Index

A

Abbott Laboratories, 190n.1

Abbreviated new drug application (ANDA), 6, 40–41

Abdominal aortic aneurysm repair, 116

Access

to health care, 22, 86, 144

to new drugs, 53–67

ACE inhibitors, 37, 50n.10

Adrenal medulla tissue transplantation, 100

Adriamycin, 60

AIDS (acquired immune deficiency syndrome), 5, 55, 83, 144

drug therapies, 145, 172, 174–175, 178

Alcon Laboratories, Inc., 81

Allergan Medical Optics, 81

Allergy treatment, 89

Alzheimer's disease, 190

American Home Products Corporation, 190n.1

American Medical Association, 7, 107–108

Drug Evaluations, 7, 61

Ancillary services, 24

Anesthesia, 76, 94

Angina pectoris, 4, 99

Angioplasty equipment, 77

Animal research, 5, 99, 128, 170–171

Annual update factor, 28

Antibacterials, 160

Antibiotics, 37

Antihistamines, 89

Antihypertensive drugs, 25–26

Antitrust legislation, 2

Appendectomies, 97

Applied research, 188

Arterial switch surgery, 98

Arthroscopy, 96, 107, 108

Artificial heart, 85, 92

Artificial Heart Program (NIH), 74, 75

Assessment of technology, 31, 84, 100, 111, 141, 144–145

“Assignment,” 117, 120n.6

Association of Community Cancer Centers (ACCC), 55, 58

Austenal Dental, Inc., 73

Austria, 129

Autologous bone marrow transplantation, 56

Axid, 50n.10

Azidothymidine (AZT), 175

B

Baby boom, 22

Banyu Pharmaceutical Company, Ltd., 164

Baxter Healthcare Corporation, 149

Beckman, Arnold, 91

Beckman Instruments, Inc., 91

Beecham Group P.L.C., 160, 183

Belgium, 138n.3, 147



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The Changing Economics of Medical Technology Index A Abbott Laboratories, 190n.1 Abbreviated new drug application (ANDA), 6, 40–41 Abdominal aortic aneurysm repair, 116 Access to health care, 22, 86, 144 to new drugs, 53–67 ACE inhibitors, 37, 50n.10 Adrenal medulla tissue transplantation, 100 Adriamycin, 60 AIDS (acquired immune deficiency syndrome), 5, 55, 83, 144 drug therapies, 145, 172, 174–175, 178 Alcon Laboratories, Inc., 81 Allergan Medical Optics, 81 Allergy treatment, 89 Alzheimer's disease, 190 American Home Products Corporation, 190n.1 American Medical Association, 7, 107–108 Drug Evaluations, 7, 61 Ancillary services, 24 Anesthesia, 76, 94 Angina pectoris, 4, 99 Angioplasty equipment, 77 Animal research, 5, 99, 128, 170–171 Annual update factor, 28 Antibacterials, 160 Antibiotics, 37 Antihistamines, 89 Antihypertensive drugs, 25–26 Antitrust legislation, 2 Appendectomies, 97 Applied research, 188 Arterial switch surgery, 98 Arthroscopy, 96, 107, 108 Artificial heart, 85, 92 Artificial Heart Program (NIH), 74, 75 Assessment of technology, 31, 84, 100, 111, 141, 144–145 “Assignment,” 117, 120n.6 Association of Community Cancer Centers (ACCC), 55, 58 Austenal Dental, Inc., 73 Austria, 129 Autologous bone marrow transplantation, 56 Axid, 50n.10 Azidothymidine (AZT), 175 B Baby boom, 22 Banyu Pharmaceutical Company, Ltd., 164 Baxter Healthcare Corporation, 149 Beckman, Arnold, 91 Beckman Instruments, Inc., 91 Beecham Group P.L.C., 160, 183 Belgium, 138n.3, 147

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The Changing Economics of Medical Technology medical device industry, 81 pharmaceutical industry, 126–127, 130, 133, 134 Beta blockers, 4, 25 Biliary lithotripsy, 79–80, 98 “Bioequivalence,” 17n.4 Biologics Evaluation and Research Center (FDA), 179–180n.1 Biotechnology, 8 drug regulation, 129, 173, 175, 177 drug research, 36, 49–50n.8 Japanese industry, 161, 165 Blood cardioplegia, 98 Blue Cross and Blue Shield Association, 61–62, 105 Medical Advisory Panel, 106 Blue Shield of California, 108, 113, 116, 117, 120n.5 Breast cancer, 56 Breast reconstruction, 116 Bristol-Myers Squibb, 158, 183, 190n.1 C Calcium channel blockers, 37 California, 29–30 Medicaid coverage, 47–48, 107, 113 Office of Statewide Health Planning and Development, 112 Canada, 28, 29 Cancer chemotherapy innovations, 53–56, 64 chemotherapy reimbursement, 7, 56–65 drugs, 5, 17n.5, 40, 55, 59–62, 64, 83, 172, 174, 175, 178 patients, 56, 61, 66 screening, 144, 171 Capitated plans, 11–12, 29 Capoten, 50n.10 Carcinogenicity bioassay, 171 Cardiac arrhythmias, 4 Cardiac catheterization, 28, 116 Cardiac Pacemaker Registry, 85 Cardiac pacemakers, 76, 85, 91 Cardiac surgery, 28, 96–97, 98, 112, 113, 116 Cardiac transplantation, 99, 112, 113–114, 120n.5, 151 Cardiovascular disease drug therapies, 37, 40, 174, 175 mortality, 37 Carte Sanitaire, 151 Case management, 13 Case studies, 23, 24, 73 Cataracts, 80, 81 Catastrophic Care Act (1988), 61, 62 Catheter ablation of abnormal cardiac conduction foci, 116 Cefazolin, 160 “Centers of excellence,” 115 Cephalosporins, 25 Certificate-of-need regulations, 1, 113 Chemonucleolysis, 108 Chemotherapy innovations, 53–56, 64 reimbursement policies, 7, 56–65, 66 Chest radiographs, 30 Chiron Corporation, 81 Chiron Ophthalmics, Inc., 81 Cholecystectomy, 14, 97, 108 Cholesterol-reducing drugs, 26, 37, 162 Chronic disease drugs, 40 Ciba-Geigy Corporation, 158, 161 Cimetidine, 25 Class action suits, 136 Class I devices, 17n.8, 76 Class II devices, 17n.8, 76 Class III devices, 17n.8, 76, 79, 80–81 Clinical practice, 37, 55, 141 Clinical trials cancer therapies, 54, 55, 61, 62, 63, 64, 65, 66, 67 pharmaceutical, 7, 40, 128, 136, 158–159, 171–174, 178–179, 180n.2 Phases of, 5, 170–176, 180nn.2, 4, 5, and 7 surgical procedures, 13, 99, 102, 103 Cochlear implants, 11, 28, 109–110 Coding medical devices, 94–95 surgical procedures, 13, 97, 102, 105, 107–111, 118 Compassionate use, 7, 17n.5, 173, 178–179 Computerized tomography, 24, 29–30, 103, 146, 148–149, 151 Concurrent review, 13 Consensus NCEs, 37, 38 Consumer groups, 130 Contact lenses, 18n.12 Contingency fees, 136 Contraception, 10, 76 Coopervision G.m.b.H., 81 Copyrights, 182, 189 Coronary artery bypass grafting (CABG), 24, 26, 98, 99, 112–113 reimbursement policy, 108, 111 selective contracting, 14, 115, 116 Coronary artery disease, 26

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The Changing Economics of Medical Technology Cost containment, 1–2, 6–7, 31, 77 Europe, 130–131, 133 and medical device innovation, 10–12, 77–79, 82, 83, 86 private insurers, 57 and surgical procedure innovation, 13–14, 96, 108, 111, 113, 116, 118, 119 Cost-effectiveness, 119 cardiac transplantation, 113–114 of drug formularies, 50n.20 HMOs and, 11–12, 29, 30 lithotripsy, 149–150 and medical device innovation, 10–12, 91, 142, 146, 152 model of diffusion and, 22, 24–26, 27, 30–31 MRI utilization, 29 pharmaceutical studies, 8, 25–26, 190 public policy and, 144, 145, 190 Costs of disease, 190 health care, 1, 4, 15–16, 21–22, 25, 26– 27, 50n.20, 77, 85, 151, 181, 186, 187, 190 hospital, 7, 75, 77, 111, 147–148 induced costs, 23, 24, 31 lithotripsy, 78 medical device innovation, 10, 18n.12, 91–92 pharmaceutical research and development, 6, 37–40, 41, 42–43, 44, 45, 46, 100, 127, 182–183, 187 physicians and, 27 surgery, 14, 79, 81, 97, 98, 99–100, 105, 110–111, 112, 114, 115, 116, 118, 119 of technology, vii, 63, 145–146 See also Prices, pharmaceutical Coverage, 1, 13, 16n.1, 25 interim, 12, 14 See also Reimbursement Crippled Children's Services, 113 Crout, Richard, 175 Current Procedural Terminology (CPT), 13, 57, 107–108, 119n.1 Cyclosporine, 96 Cytoxan, 60 D Demand for health services, 142 for medical devices, 75 for pharmaceuticals, 139n.8, 157 for technology, 1, 3, 4–5, 22 Denial of payment, 56, 58, 61, 63, 65 Denmark health care system, 147, 148, 150, 151 pharmaceutical industry, 126–127, 131– 132, 134 Development of technology. See Research and development “Device lag,” 10, 83 Devices. See Medical devices Devices and Radiological Health Center (FDA), 179–180n.1 Diagnosis-related groups (DRG), 1–2 hospitals and, 13, 27, 28, 56–57, 63, 77, 109, 110, 117, 119n.2 medical devices, 10, 11, 77 pharmaceutical therapies, 56–57, 179 surgical procedures, 11, 109–110, 117 Diagnostic technologies, 26, 75, 144 Dialysis machines, 151 Diasonics, Inc., 79 Diffusion of technology, 16, 27, 29, 66 control of, 1, 2, 10, 21, 56, 73 and health care costs, 21–22, 24–26, 30–31 medical devices, 10, 70, 71, 72, 73, 85, 91, 141, 144, 146, 149–150 payment policies and, 14, 28, 53, 77, 109, 119, 144, 150–151 surgical procedures, 13, 96, 97, 101–102, 112–113, 114, 119 DiMasi, Joe, 39 Diuretics, 37, 50n.10 Dornier Medical Systems, 9, 79, 149–150 Dow Chemical Company, 183 Doxazosin, 156 Drug Amendments (1962, Food, Drug, and Cosmetic Act), 169 Drug Evaluation and Research Center (FDA), 179–180n.1 Drug Evaluations (American MedicalAssociation), 7, 61 Drug Information (U.S. Pharmacopeia), 7, 61 Drug Price Competition and Patent Term Restoration Act (Waxman-Hatch Act, 1984), 6, 40–41, 42, 129–130, 135, 139n.9, 177 Drugs. See Pharmaceuticals Duke University, 42 Dutch Organization for Applied Scientific Research, 149 E Education, 182, 188 Effectiveness evaluation, 21

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The Changing Economics of Medical Technology pharmaceuticals, 174, 175, 179–180n.1, 180n.4 Efficacy evaluation medical devices, 4, 12, 15, 18n.10 pharmaceuticals, 4, 5, 63 surgical procedures, 99, 101–102 Elderly, 80, 81, 85 Electrocardiograms, 30 Electronic fetal monitoring, 24 Electron microscopy, 36 Electrophysiologic mapping (EPS), 116 EMI Medical, Inc., 148–149 Endoscopic papillotomies, 103 End-stage renal disease, 25, 26, 98 Europe, 2, 139n.10, 189 health care systems, 14, 123, 124, 147– 148, 152 medical device innovation, 15, 141–146, 148–153 patent laws, 14, 15, 17n.2, 123, 129–130, 133, 137, 138n.5, 139n.9 pharmaceutical innovation, 14–15, 37, 123–138, 157–158, 163, 165 European Commission, 124, 128, 129, 134, 135, 137, 152 European Court of Justice, 134, 138n.1, 139n.12 European Economic Community (EEC), 137, 163, 164 medical device policies, 141–146, 149–153 pharmaceutical regulation, 15, 128, 130, 131, 132, 133, 135, 136, 138n.1, 139n.11, 161 European Parliament, 130 European Patent Convention, 129, 138n.5 Evaluation medical device, 76, 93 pharmaceutical, 4, 5, 61, 63, 174, 175, 179–180n.1, 180nn.2 and 4, 185 surgical procedures, 12–13, 99, 101–102, 104–105, 111 Exercise tolerance testing, 26 Experimental therapies, 7, 17n.5, 64, 99, 102 Extracorporeal shock wave lithotripsy (ESWL), 78–80 Extracranial/intracranial arterial bypass surgery, 99 Eye diseases, 80, 81 F “Fast-follower” drugs, 184–185 Federalism, 85 Fee-for-service systems, 1, 26, 30, 108 Fiberoptic endoscopes, 96 Fluorouracil, 60 Food, Drug, and Cosmetic Act (1938), 5, 169 Drug Amendments (1962), 169 510 (k) provision, 9–10, 11, 18n.10, 93 Medical Device Amendments (1976), 9, 10, 76 Food and Drug Administration (FDA) cancer drug approval and labeling, 55, 58, 59–61, 64, 65, 66–67, 83, 175 Cardiac Pacemaker Registry, 85 evaluation centers, 179– 180n.1 510(k) applications, 9–10, 11, 18n.10, 93 generic drug regulations, 6, 139n.9, 170 medical device regulation, 4, 9–10, 11, 12, 18nn.10 and 11, 28, 76, 79–81, 82, 83, 85, 93, 100, 108 pharmaceutical regulation, 4, 5–6, 7, 8, 17n.3 and 6, 39, 47, 50n.19, 70, 76, 83, 92–93, 97, 100, 101, 102, 108, 128, 136, 169–176, 177, 179, 180nn.7 and 8, 188 Food Safety and Applied Nutrition Center (FDA), 179–180n.1 Formularies, 7–8, 17n.7, 30, 47–48, 50n.20, 61, 102 Fox, Renee, 4 France health care system, 138nn.3 and 6, 147– 148, 151 medical device industry, 81, 149, 150 pharmaceutical industry, 126, 127, 130, 134, 137–138 pharmaceutical regulation, 128, 132, 133 Fujisawa Pharmaceutical Company, Ltd., 160, 162 G Gallstone lithotripsy, 79–80, 98 Gastric balloon placement, 99 General Accounting Office (GAO), 10, 18n.11, 76 General Electric Company, 73 Generic drugs, 7, 43, 46, 47, 61, 65 in Europe, 15, 123–124, 131, 133 HMOs and, 30 regulation of, 6, 17n.4, 40–41, 42, 139n.9, 170, 177, 185 Generic substitution laws, 7 Genetic engineering, 145 Germany, 138n.3, 147, 148 medical device industry, 81, 149–150

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The Changing Economics of Medical Technology medical device regulation, 151 pharmaceutical industry, 126, 127, 133, 138, 162, 163, 166, 186–187 pharmaceutical regulation, 128, 130, 132, 134 Gibbon, John H., Jr., 96–97 Glaxo Holdings P.L.C., 161, 190n.1 Global budgeting, 28–29, 31 Good Licensing Practices, 161 Good Manufacturing Practices, 150, 161 Greece, 127, 138n.6, 147 Gross National Product price deflator, 43, 50n.14 Group C drugs, 5, 17n.5, 55, 62, 63, 178 See also Cancer: drugs H Hairy cell leukemia, 64 Hansen, Ron, 39, 44 Hatch, Orrin G., 85 Health care, 56 access to, 22, 86, 144 costs, 1, 4, 15–16, 21–22, 25, 26–27, 50n.20, 75, 77, 85, 151, 181, 186, 187, 190 Europe, 14, 123, 124, 147–148, 152 Japan, 163 liability, 94 technology and, 22–24, 53, 82, 142 Health Care Financing Administration (HCFA), 8, 24 Bureau of Eligibility, Reimbursement and Coverage (BERC), 106 Cardiac Pacemaker Registry, 85 Common Procedure Coding System, 119n.1 experimental therapy coverage, 62–63, 67, 179 medical device coverage, 10–11, 12, 80, 81–82, 85 Office of Coverage Policy, 10–11 pharmaceutical coverage, 17n.5, 178 surgical procedures coverage, 105, 106, 109–110, 113, 114, 115 Health care market, 3–4 Health insurance, 4, 22, 26, 138n.7, 148, 178 Health Insurance Association of America, 7, 62 Health maintenance organizations (HMO), 57 cost containment, 1–2, 11–12, 58, 187 drug formularies, 17n.7 selective contracting, 105, 115 technology utilization, 29–30, 31 Health outcomes surgical, 14, 99, 100, 112–113, 114, 115, 116 technology and, 21, 22, 24–26, 28 Heart valves, 76 Hemodialysis, 25, 98 Herniorrhaphy, 14, 104, 106 Hewlett-Packard Company, 73, 149 High Technology Directive (1987), 130 Hip fracture patients, 116 Hoechst-Roussel Pharmaceuticals, Inc., 158 Hoffman-LaRoche, Inc., 90, 161 Home health care, 12 Honeywell, Inc., 115 Hospital Provisions Act (Netherlands), 151 Hospitals, 144 cancer care, 54–55, 66 clinical research, 63, 66, 128, 179 coding practices, 13, 105, 109–110, 118, 119n.2 competition for patients and surgeons, 29, 55, 104, 112–113, 114 cost shifting, 57 costs of technology utilization, 24, 26 drug formularies, 17n.7, 61 Europe, 147–148, 150, 151 liability, 94 payment systems and cost containment, 1, 7, 26, 75, 77, 79, 91, 105, 111, 118, 119 Prospective Payment System and, 11, 14, 27–29, 56, 63, 77, 117, 118, 119 Howmedica, Inc., 73 Humana Hospital Audubon, 104 Human immunodeficiency virus (HIV), 5 Hydroxyzine, 156 Hypertension, 30 I Imaging devices, 23, 26, 75, 91 Immunostimulants, 162 Immunosuppressive drugs, 96 Income tax law, 90, 183 Induced costs, 23, 24, 31 Inflation, 43, 50n.14, 184, 187 Innovation, 1–2 dynamic model of, 2–5 medical devices, 4, 8–12, 89–95, 97 medical devices, Europe, 15, 141–153 medical devices, public policy and, 69– 86, 89, 92, 95 pharmaceutical, 4, 5–8, 66, 166, 184, 186, 188, 189, 190

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The Changing Economics of Medical Technology pharmaceutical, Europe, 14–15, 37, 123–138, 157–158, 163, 165 pharmaceutical, public policy and, 5, 47–49, 123–124, 135–138, 181–182, 183, 184, 185, 186, 188, 189, 190 pharmaceutical, regulation and, 169–177, 181–182, 186–187 pharmaceutical, reimbursement and, 63–65, 178–179 public policy and, 2, 16, 56 surgical procedures, 4, 12–14, 96–119 Inpatient treatment, 57 Institutional Review Boards (IRB), 13, 99, 171, 173, 180n.3 Insurance claims systems, 6–7, 13 Europe, 147 health, 4, 22, 26, 138n.7, 148, 178 Japan, 157 liability, 10 Insurers, 178 denial of payment, 56, 58, 64 and drug labeling, 59, 61, 62, 64, 65–66 and surgical procedures, 14, 105, 106, 115, 120n.4 Intensive care units, 24, 75 Interferon, 64–65 Interim coverage, 12, 14 Internal Revenue Service, 90 International Classification of Diseases, 109 Intraocular lenses, 18n.12, 73, 80–82, 111, 117 Intrauterine devices, 76 Investigational device exemption (IDE), 81, 82 Investigational drugs, 17n.5, 62–63, 173, 178–179 Investigational New Drug (IND), 37–38, 55, 170, 171–174 treatment IND, 5–6, 55, 62, 178 IOLAB Corporation, 81 IOPTEX Research, Inc., 73, 81 Ireland, 129, 133–134, 138nn.3 and 5, 147 Israel, 81 Italy, 130 health care system, 138n.3, 147, 149 pharmaceutical industry and regulation, 130, 133, 134, 137–138, 162 J Japan, 81, 188 National Health Insurance, 157, 159, 161, 163–164 pharmaceutical industry and regulation, 2, 14, 15–16, 126, 127, 129–130, 139n.11, 155–166, 187 Johnson & Johnson Products, Inc., 81, 190n.1 Journal of the American Medical Association, 104 K Kaiser Permanente, 29–30 Kentucky, 47–48 Kidney stone lithotripsy, 78, 79, 80, 149– 150 Kyowa Chemical Industry Company, Ltd., 157 L Laparoscopic gynecological surgery, 14 Lasagna, Louis, 39, 173 Lasagna Committee. See National Committee to Review Current Procedures for Approval of New Drugs for Cancer and AIDS Laser atherectomies, 96 Lasers, 18n.12, 75, 77 Lawyers, 137 Lederle Laboratories, 158 Liability law and diffusion of technology, 2, 10, 71, 72, 75–76, 84, 94 Europe, 15, 136 Lilly, Eli, & Company, 160, 164, 190n.1 Linear accelerators, 151 Lithotripsy, 9, 28, 73, 78–80, 98, 149–150, 151 Liver transplantation, 98, 112, 151 Louisville, Ky., 104 Lung cancer, 56 M Magnetic resonance imaging, 26, 29, 146, 149, 151 Managed care plans, 13, 29–30, 48, 57, 58 Marion Laboratories, Inc., 183 Marketing, 185 Massachusetts General Hospital, 112 Mastectomy, 116 Medicaid, 1 and medical devices, 75, 77 pharmaceutical reimbursement, 8, 17n.7, 47–48, 50n.19, 178 surgical procedures coverage, 106–107 Medical care. See Health care

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The Changing Economics of Medical Technology Medical compendia, 7, 17n.6, 61, 67 Medical Device Amendments (1976, Food, Drug, and Cosmetic Act), 9, 10, 76 Medical devices Classes of regulation, 17n.8, 76, 79, 80–81 diffusion of, 10, 70, 71, 72, 73, 85, 91, 102, 141, 144, 146, 149–150 and health care costs, 22, 23 patent protection, 9, 70–71, 89–90, 100– 101 regulation of, 4, 9–10, 11, 12, 17nn.8 and 9, 18n.10 and 11, 28, 76, 79–81, 82, 83, 84, 85–86, 97, 100, 108, 173 and surgical innovation, 96, 108 Medical devices industry, 8–9, 12, 95, 152 patents and, 9, 89–90 regulation and, 9–10, 69–73, 74, 76, 79, 86, 86n.1 research spending, 18n.12, 75, 90, 91–92, 145–146 Medical devices innovation, 4, 8–12, 89–95, 97 Europe, 15, 141–153 public policy and, 69–86, 89, 92, 95, 141– 142, 144–145 Medical oncology, 54 Medical practice. See Clinical practice Medicare, 77 and demand for technology, 1, 75 medical device reimbursement, 12, 25, 28, 79, 80, 81, 82, 85 pharmaceutical reimbursement, 6, 57, 62– 63, 178 surgical procedure reimbursement, 105, 106, 107, 109, 113, 114, 115, 116–117, 120n.6 See also Prospective Payment System Medstone International, 79 Medtronic, Inc., 91 Meiji Seika Pharmaceutical International, Ltd., 157 Merck & Company, Inc., 158, 161, 164, 182, 183–184, 188, 190, 190n.1 Mergers, 183 Meta-analysis, 101 Methotrexate, 60 Methylmethacrylate, 96 Metropolitan Life Insurance Company, 115 Microprocessors, 93 Modifiable selective reimbursement, 14 Monitoring technologies, 94 Morbid obesity, 99 Mortality and morbidity, 14, 37, 99, 100, 111, 115 Mutamycin, 60 Myocardial infarction, 25 N National Aeronautics and Space Administration, 74–75 National Cancer Act (1971), 54 National Cancer Institute (NCI), 55, 62, 64, 172, 179 National Center for Health Statistics, 109 National Committee to Review Current Procedures for Approval of New Drugs for Cancer and AIDS (Lasagna Committee), 62, 172, 173 National Health Insurance (Japan), 157, 159, 161, 163–164 National Health Service (United Kingdom), 132, 150, 153n.2 National Hospital Formulary, 61 National Institutes of Health (NIH), 63 and AIDS drugs, 174 Artificial Heart Program, 74, 85 cancer therapy media campaign, 55 research spending, 49, 54, 67, 72, 74, 75, 85, 102, 103, 182–183, 188 Small Business Innovation Research grants, 92 National Science Foundation, 188 Netherlands, 126–127, 130, 131–132, 134, 138n.3, 147–148, 151 New chemical entities (NCE), 37, 126, 129, 186–187, 188, 191n.2 consensus, 37, 38 discoveries, Japan, 159, 160, 162, 164– 165 regulation of, 159, 174 reimbursement policy, 178 research costs, 39, 49n.5 New Drug Application (NDA), 170 abbreviated, 6, 40–41 approval time, 37–38, 42, 172, 173, 174–176 available to generic competition, 139n.9 data requirements, 6, 50n.9, 171 supplemental, 7, 61, 64, 176–177, 179 New York (state), 113 Nixon, Richard M., 54 Non-steroidal anti-inflammatory drugs (NSAID), 37 Northgate Research Corporation, 79 Nursing home care, 11–12, 29, 116

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The Changing Economics of Medical Technology O Office of Health Technology Assessment (OHTA), 10–11, 28 Off-label use, 7, 58–62, 64–65, 179, 180n.8 Omnibus Budget Reconciliation Act (1980), 117 Oncology, 54, 55, 57, 66 Oncovin, 60, 61 Open-heart surgery, 28, 98, 112, 113, 116 Ophthalmology, 80 Opportunity costs, 7, 49n.6, 50n.16 Oral H2 blockers, 103 Oregon, 107 Organ transplants, 28, 96, 107, 114 bone marrow, 56 cardiac, 99, 112, 113–114, 120n.5, 151 liver, 98, 112, 151 renal, 98, 107 Orphan disease drugs, 174 Outcomes. See Health outcomes Outpatient services, 11, 12, 27, 57, 77, 116– 117 P Parallel importing, 132 “Parallel track system,” 6 Parkinsonism, 100 Patent protection, 100–101, 182, 189 effective patent life, 6, 14, 15, 17nn.2 and 3, 41–43, 47, 53, 64–65, 123 Europe, 14, 15, 17n.2, 123, 129–130, 133, 137, 138n.5, 139n.9 Japan, 15, 16, 156, 160, 163, 165 medical devices, 9, 70–71, 89–90, 100– 101 pharmaceuticals, 5, 6, 40, 41–43, 46, 47, 50n.11, 64–65, 66, 139n.9, 163, 165, 177, 185, 186 Patient outcomes. See Health outcomes Patients, 3, 185, 187 cancer, 5, 54, 55, 56, 61, 66 in clinical research, 50n.9, 62, 63 and payment policies, 56, 62, 63, 66, 120n.6, 131, 147 surgical, 99, 115, 116 Payers, 4 and health care costs, 27, 119 and medical devices, 94 and pharmaceuticals, 17n.5, 62, 102, 178, 180n.8, 187 Payment, 67, 96 denial of, 56, 58, 61, 63, 65 hospital, 75, 77, 105, 118 for investigational therapies, 62–63, 178– 179 Medicare, 62–63, 77, 81–82, 85, 116–117, 120n.6 physician, 1–2, 18n.13, 30, 105, 110, 118 public policy, 1–2, 5, 6–7, 12, 13–14, 15– 16, 16n.1, 75, 178–179 surgical procedure, 97, 104–117 See also Coverage; Prospective Payment System; Reimbursement Peer review, 13, 105, 111, 117 Penicillin, 156 Pepcid, 50n.10 Peptic ulcer disease, 25, 98, 99, 103 level="1"Percutaneous biopsy, 103 Percutaneous catheter ablation, 116 Percutaneous endoscopic techniques, 78 Percutaneous transluminal coronary angioplasty (PTCA), 11, 108, 112 Peter Principle, 26 Pfizer, Inc., 73, 156, 158, 163, 190n.1 Pfizer Laser Systems, 73 Pharmaceutical Affairs Law (Japan), 161 Pharmaceutical Manufacturers Association, 49n.5, 183, 191n.2 Pharmaceutical producer price index (PPPI), 43, 50nn.13 and 14 Pharmaceuticals, 22 AIDS drugs, 144, 145, 172, 174–175, 178 approval time, 17n.3, 37–38, 42, 172, 173, 174–176, 180nn.5 and 6 cancer drugs, 5, 17n.5, 40, 54, 55, 59–62, 64, 83, 172, 174, 175, 178 cardiovascular disease drugs, 37, 40, 174, 175 cholesterol-reducing drugs, 26, 37, 162 clinical trials, 7, 40, 128, 136, 158–159, 171–174, 178–179, 180n.2, 4, 5 and 7 cost-effectiveness analysis, 8, 25–26, 190 denial of payment, 58, 61, 65 diffusion of technology, 102 drug formularies, 7–8, 17n.7, 30, 47–48, 50n.20, 102 drug utilization, 15–16, 30, 125, 138n.3 labeling, 17n.6, 59, 64 new drugs, 8, 23, 36, 40, 45, 46–47, 48, 53–67 new indications, 58–62, 179 off-label use, 7, 58–62, 64–65, 179, 180n.8 patent protection, 5, 6, 40, 41–43, 46, 47, 50n.11, 64–65, 66, 89, 100–101, 139n.9, 163, 165, 177, 185, 186

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The Changing Economics of Medical Technology Phases of clinical trials, 5, 170–176, 180nn.2, 4, 5 and 7 polypharmacy, 69 product life cycle, 40–41, 43, 46, 47, 50n.18, 93, 184–185 regulation, Europe, 15, 123, 128–129, 131–132, 133, 135, 136, 137, 138n.1, 139n.11, 161 regulation, FDA, 4, 5–6, 7, 8, 17nn.3 and 6, 39, 47, 50n.19, 70, 76, 83, 92–93, 97, 100, 101, 102, 108, 128, 136, 169– 176, 177, 179, 180nn.5, 6, 7 and 8, 188 regulation, Japan, 156, 158–159, 160–161, 164 research and development, 6, 35–49, 126– 127, 128–129, 135, 138n.4, 181–190 side effects, 6, 176, 180n.7 and surgical innovation, 96, 108 used in lithotripsy, 80 See also Prices, pharmaceutical Pharmaceuticals industry, 37, 65, 73, 89, 90, 95 and cancer drugs, 54, 55, 66 and clinical trials, 61, 64, 172, 176 Europe, 15, 126–127, 129, 132, 133–134, 135–136, 137, 138n.1, 139n.10 Japan, 15, 16, 155–166 patent protection and, 129–130, 177, 186 pricing behavior, 8, 43, 177, 187 research and development, 8, 35, 36, 38, 40, 46–47, 49, 127, 181–188, 190 return on investment, 8, 43–46, 47, 49n.6, 50n.16, 53, 64, 65, 123, 129, 177, 183, 185–186, 190 Pharmaceuticals innovation, 4, 5–8, 66, 166, 184, 186, 188, 189, 190 Europe, 14–15, 37, 123–138, 157–158, 163, 165 public policy and, 5, 47–49, 123–124, 135–138, 181–182, 183, 184, 185, 186, 188, 189, 190 regulation and, 169–177, 181–182, 186– 187 reimbursement and, 63–65, 178–179 Phase I trials, 171, 173, 180n.2 Phase II trials, 5, 172, 175–176, 180n.5 Phase III trials, 173–174, 175–176, 180nn.4 and 5 Phase IV studies, 5, 176, 180n.7 Philips Medical Systems International, 149 pH meter, 91 Physician Payment Review Commission (PPRC), 109 Physicians, 31, 117 and coding systems, 13, 107–109, 118 and health care costs, 27–28, 119 in Japan, 15, 157, 159 liability and, 94 payment systems, 1–2, 18n.13, 30, 105, 110, 118 prescription practices, 59, 64–65, 69, 176 reimbursement policies and, 1, 30, 53, 58, 85 and technological innovation, 4, 17n.6, 53, 65–66 Physician's Desk Reference, 59 Platelet activating factor antagonists, 162 Platinol, 60 Pneumonia, 25 “Polyintervention,” 69–70, 73–74, 78, 83–85, 86, 86n.1 Polypharmacy, 69 Portugal, 127, 129, 133, 138n.5, 147 Post-marketing surveillance medical devices, 10, 76, 83, 101–102 pharmaceuticals, 5, 6, 136, 170, 176–177 Pre-certification, 13 Preclinical testing, 170–171 Preferred provider organizations (PPO), 1–2, 11 Pre-marketing application (PMA), 10, 79, 81, 82 Pre-marketing approval, 2, 15, 16, 136 medical devices, 9–10, 76, 79, 82, 83 pharmaceuticals, 5–6, 169 Prices, pharmaceutical, 8, 43, 44, 45, 50nn.13, 14, and 16, 139n.8, 186, 187 Europe, 123, 130–133, 134, 135, 136, 137, 138nn.6 and 7 generics and, 65, 133, 177 Japan, 157, 161, 166 Private foundations, 103 Private sector European health care systems, 148 insurance industry, 178 public policy and, 78 research, 48–49, 70, 75, 149 Professional Review Organizations, 117 Prospective Payment Assessment Commission (ProPAC), 28, 110 Prospective Payment System (PPS) and clinical research, 63 and diffusion of technology, 1–2, 27, 28, 31, 56–57 and medical devices, 10, 11, 77 and surgical procedures, 13, 28, 110, 116, 118, 119

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The Changing Economics of Medical Technology Prudential Insurance Company of America, 115 Public Health Service, 10–11 Public policy, 16, 25, 31, 56 Europe, 14–15, 123–138, 141–153 Japan, 15–16, 165 medical device innovation, 69–86, 89, 92, 95, 141–142, 144–145 payment, 1–2, 5, 6–7, 12, 13–14, 75, 178– 179 pharmaceutical innovation, 5, 47–49, 123–124, 135–138, 181–182, 183, 184, 185, 186, 188, 189, 190 Pulse oximetry, 89–90 Q Quality-adjusted life years, 25, 31n.1 Quality of life, 25–26, 142–143 Quinolones, 162 R Regulation, 2, 13 approval time, 17n.3, 37–38, 42, 172, 173, 174–176, 180nn.5 and 6 certificate-of-need, 1, 113 Classes of medical devices, 17n.8, 76, 79, 80–81 generic drugs, 6, 17n.4, 40–41, 42, 139n.9, 170, 177, 185 medical devices, 4, 9–10, 11, 12, 17nn.8 and 9, 18nn.10 and 11, 28, 71, 72, 75–76, 78–81, 82, 83, 84, 85, 89, 92–93, 100, 108 medical devices, Europe, 15, 143–144, 150, 152 pharmaceuticals, 4, 5–6, 7, 8, 17nn.3 and 6, 39, 47, 50n.19, 70, 76, 83, 92–93, 97, 100–102, 108, 169–177, 186–187 pharmaceuticals, Europe, 15, 123, 128– 129, 131–132, 136, 137, 138n.1, 139n.11, 161 pharmaceuticals, Japan, 156, 158–159, 160–161, 164 Phases of clinical trials, 5, 170–176, 180nn.2, 4, 5 and 7 “polyintervention,” 69–70, 73–74, 78, 83– 85, 86, 86n.1 surgical procedures, 97, 100, 113 See also Food and Drug Administration Reimbursement, 16n.1, 21, 96 and diffusion of technology, 26–30, 31, 53 Europe, 131, 144, 145–146, 147, 148, 150–151 HMOs and managed care plans, 13, 29– 30, 57, 58 hospital, 1, 27–29 Japan, 161, 164 Medicaid, 8, 17n.7, 47–48, 50n.19, 106– 107, 178 and medical devices, 71, 72, 77, 80, 83, 85, 94–95 Medicare, 6, 11, 12, 25, 27, 28, 31, 56–57, 62–63, 77, 79, 80, 81, 82, 85, 105, 106, 107, 109, 113, 114, 115, 116–117, 120n.6, 178 pharmaceutical, 6–8, 47–48, 56–65, 66, 177, 178–179, 180n.8 physician, 1, 30, 53, 58, 85 surgical procedures, 13, 96, 105, 106, 107, 109, 113, 114, 115, 116–117, 118, 120n.6 See also Coverage; Payment Reischauer, Edwin O., 155 Renal dialysis, 24, 151 Renal lithotripsy, 98, 110 Renal transplantation, 98, 107 Renin inhibitors, 162 Research, 16, 23–24, 74, 102, 103, 127, 142 animal studies, 5, 99, 128, 170–171 biomedical, 2–3, 48–49, 72, 75, 82, 138n.2, 182–183, 184, 188 cost-effectiveness, 8, 22, 24–26, 27 translation of, 70, 141 university, 13, 14, 54, 55, 92, 103, 149, 173, 184, 188 Research Councils (United Kingdom), 149 Research and development cancer and AIDS drugs, 40, 54–55, 64, 144, 145 contraceptives, 10 demand for technology and, 3, 4–5 medical devices, 9, 11, 12, 70, 74–75, 85, 89, 90–91, 92, 95 medical devices, Europe, 144, 145, 149– 150, 152 patent protection and, 6, 9, 41–43, 47, 64– 65, 185, 186 payment policies and, 11, 47–48, 64, 187 pharmaceutical, 6, 35–49, 64–65, 66, 181–190 pharmaceutical, costs of, 8, 37–40, 41, 42–43, 44, 45, 46–47, 49, 49nn.4, 5 and 6, 50n.17, 162, 182–183 pharmaceutical, Europe, 15, 123, 127, 131, 133–134, 135–136, 137, 186–187

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The Changing Economics of Medical Technology pharmaceutical, Japan, 159–160, 162, 164, 165, 166, 186–187 pharmaceutical, return on investment, 8, 43–46, 47, 50n.16, 53, 64, 65, 123, 177, 183, 185–186, 190 public policy and, 2, 47–48, 66–67, 85, 181–182, 183–184, 188 surgical procedures, 12, 103 Resource-based relative value scale(RBRVS), 1–2, 13, 18n.13, 30, 118– 119 Return on assets (ROA), 185–186, 190n.1 Rhône-Poulenc, Inc., 183 Risk-adjusted economic returns, 185 Rorer Group, Inc., 183 Roussel Uclaf, 158 S Safety medical devices, 12, 15, 18n.10, 79, 82, 83, 84, 85, 86 pharmaceuticals, 4, 5, 174, 175, 179–180n.1, 180n.2, 185 Sandoz, Inc., 158 Schering AG, 158 Schering-Plough Corporation, 190n.1 Science, 2–3, 70, 102 education, 182, 188 research spending, 74, 75, 103, 127, 135 Selective contracting, 13–14, 113–118, 119, 120n.4 Self-insured employers, 67, 115 Shionogi & Company, Ltd., 164 Shumway, Norman Edward, 99 Sick Funds Council (Netherlands), 151 Side effects, 6, 176, 180n.7 Siemens Corporation, 149 Small Business Innovation Research program, 92 Smallpox, 190 SmithKline Beecham P.L.C., 81, 183, 190n.1 Social security health care systems, 147–148 Spain health care system, 138n.3, 147, 148 pharmaceuticals in, 127, 129, 132, 133, 134, 138nn.5 and 6 Squibb Corporation, 183 Stanford University, 99, 112, 113, 120n.5 States, 1, 8, 47–48, 50n.19, 76, 85, 187 “Substantial equivalence,” 17n.9 Supplemental NDA, 7, 61, 64, 176–177, 179 Supratentorial craniotomy, 107 Surgeons, 14, 115 Surgical procedures, 2, 22 cardiac, 28, 96–97, 98, 112, 113, 116 case loads, 112 cataract, 81 coding, 13, 97, 102, 105, 107–111, 118 innovation, 4, 12–14, 96–119 kidney stone, 78, 79 selective contracting, 13–14, 113–118, 119, 120n.4 Swan-Ganz catheter monitoring, 108 Sweden, 129, 136, 147, 150, 153n.2 Switzerland, 138n.3 pharmaceutical development, 126, 129, 132, 138, 166, 186–187, 191n.2 T Tagamet, 50n. 10 Taito Corporation, 157 Taxation, 90, 183 Tax Equity and Fiscal Responsibility Act (1982), 56 Technology, 82, 104, 112, 188 assessment of, 31, 84, 100, 111, 141, 144–145 cost-effectiveness of, 12, 91, 152 demand for, 1, 3, 4–5, 22 dynamic model of innovation, 2–5 and health care costs, 1, 6, 21, 22–24, 114 policy incentives and, 1–2, 16, 53, 75, 77, 141, 142 translation of, vii, 70, 141 use of, reimbursement and, 26–30, 56–63 See also Diffusion of technology; Research and development Technomed International, Inc., 79 Texas Heart Institute, 115 Thalidomide, 5, 158, 171 Thatcher, Margaret, 127 Tissue plasminogen activator, 110 Total hip joint replacement, 96 Toyo Jozo Company, Ltd., 157 Trade, 2, 148, 182, 189 import restrictions, 138n.1, 139nn.11 and 12, 156 parallel importing, 132 Trademarks, 182, 189 Translation of technology, 70, 141 Transparency Directive (1990), 134 Transurethral resection of the prostate (TURP), 109 Treatment IND, 5–6, 55, 62, 178

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The Changing Economics of Medical Technology Treaty of Rome, 124, 131, 132, 134, 138n.1, 139nn.11 and 12 Tufts University, 39 U Ulcer treatment, 103 Ultrasound, 75 “Unbundling,” 108, 120n.3 Uninsured persons, 22 United Kingdom health care system, 138n.3, 147, 148 medical device industry, 146, 148–149 medical device regulation, 150, 151 National Health Service, 132, 150, 153n.2 pharmaceutical industry, 126, 127, 132, 134, 138, 138n.2 and 4, 139n.14, 166, 186–187 pharmaceutical regulation, 128, 130, 132– 133, 134, 136 United States, 2, 14, 15–16, 29, 31, 123 Defense Department, 75, 92 generic drug policy, 15, 40–41, 133 and medical device industry, 69–70, 73– 78, 85–86, 152 medical device market, 148, 150, 153 national debt, 189 Occupation Administration (Japan), 155, 156 patent law, 17n.2, 129–130, 165 pharmaceutical industry in, 36–40, 126, 127, 135–136, 157–158, 162, 163, 166, 183, 186–187, 188, 189, 191n.2 U.S. Congress, 25, 61, 62, 67 and cost containment, 8, 30, 77, 81, 85, 110 medical device regulation, 10, 76, 81, 83 pharmaceutical regulation, 170, 171, 177, 186, 189 U.S. Pharmacopeia, 7, 17n.6, 61 Universities, 13, 14, 54, 55, 92, 103, 149, 173, 184, 188 University of California at San Francisco, 111 “Upcoding,” 108 Upjohn Company, 190n.1 Uruguay Round trade talks, 164, 165 Utilization review, 6–7, 29, 30, 62, 117 V Vagotomy techniques, 98 VAMP Ltd., 139n.14 Vasotec, 50n.10 Vepesid, 60 Vernon, John, 40, 41, 43 Veterinary Medicine Center (FDA), 179– 180n.1 W Warner Lambert Company, 190n.1 Washington (state), 47–48 Waxman-Hatch Act. See Drug Price Competition and Patent Term Restoration Act West Germany. See Germany World War II, 15, 139n.10, 155 X X-ray crystallography, 36 Y YAG laser, 18n.12 Yarbro, John W., 63 Z Zantac, 50n.10