opera- tion of a council on health care technology at the Institute of Medicine, National Academy of Sciences. National Center for Health Statistics The National Center for Health Statis- tics is the federal agency established to col- lect, analyze, and disseminate data on the nation's health. NCHS provides data on the health status of the population (e.g., through its "Vital and Health Statistics" re- ports); the nature and use of health re- sources, costs, and expenditures for health services; and other areas of national con- cern. NCHS supports and helps to coordi- nate statistical programs of other organiza- tions such as the Duke University Cardio-
THE SCOPE OF U.S. MEDICAL TECHNOLOGY ASSESSMENT vascular Data Bank and the American Rheumatism Association Medical Informa- tion System. NCHS also conducts research in data collection methods and statistical methodology. As discussed in Chapter 3, NCHS routinely produces data that can be used in technology assessment efforts of other federal agencies, health researchers, industry, and the public. NCHS data are useful for monitoring changes in health services utilization and practice behavior. Furthermore, they may provide a national yardstick for indicating the effect of medi- cal and public health interventions and call attention to health services research and other technology assessment needs. NCHS devoted approximately $2 million of its $46 million 1984 budget to R&D (OMAR, 1984~. Veterans Administration The Veterans Administration devoted about $192 million in FY 1985 to R&D ac- tivities conducted or sponsored by the Medical Research Service ($171 million), Rehabilitation Research and Development Service ($15 million), and the Health Ser- vices Research and Development Service ($6 million; VA Central Office figures for FY 1985~. Total 1985 VA health care costs were approximately $9 billion. The VA Cooperative Studies Program of the Medi- cal Research Service coordinates multihos- pital studies conducted by investigators at different VA medical centers under com- mon protocols. In FY 1985, the VA spent approximately $20 million on clinical trials, including $12 million by the Co- operative Studies Program (P. Huang, VA, personal communication, 1985~. The VA Health Services Research and De- velopment Service supports and conducts evaluations of alternative policies and in- terventions of care (P. Goldschmidt, VA, personal communication, 1984~. The VA Supply Service evaluates (including bench testing) new equipment for safety and ef- fectiveness for procurement by VA facili- 45 ties. In 1984, the VA instituted a Technol- ogy Assessment Committee to make recommendations to the chief medical di- rector of the VA regarding priority tech- nologies for assessment and appropriate as- sessment methocis and purchasing and deployment of technologies, to track as- sessment activities of other agencies, and to coordinate these and other agency-wide as- sessment activities (P. Goldschmidt, VA, personal communication, 1984~. In 1982, the VA initiated a Prosthetics Technology Evaluation Committee to coordinate the evaluation of VA prosthetic products and devices. Centers for Disease Control The Centers for Disease Control medical technology assessment activities consist primarily of improving the performance of clinical laboratories, including setting standards for laboratory practices and re- search and evaluation of laboratory mate- rials (e.g., reagents) and procedures, and developing and testing disease prevention, control, and health promotion programs. The CDC provides laboratory support to other agencies, e. g., to the National Heart, Lung, and Blood Institute for its cardiovas- cular intervention trials, and to the FDA for investigating medical devices (espe- cially laboratory test kits) and assistance in developing FDA guidelines and perfor- mance standards for these products. In 1982, the CDC devoted approximately $4 millions to medical technology assessment activities (C. Blank, CDC, personal com- munication, 1984~. CDC spent an esti- mated $76.1 million of its $378 million 1984 budget on R&D (OMAR, 1984~. Department of Defense The Department of Defense conducts medical and life sciences R&D under the Navy Medical R&D Command, Army Medical R&D Command, and the Air Force Aeromedical Division. Total defense
46 health care expenditures, including care for retirees and military dependents, were $6.6 billion in 1983 (Gibson et al., 1984~. The total medical and life sciences R&D budget is $446 million for 1985. These R&D activities are primarily addressed to military needs not met in the civilian sec- tor. Included are infectious and parasitic disease research; combat casualty re- search; medical defense against biological and chemical weapons; effects of electro- magnetic radiation; and diving, subma- rine, and aviation medicine. Among the medical technologies under development and evaluation are field-operated imaging systems, noncontact monitoring systems, and combat information systems. Expendi- tures for clinical trials are probably under $10 million annually (Vorosmarti, 1985; H. Dangerfield, personal communication 1984~. DRUG INDUSTRY The U.S. drug industry is one of the na- tion's most profitable in terms of returns on sales and investments (Standard & Poor's Corporation, 1983a,b). The industry has three major components as classified by the U.S. Department of Commerce (USDOC): biological products, medicinals and botan- icals, and pharmaceutical preparations. Pharmaceutical preparations, including ethical (prescription) and proprietary (nonprescription, over-the-counter) prod- ucts, accounted for 75 percent of the esti- mated $27.9 billion in 1984 U. S. drug product shipments (USDOC, 1985~. When adjusted for inflation, annual growth in dollar shipments of drugs over the 10-year period from 1972 to 1982 was 3.8 percent (Standard & Poor's Corporation, 1983a). Drug industry after-tax profits were an estimated 13.5 percent of sales in 1984 (USDOC, 1985~. The industry places great emphasis on research and development, which produce many successful product innovations. The number of prescriptions ASSESSING MEDICA ~ TECHNOLOGY filled in the United States was 1.5 billion in 1983 (USDOC, 1985). Drug Industry Research and Development Drug industry R&D and successful product innovation provide the impetus for the industry's profitability. Individual drug firms depend on a handful of success- ful innovations. Failure to produce new products to replace those that lose mar- ket share to imitators or for which patents expire would be devastating to many drug firms. Of the 30 top-selling products in 1965, only four remained in the top 30 by 1980. Some 9S unique prescription drug products (i.e., different, new chemical en- tities) were introduced into the U.S. mar- ket in the 5-year period 1980-1984 (USDOC, 1985; Pharmaceutical Manufac- turer's Association tPMA], PMA Statistical Factbook, unpublished, 1984~. In 1984, nearly 400 new drug products were in vari- ous stages of development (USDOC, 1984~. Taking a new chemical entity from discovery through FDA approval for mar- keting currently requires from 7 to 10 years and over $90 million,4 according to the Pharmaceutical Manufacturers Associa- tion (PMA Statistical Factbook, unpub- lished, 1984). The importance of new product R&D and competition in the drug industry is ex- emplified by the antiulcer drug Tagamet (active ingredient cimetidine), a product of the SmithKline Beckman Corporation. Between 1977, when Tagamet was ap- proved for the U.S. market, and 1982, the company's total annual sales quadrupled. In 1984, Tagamet was the world's largest- selling drug; its worldwide sales (including chemical sales of cimetidine), approached $1 billion, half of which was accounted for by U.S. sales. This single drug accounted for 60 percent of SmithKline Beckman's ethical pharmaceutical sales in 1983 and 30 percent of corporate sales (SmithKline
THE SCOPE OF U.S. MEDICAL TECHNOLOGY ASSESSMENT Beckman, 1983; M. L. Paterson, Smith Kline & French, personal communication, 1984~. However, a new, similar antiulcer drug, Zantac, a product of the British- based firm Glaxo, Inc., challenged Taga- met in 1984. Popular in the United King- dom and Europe, in 1984 it was ac- counting for 25 percent of all new antiulcer drug prescriptions, following its introduc- tion to the U. S . market by mid- 1983 (Kleinfield, 1984; Koenig, 1983~. Drug companies invest high proportions of sales and profits in R&D and spend rela- tively high amounts on basic research. Eth- ical pharmaceuticals account for the bulk of drug industry R&D. Drug industry ex- penditures for R&D have been increasing at a rate of about 15 percent a year since 1978, compared with about 11 percent for all industries (Standard & Poor's Corpora- tion, 1983a; USDOC, 1985~. Drug R&D expenditures were an estimated $3.5 bil- lion in 1984 (including 5 percent for veteri- nary use) and is projected to be $4.0 billion in 1985 (USDOC, 1985~. This amounts to 12 percent of drug product shipments. The Pharmaceutical Manufacturers Associa- tion (1984) estimates that its member firms devote over 14 percent of sales to R&D and that 80 percent of pharmaceutical firm R&D expenditures is devoted to new prod- uct development, and the remaining 20 percent is devoted to improvement and modification of existing products. (PMA members number about 130 of the well over 1,000 U. S. drug companies and pri- marily are the larger, brand name phar- maceutical firms, accounting for over 90 percent of total U.S. drug sales.) There is little (less than 1 percent) direct govern- ment financing of drug industry R&D, al- though much of the basic research that precedes the development of new drugs is federally supported, primarily by NIH, and is performed in universities and medi- cal centers. 47 Assessment of Drugs Following basic research and discovery, drug evaluation largely is guided by the regulatory process administered by the FDA. FDA involvement begins when a sponsor seeks to investigate a drug's safety and efficacy using clinical testing in hu- mans. The FDA has established a two-part process for premarketing drug evaluation: (1) the investigational new drug (IND) ap- plication process and (2) the new drug ap- plication (NDA) process (FDA, 1977~. In an IND application, a drug sponsor de- scribes the proposed clinical studies, the qualifications of the investigators, the chemical description of the drug, and available data on its pharmacology and toxicity gained from studies in animals (and humans when available, usually from foreign studies). If the IND application is approved by the FDA, the sponsor may proceed with a three-phase clinical investi- gation of the drug. Following completion of testing under the approved IND appli- cation, a sponsor may file an NDA, which is a request for FDA permission to market the drug. About 1 in 10 drugs for which INDs are issued complete all phases of clin- ical investigation and receive NDA ap- proval by the FDA (FDA, 1983c). Premarketing clinical studies do not pro- vide an adequate picture of a drug's poten- tial adverse effects or indications. The total drug-exposed populations in such studies are relatively small (usually 700-3,000 pa- tients) and do not permit detection of un- common effects, such as those occurring less often than in 1 in 1,000 patients. Many types of patients who ultimately will use the drug are excluded from the premarket- ing study (e.g., certain age groups, preg- nant women, patients with diseases other than the one being studied, patients taking concomitant medications, specific degrees of severity of disease), which may preclude identification of effects that occur only in other types of patients or effects that result . · · .
48 from drug-drug interactions. The duration of premarketing studies is limited, usually 1 to 2 years, and thus may not enable iden- tification of long-term effects. The conduct of premarketing studies often is limited to specialists affiliated with major medical centers and so may not permit assessment of effects of a drug as used by the average physician engaged in clinical practice. New indications for a drug may be found after marketing, raising efficacy issues not previously addressed (FDA, 1983a; Joint Commission on Prescription Drug Use, 1980; OTA, 1982b). Although the FDA closely regulates the introduction and labeling of new drugs, the use of legally marketed drugs in prac- tice is not regulated. The agency approves of what the manufacturer may recom- mend about uses in its labeling and adver- tising, but it cannot approve or disapprove of how a legally marketed drug is used by a physician in practice (Archer, 1984~. In- dustry and the FDA conduct postmarket- ing studies of drugs which address some of the needs left unfilled by the premarketing study. However, compared with the vol- ume of data that is collected prior to mar- keting, far fewer data are collected in the United States on drugs after they are ap- proved for marketing (Altman, 1983; Bor- den and Lee, 1982; Joint Commission on Prescription Drug Use, 1980; OTA, 1982b). This reflects differences both in level of effort and types of study. Postmarketing studies include so-called phase IV studies and a variety of surveil- lance activities. Phase IV studies are not mandated in FDA regulations but are dis- cussed in FDA guidelines. A phase IV study may be a condition of FDA market- ing approval if the uncertainty over a drug's safety or efficacy does not warrant delaying its release on the market, or it may be initiated by companies to further substantiate drug safety and efficacy and to support marketing efforts. Phase IV studies may be experimental or nonexperi- ASSESSING MEDICAL TECHNOLOGY mental. Although a number of drug manu- facturers have periodically conducted postmarketing studies of adverse and bene- ficial drug reactions and drug-drug inter- actions for specific drugs, only a few have established permanent units for these ac- tivities (Blue Sheet, 1983), e.g., those of Burroughs Wellcome, Hoffman-La Roche (E. Roberson, Hoffman-La Roche, per- sonal communication, 1984), and Upjohn (Borden and Lee, 1982~. A few companies are venturing into studies beyond safety and efficacy, Smith Kline & French Lab- oratories initiated a cost-benefit studies program in response to the increased em- phasis on cost containment and to justify the prices of its leading products (M. L. Paterson personal communication, 1984~. The FDA conducts, coordinates, or sponsors a number of surveillance pro- grams, including spontaneous reaction re- porting programs, adverse reaction regis- tries, and research programs. Other agencies such as the CDC, the National In- stitute on Drug Abuse, and the World Health Organization share drug surveil- lance information with the FDA (Jones, 1985; OTA, 1982b). Expenditures for Drug Assessment Data for making direct estimates of drug industry expenditures devoted to technol- ogy assessment activities such as clinical trials and postmarketing surveillance are not available, as company budgets do not generally show line items for such activi- ties. However, indirect estimates can be made from survey data. Based on a recent survey of its members, the Pharmaceutical Manufacturers Associ- ation estimates that clinical evaluation (in- cluding controlled and uncontrolled trials in phases I, II, and III and in postmarket- ing phase IV) accounts for 23.1 percent of R&D expenditures for ethical pharmaceu- ticals in 1982 (PMA, 1984~. Assuming that clinical evaluation accounts for a smaller
THE SCOPE OF U.S. MEDICAL TECHNOLOGY ASSESSMENT proportion of R&D costs for other drug product makers than it does for PMA- member ethical pharmaceutical makers, we estimate that roughly $700 million to $750 million of the $3.3 billion in 1984 human-use drug R&D expenditures was devoted to clinical evaluation, including postmarketing studies. A rough estimate of 1984 expenditures for postmarketing stud- ies is $100 million, most of which was spent by industry.5 Despite its shortcomings, premarketing assessment of drugs for safety and efficacy in the United States is the most comprehen- sive and well-funded area of medical tech- nology assessment in the world. The fed- eral government and the drug industry have had sufficient opportunity since the 1962 amendments to the Food, Drug, and Cosmetic Act to clarify, improve, stan- dardize, and adapt to drug assessment pro- cedures. The industry's vitality evinces lit- tle sign of deleterious effects of the reg- ulatory process, which may have enhanced overall provider and consumer confidence in drug products, both in the United States and worldwide. Adjustments in the regula- tory process are being made to address the role of generic drugs, patent restoration, orphan drugs (notably the Drug Price Competition and Patent Restoration Act of 1984 and the Orphan Drug Act of 1983), and other issues related to industry innova- tion and competition. Improvement is needed in gathering data for identifying drugs' adverse and beneficial effects, their rates of use, and in- dications for use. Methodological short- comings in the current premarket approval process are not adequately compensated by existing provisions for postmarketing sur- veillance. These efforts are scattered, rela- tively uncoordinated, and rely heavily upon voluntary participation (Blue Sheet, 1984; Joint Commission on Prescription Drug Use, 1980; OTA, 1982b). Increased cost-consciousness of physi- cians, hospitals, and consumers; increased 49 availability of alternative therapies; and expanded capabilities in diagnosis and treatment posed by new biotechnologies are among the factors that press for widen- ing of drug assessment beyond safety and efficacy, to include greater study of cost, cost-effectiveness, and certain public pol- icy implications. MEDICAL DEVICE INDUSTRY The medical device industry generates a great diversity of products. More than 8,500 device establishments currently reg- istered with the FDA have listed some 42,000 makes and models in 1,740 generic categories of medical devices (FDA Center for Devices and Radiological Health [CDRH], unpublished data, 1985~. These include diagnostic and therapeutic equip- ment, prostheses, surgical and medical in- struments and supplies, dental equipment and supplies, ophthalmic goods, and in vi- tro diagnostic products reagents, instru- ments, and systems used in the collection, preparation, and examination of speci- mens taken from the human body to deter- mine the state of a patient's health. The FDA definition of medical devices excludes drugs, which achieve their effects through chemical action within or on the body. The great majority of medical device manufac- turers are classified by the U.S. Depart- ment of Commerce in five industries: x-ray and electromedical equipment, surgical and medical instruments, surgical appli- ances and supplies, dental equipment, and ophthalmic goods. The value of medical device product shipments in these in- dustries exceeded $20 billion in 1984 (USDOC, 1985~.6 Medical Device Industry Research and Development Because of the limited availability of medical device industry R&D data, direct estimates of industry-wide R&D are not
50 available. The range of R&D spending by device manufacturers is wide; makers of such devices as heart pacemakers, intraoc- ular lenses, ant] certain diagnostic technol- ogies spend greater amounts on R&D. For example, Medtronic, Inc., the world's leading producer of implantable devices, devoted about 9 percent of sales to R&D in 1983 (R. Flink, Medtronic, personal com- munication, 1984~. For most dental prod- ucts firms, R&D expenditures average less than 2 percent of sales; even the larger firms invest only about 3 to 4 percent of sales in R&D (USDOC, 1985~. A rough estimate of R&D expenditures across the medical device industry, includ- ing federal contributions, is 5 percent of sales.7 Applying the 5 percent estimate to an estimated $20 billion in 1985 sales, total annual medical device industry R&D ex- penditures would be on the order of $1 bil- lion. Principal federal participants in medical device research and development include NIH, the VA, CDC, and the National In- stitute for Handicapped Research (NIHR) in the Department of Education. The VA is a leader both in the R&D and the use of rehabilitative technologies and devices. The VA Rehabilitation Research and De- velopment Service does extensive work in amputation prosthetics, spinal cord injury, and sensory aids; the Prosthetic and Sen- sory Aids Service provided $81 million in appliances and services to one million dis- abled veterans in 1982 (VA, 1983~. NIH R has the largest federal budget (estimated at $36 million in FY 1984; American Associa- tion for the Advancement of Science [AAAS], 1984) specifically directed toward disability-related research. The National Aeronautics and Space Administration (NASA, 1982), National Bureau of Stan- dards, and the Department of Energy also contribute to medical device R&D. ASSESSING MEDICAL TECHNOLOGY Assessment of Medical Devices Assessment of medical devices is influ- enced by and may be described in terms of the device classification and premarket no- tification and approval processes stipu- lated in the Medical Device Amendments of 1976. This legislation gave the FDA sig- nificant authority to regulate the testing and marketing of medical devices to ensure their safety and efficacy. Congress re- quired classification of all devices into one of three regulatory classes differentiated according to the extent of control necessary to ensure their safety and efficacy: class I, general controls; class II, performance standards; and class III, premarket ap- proval. The amendments instituted sys- tematic premarket notification and screen- ing procedures rather than continued reliance on postmarket regulatory actions on a case-by-case basis. The FDA floes not regulate the use of approved medical de- vices in clinical practice, but has the power to ban devices of any classification that present substantial deception or unreason- able and substantial risk of illness or injury that is not correctable by labeling (FDA, 1980, 1983b). All post-1976 devices require premarket approval unless exempted by the FDA as being substantially equivalent to one al- ready in use before the 1976 amendments or unless the sponsor successfully petitions the FDA for reclassification into class I or II. By 1985, nearly 29,000 premarket noti- fications for new post-Amendment devices had been received including over 5,000 in 1984 alone. Over 98 percent of these have been found to be substantially equiv- alent to pre-Amenciment devices; the oth- ers 405 devices by 1985 have been placed in class III (FDA CDRH, unpub- lished data, 1985~. For a class III device not substantially equivalent to a pre-1976 device, the sponsor must provide informa- tion to the FDA concerning all investiga- tions about safety and efficacy. (Pending
THE SCOPE OF U.S. MEDICAL TECHNOLOGY ASSESSMENT final classification by the FDA and after a designated grace period, the agency may require the filing of evidence of safety and efficacy for pre-Amendment devices and their post-Amendment substantial equiva- lents in order to allow for continued mar- keting.) This information normally is pro- vided through the premarket approval process, involving an investigational de- vice exemption (IDE) and submission of a premarket approval application (PMAA). The IDE, which is analogous to the investi- gational new drug process in FDA drug regulation, permits limited use of an unap- proved device in controlled settings for the purpose of collecting safety and efficacy data. In a PMAA, the sponsor submits to the FDA the results of clinical investigations made under the IDE together with manu- facturing data. The FDA will approve a PMAA if the results demonstrate the device to be safe and efficacious. As is the case for new drugs, FDA may require specified postmarketing study of a new medical de- vice as a condition of marketing approval. FDA approval of a PMAA authorizes a sponsor to distribute commercially a de- vice for the purposes for which it is labeled subject to any FDA-imposed restrictions. Sponsors may be required by the FDA to file "supplemental" PMAAs with clinical data to support new labeling claims for previously approved devices. PMAAs remain a comparatively new and infrequently implemented regulatory requirement, although they account for a significant portion of the FDA's device- related workload, and the median time for processing them is about 10 months (FDA CDRH, unpublished data, 1985~. Through 1983, only one medical device firm in 25 had any direct experience with PMAAs (Blozan and Tucker, 1984~. Of the 358 PMAAs submitted through 1983, 46 per- cent were for ophthalmic devices (intraoc- ular lenses, contact lenses, and related products); the rest were mostly alpha- 51 fetoprotein test kits, pacemakers/pulse generators, plasma exchange systems, transcutaneous carbon dioxide (CO2) mon- itors, antimicrobial test systems, and heart valves. Based on an FDA survey of 20 man- ufacturers of various types of medical de- vices, the cost of bringing a new device to market through the PMAA process in- cluding device development, clinical trials, manufacturing and controls, application preparation, and other activities con- ducted during review ranges from $370,000 to $1,025,000 (Blozan and Tucker, 1984~. Pursuant to the 1976 Amendments, FDA published in 1984 final rules on medical device reporting (MDR), which require manufacturers and importers of medical devices to report adverse experiences sug- gesting that a device may have caused or contributed to a death or serious injury or has malfunctioned and would be likely to cause or contribute to a death or serious in- jury if the malfunction were to recur (Fed- eral Register, 1984a). In addition, the FDA will maintain its voluntary, and less than comprehensive, Device Evaluation Network (DEN). As part of DEN, the FDA supports the Medical Device and Labora- tory Product Reporting Program (PRP) ad- ministered by the United States Pharmaco- peial Convention, Inc. ($250,000 1984 budget; D. M. McGinnis, U.S. Pharmaco- peial Convention, personal communica- tion, 1984~. PRP receives approximately 2,000 device problems reports annually. The agency also has a contract ($50,000 in 1984) with the Consumer Product Safety Commission for similar data. Other sources for DEN are FDA field offices, the VA, the Department of Defense, and the independent medical device and equip- ment evaluator ECRI (C. Reynolds, FDA, personal communication, 1984~.
52 Expenditures for Medical Device Assessment The range of resources devoted to clini- cal trials of medical devices varies widely by type of product. Many devices (e.g., many of the 1,600 types of class I and class II devices which are remote from the body or otherwise pose minimal hazard) require little investment in clinical evaluation, others, such as implantable devices, re- quire a great deal. Medtronic, Inc., spent approximately 7 percent of its 1983 heart pacing products R&D budget on clinical trials (R. Flink, personal communication, 1984~; IOLAB, Inc., and other manufac- turers of intraocular lenses may spend 20- 25 percent of their intraocular lens R&D budgets on clinical trials (M. Nimoy, IOLAB, personal communication, 1984~. (A company's expenditures for clinical trials in a given year depend on the stage of development of its new products.) Medical device industry expenditures for clinical evaluation were probably on the order of $35 million in 1984, or about 4 percent of medical device industry R&D expenditures. At least half of this amount may be accounted for by clinical trial ex- penditures associated with devices submit- ted for FDA approval under PMAAs. s Clinical evaluation costs other than those for devices submitted under PMAAs in- clude costs for devices tested under investi- gational device exemptions (IDEs), but not carried through the entire premarket ap- proval process, and for the several thou- sand devices annually that bypass the PMAA process as being substantially equivalent to marketed devices. However, few of these entail costly, if any, clinical evaluations. Medical device assessment has yet to emerge from a shakedown period, partly because the relative newness of the 1976 Medical Device Amendments (as com- pared with the 1962 Amendments to the Food, Drug, and Cosmetic Act) and the ASSESSING MEDICAL TECHNOLOGY great diversity of devices subject to regula- tion. Many thousands of devices from implantable, programmable dual chamber cardiac pacemakers and diagnostic re- agents using monoclonal antibodies to por- cine heart valves, injectable silicone, snakebite kits, ice bags, and bed boards- must be properly classified and regulated to protect consumers and to be responsive to provider needs and manufacturers' con- cerns. Congress has reproved the FDA for being slow to implement certain major provisions of the 1976 Amendments (U.S. Congress, House, 1983; U. S. Congress GAO, 1983~. In 1984, the FDA required for the first time premarket approval data for a pre-Amendment device (an im- planted cerebellar stimulator, the first of 13 such devices identified in 1983) and its post-Amendment substantial equivalents (Federal Register, 1984b). As noted above, the FDA did not establish final mandatory medical device reporting rules until 1984. The agency has not set performance stan- dards for the 1,100 generic types of class II devices as specified by the law, although Congress set no time limit for doing so. The FDA is faced with making decisions regarding priorities in device regulation, and these will have implications for indus- try and the public. The workload for han- dling premarket approval of class III de- vices, already substantial given current technological advances, may increase, de- pending on the emphasis placed on requir- ing premarket approval applications for pre-Amendment devices and their substan- tial equivalents. Greater resources should also be devoted to expanded postmarketing surveillance of devices, addressed only in part by the new mandatory medical device reporting requirements, and perhaps to work in classifying devices and setting per- formance standards for class II devices. This type of work will require additional properly trained people, both in the FDA and in industry. As is the case for drugs, resources for de-
THE SCOPE OF U.S. MEDICAL TECHNOLOGY ASSESSMENT vice assessment are limited and too nar- rowly focused. Device assessment rarely extends beyond safety and efficacy to mat- ters of cost-effectiveness and broader social implications and devotes few resources to postmarketing surveillance. ECRI and, to a lesser extent, the American Hospital As- sociation are among the few programs that make available comparative information on technical performance, cost, hazard re- ports, and other valuable information for device procurement and maintenance. OTHER PRIVATE SECTOR ASSESSMENT ACTIVITIES There is widespread and increasing in- terest in technology assessment among or- ganizations in the private sector in addi- tion to those in medical product industries. Private insurers, medical associations, pro- fessional and industry associations, hospi- tal corporations and other major uro- viders, policy institutes, and voluntary health agencies conduct and sponsor assess- ment activities to suit their varied needs. These include making coverage and reim- bursement policies and procurement deci- sions, responding to practitioner inquiries, setting voluntary standards for manufac- turing and practice, providing guidance to regulatory agencies and other policyma- kers, and improving medical practice and services delivery. Despite this heightened interest, current private sector activity remains limited in several important ways. Except for the pri- vate, independent health devices-testing organization ECRI, few of the evaluations undertaken in these private sector efforts involve the generation of primary data, and no other organization has as its pri- mary purpose the assessment of medical technologies. The scope of evaluations is limited most evaluations do not extend beyond matters of safety and effectiveness to cost-benefit and cost-effectiveness and ethical, legal, and other broader social is- 53 sues. Safety and efficacy/effectiveness are addressed only indirectly in some evalua- tions; third-party payers generally rely on medical providers' acceptance of a technol- ogy as standard practice rather than ex- perimental or investigative- as an indi- cant of its safety and effectiveness. The predominant assessment methods are liter- ature reviews and consultation of experts. Assessments are generally conducted on a reactive, ad hoc basis rather than by sys- tematic review and priority setting. Evalu- ation activity of insurers largely is driven by the insurance claims process; assess- ments by medical associations generally are conducted in response to inquiries by third-party payers and practitioners. The magnitude of expenditures made by pro- viders and insurers for the extraordinarily varied array of new, emerging, accepted, and outmoded health care services merits a much more serious commitment to tech- nology assessment. Insurers Blue Cross and Blue Shield Plans, com- mercial insurance companies, and prepaid and self-insured plans paid an estimated $100 billion in medical benefits in 1983, or 32 percent of total U.S. personal health care expenditures (Gibson et al., 1984~. The purpose of assessment efforts by pri- vate insurers is to fulfill equitably the con- tractual responsibility to pay for care of good quality at a reasonable cost. Insur- ance contracts generally cover only tech- nologies that are "medically necessary" and reimburse for covered procedures in amounts that are "usual, customary, and reasonable." Most contracts exclude inves- tigational and experimental procedures or those done for educational purposes. Technology reviews by insurers gener- ally arise through the claims process; in very few instances do providers inquire be- fore providing a service as to whether it will be reimbursed. For the most part, bur-
54 den of proof for payment decisions rests on the payer rather than the provider. Claims reviewers may question procedures that are new, unorthodox, outmoded, or ap- plied in an unconventional manner. Few third-party payers explicitly evaluate safety, effectiveness, appropriate use, or cost-effectiveness of medical technologies. Payers generally rely on a determination of a technology's diffusion, i.e., whether it is standard practice rather than experimen- tal or investigative, as an indicant of physi- cians' judgment of its safety and effective- ness. Because assessments are triggered by the claims process, they can be bypassed by concealing new technologies under old coding and nomenclature. Insurers increasingly rely on claims re- view committees and assistance from med- ical associations such as the American Col- lege of Radiology, the American College of Physicians, and the American College of Cardiology for making coverage and reim- bursement decisions. Very few insurers are able to assign dollar amounts to their as- sessment activities, because these generally are not budget line items and involve the efforts of a variety of personnel having ad- ditional responsibilities. The Blue Cross and Blue Shield (BCBS) Association has a number of activities in technology review. The Technology Eval- uation and Coverage Program develops medical policies for the Association's Uni- form Medical Policy Manual, which is used by plans in administering certain national account contracts. These policies are for- mulated by the BCBS Medical Advisory Panel, which determines the status, i.e., experimental, investigative, or standard, of new and emerging technologies, and if appropriate any special indications for coverage or noncoverage. The purpose of the BCBS Medical Necessity Program is to identify outmoded, duplicative, and un- proved technologies, as well as procedures, that are standard practice but that are uti- lized more often than warranted by good ASSESSING MEDICAL TECHNOLOGY medical practice. Medical Necessity Pro- gram guidelines are distributed to the BCBS Plans to assist them in determining their subscriber contractual obligations. Including these two programs, the Blue Cross and Blue Shield Association spends approximately $350,000 annually on medi- cal policy and coding activities (L. Morris, Blue Cross and Blue Shield Association, personal communication, 1984~. In addi- tion to the activities of the association, the 87 local Blue Cross and Blue Shield Plans have medical departments and engage in various levels of technology review activi- ties. The California Blue Shield Medical Policy Committee ($100,000 1985 budget) assesses for coverage purposes new diag- nostic and therapeutic technologies and initiated the review of obsolete procedures that grew into the Medical Necessity Pro- gram of the Blue Cross and Blue Shield As- sociation. Beginning with percutaneous transluminal coronary angioplasty in 1982, California Blue Shield became the first private third-party payer to institute selective reimbursement i. e., payment for certain procedures at designated insti- tutions only and currently reimburses se- lectively for heart transplants and liver transplants. Direct private payer support of medical R&D and technology assessment is negligi- ble (Gibson et al., 1984; Kahn, 1984~. A few private payers provide funds for re- search and technology assessment activi- ties. For example, since 1982, Blue Cross of Massachusetts has obligated over $5 mil- lion in matching funds to the Massachu- setts Fund for Cooperative Innovation, a grant program for hospital cost-contain- ment experiments administered jointly with the Massachusetts Hospital Associa- tion (MHA) (Blue Cross/MHA, 1985~. Medical Associations Many of the major national medical as- sociations and societies conduct assess-
THE SCOPE OF U.S. MEDICAL TECHNOLOGY ASSESSMENT meets in response to inquiries from their members and from government and third- party payers. Some associations establish panels to set voluntary guidelines for prac- tice. Evaluations often are undertaken in response to requests made by government and private payers trying to determine whether technologies are standard practice as opposed to investigational or experimen- tal. Some associations set voluntary guide- lines for practice, e. g., American Academy of Pediatrics recommendations for immu- nization practice. For the most part, medi- cal association assessment activities are confined to matters of safety and efficacy and do not involve original studies. Meth- ods generally consist of literature searches by staff and informal polling and review of association committees and other experts. Studies that collect primary data are the exception; probably the foremost example is the ongoing American College of Radiol- ogy's Patterns of Care Study of cancer treatment supported by the National Can- cer Institute, currently funded at approxi- mately $500,000 annually if. Diamond, American College of Radiology, personal communication, 1984~. Medical associa- tions generally are unable to provide budget figures for their assessment efforts. A few of the larger assessment programs do have their own budgets; e.g., the Ameri- can College of Physicians (ACP) Clinical Efficacy Assessment Project has a $160,000 1985 budget (L. J. White, American Col- lege of Physicians, personal communica- tion, 1985), and the American Medical As- sociation's new Diagnostic and Ther- apeutic Technology Assessment program has a $380,000 1985 budget (N. E. Cahill, American Medical Association, personal communication, 1985~. Policy Research Groups A number of independent assessment and policy research groups undertake tech- nology assessment studies and analyses of 55 related issues. These are generally sup- ported by government contracts, contribu- tions of philanthropic foundations, corpo- rations, and private individuals; mem- bership and conference fees; and publica- tion sales. Examples are the American En- terprise Institute for Public Policy Re- search; the Battelle Memorial Institute; the Brookings Institution; the Hastings Center Institute of Society, Ethics and Life Sci- ences; Project HOPE Center for Health Af- fairs; InterStudy; and the Rand Corpora- tion. Although some nonprofit institutes have health divisions that conduct medical technology assessments on request under contract, few have ongoing technology as- sessment programs. The Hastings Center ($250,000 1985 health-related budget; A. L. Caplan, Hastings Center, personal communication, 1985) is one of very few organizations that deals consistently and explicitly with ethical and legal issues of medical technologies. Assessments usually consist of findings drawn from reviews of the literature. A notable exception is ECRI (formerly the Emergency Care Research Institute), a self-sufficient organization that provides a number of assessment services, including published reports of comparative laboratory testing of medi- cal devices and equipment and informa- tion on device alerts and related develop- ments ($5.0 million 1985 budget; M. VanAntwerp, ECRI, personal communi- cation, 1985~. Examples of assessments that generate primary data are the Battelle heart transplantation and kidney trans- plantation and hemodialysis studies con- ducted for DHHS and the Rand health in- surance experiment (Brook et al., 1983) funded by DHHS. Industry Associations Many industry and professional associa- tions have strong interests in medical tech- nology issues and often are particularly concerned with effects of government reg- ulation on industry innovation and mar-
56 keting. Although a few of these organiza- tions conduct technology assessments on a contractual basis, most of their technology assessment-related activities consist of set- ting voluntary standards, monitoring and responding to legislation, and conducting conferences and educational programs for members. Particularly active with regard to FDA regulation of drugs and medical devices and related congressional activity are the Pharmaceutical Manufacturers Associa- tion and the Health Industry Manufactur- ers Association. The American Hospital Association (AMA) has helped to formulate hospital industry positions with regard to Medicare prospective payment and related issues. The Group Health Association of America recently established a medical technology panel to examine policies for inclusion of technologies in benefits plans; of particular interest is the effect on com- petitive status among health maintenance organizations (HMOs) and other third- party payers of mandatory coverage by federally qualified HMOs of expensive new technologies such as liver transplantation (Group Health Association of America, 1984~. The AHA Hospital Technology Series Program provides medical equipment pro- curement guidelines, alerts, and related evaluative information to its hospital sub- scribers for medical equipment ($225,000 1985 budget; M. Goodhart, AHA, personal communication, 1985~. Other associations active in medical technology issues include the Alliance for Engineering in Medicine and Biology, American Public Health As- sociation, American Society for Testing and Materials, Association for the Ad- vancement of Medical Instrumentation, Health Insurance Association of America, Institute of Electrical and Electronics En- gineers, National Electrical Manufacturers Association, and Rehabilitation Engineer- ing Society of North America. ASSESSING MEDICAL TECHNOLOGY Provider Institutions Major medical centers, hospitals, hospi- tal corporations, health maintenance orga- nizations, private clinics, and other pro- vider institutions have played important roles in the development, application, and evaluation of medical technologies. Although it is not possible to account for even a substantial fraction of the assess- ment work conducted by provider organi- zations, we can cite a few examples that il- lustrate the evolution and variety of these activities, even within single institutions. The Cleveland and Mayo Clinics were par- ticularly active in the early evaluation of the computed tomography (CT) scanner. The Cleveland Clinic has conducted major research and assessment programs in car- diovascular diseases, including an artificial heart program. The Mayo Clinic has done important work in many areas of biomedi- cal research and has conducted surveil- lance studies of Guillain-Barre syndrome, leukemia, vaginal cancer associated with diethylstilbestrol (DES), hip arthroplasty, and other conditions and procedures (Kurland and Molgaard, 1981; Melton et al., 1982~. The Mayo Clinic also has a health care studies unit examining corpo- rate health care cost-containment, mea- sures of illness severity, cost-effectiveness of liver transplantation, cost studies com- paring coronary bypass grafting and per- cutaneous transluminal coronary angio- plasty, and issues in rural health services delivery (F. Nobrega, Mayo Clinic Health Care Studies Unit, personal communica- tion, 1985~. Health maintenance organizations have made important contributions in health services research, cost-effectiveness of new technologies, and other aspects of technol- ogy assessment. Group Health Cooperative of Puget Sound, Harvard Community Health Plan, Health Insurance Plan of Greater New York, and Kaiser-Perma-
THE SCOPE OF U.S. MEDICAL TECHNOLOGY ASSESSMENT nente Medical Care Program are examples of some of the larger HMOs that have sig- nificant and evolving assessment activities. The Harvard Community Health Plan has conducted noteworthy evaluations in such areas as psychotherapy and quality assurance. It recently merged its research department with the Harvard Center for Analysis of Health Practice to form the In- stitute for Health Research, which exam- ines cost-benefit of health care practices, resource allocations, system response to pa- tients' needs, and methods of measuring performance in health care (Harvard Community Health Plan, 1984~. Among numerous evaluation activities, Group Health of Puget Sound (GHC) has been in- volved in the Rand Health Insurance Ex- periment (Brook et al., 1983) and the Bos- ton Collaborative Drug Surveillance Program, a joint effort with Boston Uni- versity. GHC has consolidated and ex- panded its research and evaluation activi- ties under the Center for Health Studies ($1.8 million 1985 budget) which, in addi- tion to serving GHC internal evaluation needs, conducts studies of wider interest in preventive care, reproductive health, pri- mary care, mental health, geriatrics, can- cer control, and accidents and injuries (GHC, 1984; M. Durham, GHC, personal communication, 1985~. The implementation of the Medicare prospective payment system and the growth of multi-institutional providers able to pool information resources and take advantage of purchasing power are two major factors expanding the interests of provider organizations in technology as- sessment. The Medicare prospective pay- ment system has increased the stakes for cost-containment measures in provider in- stitutions and has broadened the market for assessment information. Prospective payment provides incentives for hospitals to shift their behavior regarding adoption and use of medical technologies. Because 57 Medicare accounts for such a large portion of hospital revenues, these may be strong incentives. Hospitals are rewarded for technology use that attracts admissions of profitable DRGs, reduces patient length of stay, and controls the use of ancillary ser- vices. (See, e.g., Anderson and Steinberg t1984], OTA [1984, 1983a], and Roe and Schneider [1984] for projected effects of Medicare prospective payment on technol- ogy adoption and use.) Traditionally, providers have gathered procurement information from vendors and trade shows, medical specialty soci- eties, and other providers. Currently, pro- viders seek concise comparative purchas- ing information regarding product price and value, useful life, operating costs, and service support, as well as product up- dates, alerts, and corrective actions such as are provided by ECRI and the American Hospital Association. In addition, more hospital corporations, HMOs, and other large provider organizations are undertak- ing their own assessment of medical de- vices, equipment, supplies, and facilities. Hospital Corporation of America (PICA), Humana, Inc., and Kaiser-Permanente Health Care Program are examples of or- ganizations with units for examining effec- tiveness, regulatory and reimbursement status, cost, service requirements, and other attributes of medical devices and equipment and for assisting member hospi- tals in capital equipment selection and purchasing (Collen, 1985; T. Dwyer, Hu- mana, personal communication, 1985; D. Foutch, HCA, personal communica- tion, 1984~. Major provider organizations are especially likely to use group purchas- ing and sole source supply for volume dis- counts and competitive bidding for equip- ment and supplies. The increased market for assessment information and the lever- age afforded by economies of scale should make provider institutions into more dis- cerning buyers of medical technologies.
58 Similar to the manner in which the VA Cooperative Studies Program facilitates the conduct of multicenter clinical trials sharing common protocols, the networks of hospitals managed and owned by hospital corporations may provide resources for multicenter clinical trials of medical tech- nologies. HCA Medical Research Services, an affiliate of HCA, has begun contracting with pharmaceutical firms to conduct and manage clinical trials of new drugs, using common protocols in selected HCA hospi- tals if. Butler, HCA Medical Research Ser- vices, personal communication, 1985~. HCA Capital Corporation, the venture capital arm of HCA, has invested in and provided other forms of support for ap- plied R&D and assessment of emerging technologies such as cochlear implants, the artificial heart, lithotripters, microwave heat treatment for cancer, and reusable Imaging media for x-ray systems. In ex- change for its support, HCA receives cer- tain licensing rights for some of these tech- nologies, in addition to the benefits of involving its providers, patients, and facili- ties in these projects (HCA, 1984; L. Cole- man, HCA Capital Corporation, personal communication, 1985~. These activities may increase the facilities and other re- sources available for clinical research be- yond university teaching hospitals and other traditional settings. Another HCA affiliate, the Center for Health Studies, co- ordinates corporate studies and services implementation in management develop- ment and medical education, strategic planning and services, and telecommuni- cations (K. Hoot, HCA, personal commu- nication, 1985~. Such efforts among multi- institutional providers may widen the bridge of technology transfer. Academic Institutions ASSESSING MEDICAL TECHNOLOGY biomedical research supported by NIH; amounts for technology assessment are rel- atively small. Universities perform health services research, clinical trials, and other technology assessment activities supported by federal (especially NIH, HCFA, and NCHSRHCTA) and state agencies; foun- dations and other private, nonprofit sources; and industry. These activities of- ten are carried out at centers for health ser- vices and policy research in schools of pub- lic health and medicine. A directory compiled by the Association for Health Services Research (1983) lists 37 centers, based in or affiliated with academic insti- tutions, whose primary (although not nec- essarily sole) mission is the conduct of health services and policy research. Annual budgets of the 35 centers providing budget data range from $0.12 million to $5.5 mil- lion, average $1. 1 million, and total $38. 3 million. Of that total, 39 percent was pro- vided by the federal government; 34 per- cent by private foundations; 7 percent by corporate sources; 7 percent by universi- ties; and 13 percent by other sources such as state and local governments, individual gifts, and endowments. Examples of cen- ters associated with academic institutions are the Boston University Health Policy In- stitute, Brandeis University Center for Health Policy Research and Analysis, Duke University Center for Health Policy Re- search and Education, Georgetown Uni- versity Institute for Health Policy Analysis, Harvard University Division of Health Pol- icy Research and Education, Johns Hop- kins Health Services Research and Devel- opment Center, Northwestern University Center for Health Services and Policy Re- search, University of California at San Francisco Institute for Health Policy Stud- ies, and Yale University Health Systems Management Group. Academic institutions performed about $3.6 billion in health R&D in 1983 (NIH, 1984~. Most of this is basic and applied
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-
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
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
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 .
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
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-
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 1983should 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
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):
THE SCOPE OF U.S. MEDICAL TECHNOLOGY ASSESSMENT Implantable infusion pump. Journal of the American Medical Association 250:1906. Anderson, G., and E. Steinberg. 1984. To buy or not to buy: Technology acquisition under prospective payment. New England Journal of Medicine 311: 182- 185. Archer, J. D. 1984. The FDA does not approve uses of drugs. Journal of the American Medical Association 252: 1054-1055. Arnstein, S. R. 1977. Technology assessment: Op- portunities and obstacles. IEEE Transactions on Sys- tems, Man, and Cybernetics SMC-748~:571-582. Association for Health Services Research. 1983 (and June 1984 addendum). Health Services and Pol- icy Research Centers Directory. Washington, D.C.: Association for Health Services Research. Blozan, C. F., and S. A. Tucker. 1984. A Profile of Premarket Approval Applications and Their Costs: A Background Paper. Washington, D. C.: Office of Planning and Evaluation, Food and Drug Adminis- tration. Blue Cross of Massachusetts/Massachusetts Hospi- tal Association Fund. 1985. Blue Cross/MHA Fund for Cooperative Innovation: Report for 1984. Boston. Blue Sheet. 1984. Adverse Reaction Reporting: FDA System Must Permit 'Early Triage,' (Interview of FDA Commissioner Hayes). 27~35):P&R-4. Blue Sheet. 1983. Drug companies are establishing post-marketing surveillance systems as a way to avoid unpredictable outbreaks of adverse reactions. 17(26) :7-8. Borden, E. K., and J. G. Lee. 1982. A methodolo- gic study of post-marketing drug evaluation using a pharmacy-based approach. Journal of Chronic Dis- eases 35:803-816. Braun, P. 1981. Need for timely information justi- fies NCHCT. Medical Instrumentation 15:302-304. Brook, R. H., J. E. Ware, W. H. Rogers, E. B. Keeler, A. R. Davies, C. A. Donald, G. A. Goldberg, K. N. Lohr, P. C. Masthay, and J. P. Newhouse. 1983. Does free care improve adults' health? New En- gland Journal of Medicine 309:1426-1434. Bunker, J. P., J. Fowles, and R. Schaffarzick. 1982. Evaluation of medical-technology strategies: Proposal for an institute for health-care evaluation. New England Journal of Medicine 306:687-692. Coates, J. 1974. Some methods and techniques for comprehensive impact assessments. Technological Forecasting and Social Change 6:341-357. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evalua- tion. 1984. Technology Assessment and Coverage De- cisionmaking in the Department of Health and Hu- man Services. Washington, D.C. Dooley, B., C. Jackson, J. Merrill, J. Reuter, and K. Tyson. 1983. How do private foundations spend their money? A description of health giving. Health Affairs 2(3):104-114. 67 ECRI. 1982. Implantable Drug Infusion Pumps. Issues in Health Care Technology 5.I.4.:1-3. Ply- mouth Meeting, Pa. Eddy, D. M. 1983. Flying without instruments: Analyzing medical policies by consensus and expert opinion. The John Hartford Foundation Bulletin. Winter: 1-4. Federal Register. 1984a. Department of Health and Human Services, Food and Drug Administration: Medical Device Reporting: Final Rule. 21 CFR Parts 600, 803, 1002, and 1003:36326-36351. Washington, D.C.: U.S. Government Printing Office. Federal Register. 1984b. Department of Health and Human Services, Food and Drug Administration: Neurological Devices; Premarket Approval of the Im- planted Cerebellar Stimulator: Final Rule. 21 CFR Part 882:26573. Washington, D.C.: U.S. Govern- ment Printing Office. Federation of American Hospitals Review. 1984. Business and the health marketplace: testing grounds for competition, cost containment. 17:26-35. Finkelstein, S. N., K. A. Isaacson, and J. J. Frishkopf. 1984. The process of evaluating medical technologies for third-party coverage. Journal of Health Care Technology 1~2~:89-102. Food and Drug Administration, U. S. Department of Health and Human Services. 1977. General Con- siderations for the Clinical Evaluation of Drugs. Washington, D.C.: U.S. Government Printing Of- ~. rice. Food and Drug Administration, U.S. Department of Health and Human Services. 1980. Guideline for the Arrangement and Content of a Premarket Ap- proval Application. Silver Spring, Md.: FDA Bureau of Medical Devices. Food and Drug Administration, U. S. Department of Health and Human Services. 1983a. A Review of Safety Information Obtained from Phases I-II and Phase III Clinical Investigations of Sixteen Selected Drugs. Rockville, Md.: National Center for Drugs and Biologics. Food and Drug Administration, U. S. Department of Health and Human Services. 1983b. Regulatory Requirements for Medical Devices. Washington, D.C.: U.S. Government Printing Office. Food and Drug Administration, U.S. Department of Health and Human Services. 1983c. New Drug Evaluation Project, Briefing Book. Rockville, Md.: FDA Office of New Drug Evaluation. Foundation Center. 1984. The Foundation Center Grants Index, 13th Edition. New York: Foundation Center. Gibson, R. M., K. R. Levit, H. Lazenby, and D. R. Waldo. 1984. National Health Expenditures, 1983. Health Care Financing Review 6:1-29. Grabowski, H. 1982. Public policy and innovation: The case of pharmaceuticals. Technovation 1:157- 189.
68 Group Health Association of America. 1984. GHAA establishes medical technology panel. Group Health News 24(7)1-3. Group Health Cooperative of Puget Sound. 1984. 1983 Annual Report. Seattle. Hansen, R. W. 1979. The pharmaceutical develop- ment process: Estimates of current development costs and times and the effects of regulatory changes. Issues in Pharmaceutical Economics, in R. I. Chien, ed. Cambridge, Mass.: Lexington Books. Harvard Community Health Plan. 1984. 1983 An- nual Report. Cambridge, Mass. Harvard School of Public Health Center for the Analysis of Health Practices. 1981. Impact on Health Costs of NCHCT Recommendations for Nonreim- bursement for Medical Procedures. National Center for Health Care Technology Monograph Series. Rock- ville, Md.: National Center for Health Care Technol- ogy. Health Care Financing Administration, U. S. De- partment of Health and Human Services. 1983. Health Care Financing Status Report: Research and Demonstrations in Health Care Financing. Office of Research and Demonstrations. Baltimore. Hospital Corporation of America. 1984. Getting to Know HCA. Nashville, Tenn.: Hospital Corporation of America. Hutt, P. B. 1982. The importance of patent term restoration to pharmaceutical innovation. Health Af- fairs 1(2):6-24. Institute of Medicine. 1983. Planning Study Re- port: A Consortium for Assessing Medical Technol- ogy. Washington, D.C.: National Academy Press. Joint Commission on Prescription Drug Use. 1980. Final Report. Washington, D.C.: U.S. Government Printing Office. Jones, J. K . 1985. Post-Marketing Surveillance: A Description of the U.S. Approach and Some Consider- ations for a General Program of Post-Marketing Sur- veillance. In J. L. Alloza (ed.), Clinical and Social Pharmacology: Post-Marketing Period. Aulendorf, Germany: Editio Cantor. Kahn, C. R. 1984. A proposed new role for the in- surance industry in biomedical research funding. New England Journal of Medicine 310:257-258. Kleinfield, N. R. May 29, 1984. SmithKline: One drug image. New York Times. Koenig, R. December 22, 1983. SmithKline's Beck- man unit gets slow start. Wall Street Journal. Kolata, G. 1983. Some bypass surgery unneces- sary. Science 222:605. Kurland, L. T., and C. A. Molgaard. 1981. The patient record in epidemiology. Scientific American 245:54-63. Louis Harris and Associates, Inc. 1982. A Survey of Medical Device Manufacturers. Study No. 80205, re- port submitted to the Bureau of Medical Devices, ASSESSING MEDICAL TECHNOLOGY Food and Drug Administration, Washington, D.C.: Louis Harris and Associates. Melton, L. J., R. N. Stauffer, E. Y. S. Chao, and D. M. Ilistrup. 1982. Rates of total hip arthroplasty. New England Journal of Medicine 307:1242-1245. National Aeronautics and Space Administration. 1982. Spinoff 1982. Washington, D.C. National Center for Health Services Research. 1984a. Health Technology Assessment Series: Health Technology Assessment Reports, 1982. DHHS Publi- cation No. (PHS) 84-3371. Rockville, Md.: Depart- ment of Health and Human Services. National Center for Health Services Research. 1984b. Health Technology Assessment Series: Health Technology Assessment Reports, 1983. DHHS Publi- cation No. (PHS) 84-3372. Rockville, Md.: Depart- ment of Health and Human Services. National Institutes of Health. 1982. Orientation Handbook for Members of Scientific Review Groups. Bethesda, Md.: National Institutes of Health. National Institutes of Health. 1983. Draft Research Plan: FY: 1985. p. 60. Bethesda, Md.: National Insti- tutes of Health. National Institutes of Health. 1984a. NIH Data Book. Bethesda, Md.: National Institutes of Health. National Institutes of Health. 1985. Office of the Director. Report on the Patterns of Funding Clinical Research. Bethesda, Md. National Science Foundation. 1984. National Pat- terns of Science and Technology Resources 1984. Washington, D. C.: National Science Foundation. Office of Medical Applications of Research, Na- tional Institutes of Health. 1983. Technology Assess- ment and Technology Transfer in DHHS: A Report Submitted to the Department of Commerce in Com- pliance with the Stevenson-Wydler Technology Inno- vation Act of 1980 (P.L. 96-480). Bethesda, Md.: Na- tional Institutes of Health. Office of Medical Applications of Research, Na- tional Institutes of Health. 1984. Technology Assess- ment and Technology Transfer in DHHS: A Report Submitted to the Department of Commerce in Com- pliance with the Stevenson-Wydler Technology Inno- vation Act of 1980 (P.L. 96-480). Bethesda, Md.: Na- tional Institutes of Health. Office of Technology Assessment. 1982a. Strategies for Medical Technology Assessment. Washington, D.C.: U.S. Government Printing Office. Office of Technology Assessment. 1982b. Post- marketing Surveillance of Prescription Drugs. Wash- ington, D.C.: U.S. Government Printing Office. Office of Technology Assessment, U.S. Congress. 1983a. Diagnosis Related Groups (DRGs) and the Medicare Programs: Implications for Medical Tech- nology. Washington, D.C.: U.S. Government Print- ing Office. Office of Technology Assessment, U.S. Congress.
THE SCOPE OF U.S. MEDICAL TECHNOLOGY ASSESSMENT 1983b. The Impact of Randomized Clinical Trials on Health Policy and Medical Practice. Washington, D.C.: U.S. Government Printing Office. Office of Technology Assessment, U.S. Congress. 1984. Federal Policies and the Medical Devices Indus- try. Washington, D.C.: U.S. Government Printing Office. Pharmaceutical Manufacturers Association. 1984. 1980-1983 Annual Survey Report. Washington, D.C. Relman, A. S. 1980. Assessment of medical prac- tices: A simple proposal. New England Journal of Medicine 303:153-154. Relman, A. S. 1982. An institute for health care evaluation. New England Journal of Medicine 306:669-670. Roe, W. I., and G. S. Schneider. 1984. Technology in a changing environment. Business and Health July/ August:33-35. SmithKline Beckman. 1983. Annual Report 1982. Philadelphia. Standard & Poor's Corporation. 1983a. Industry surveys, health care: basic analysis 151:H13-H35. Standard & Poor's Corporation. 1983b. Industry surveys, health care: current analysis 151:H1-H5. U.S. Chamber of Commerce. 1985. Employee Benefits 1983. Washington, D.C.: U.S. Chamber of Commerce. U. S. Congress, General Accounting Office. 1982. Medicare payments for durable medical equipment are higher than necessary. Comptroller General's Re- port to Congress. GAO/HRD-82-61. Washington, D.C.: U.S. Government Printing Office. U. S. Congress, General Accounting Office. 1983. Federal regulation of medical devicesproblems still to be overcome. GAO/HRD-83-53. Washington, D.C.: U.S. Government Printing Office. U. S. Congress, General Accounting Office. 1985. Information requirements for evaluating impacts of Medicare prospective payment on post-hospital long- 69 term services: Preliminary report. PEMD-85-8. Washington, D.C.: U.S. Government Printing Of- r. clue. U.S. Congress, House, Committee on Science and Astronautics. 1966. Inquiries, legislation, policy stud- ies re: science and technology: Review and forecast. Second Progress Report. Washington, D.C.: U.S. Government Printing Office. U.S. Congress, House, Committee on Energy and Commerce. 1983. Medical device regulation: The FDA's neglected child. Committee Print 98-F. Wash- ington, D.C.: U.S. Government Printing Office. 13.S. Department of Commerce. 1981. Census of manufactures, industry series. Washington, D.C.: U.S. Department of Commerce. U.S. Department of Commerce, Bureau of Indus- trial Economics. 1984. 1984 U.S. Industrial Outlook. Washington, D.C. U.S. Department of Commerce, Bureau of Indus- trial Economics. 1985. 1985 U.S. Industrial Outlook. Washington, D.C. U.S. Office of Management and Budget. 1984. Budget of the United States Government, FY 1985. Washington, D.C.: U.S. Government Printing Of- fice. University of California at Los Angeles School of Public Health. 1981. The effect of third party reim- bursement on expenditures for medical care. Mono- graph prepared for the National Center for Health Care Technology Monograph Series. Rockville, Md.: National Center for Health Care Technology. Veterans Administration. 1983. Administrator of Veterans Affairs Annual Report 1982. Washington, D.C.: Veteran's Administration. Vorosmarti, J. 1985. Office of the Undersecretary of Defense for Research and Engineering. Interview in HIMAFOCUS. January 21. Washington, D.C.: Health Industry Manufacturers Association.
