Measuring
the Returns to
NASA Life Sciences Research and Development
Dr. Henry R. Hertzfeld
Washington,
DC 20052
(202)
994-6628
hrh@gwu.edu
September
30, 1998
Summary of
Results..........................................................................................................................................
4
Introduction..........................................................................................................................................................
8
Returns to
government
investment.................................................................................................
8
Mission
objectives...........................................................................................................................................
8
Economic
Effects of Government Programs in Life Sciences Research and Development 8
Measuring
Economic
Benefits of Life Sciences R&D.................................................................
8
NASA
Benefits: Methodological Approach to
Measurement........................................ 8
Methodology.....................................................................................................................................................
8
Firms in
Study: The Sample..........................................................................................................................
8
The
Interview Process....................................................................................................................................
8
Data
Methodology............................................................................................................................................
8
Background.........................................................................................................................................................
8
G.W.
Interview Data.........................................................................................................................................
8
Results
....................................................................................................................................................................
8
Evidence of
social
benefits......................................................................................................................
8
The Portfolio
of
Investments: Returns from the Three Top
Performers.............. 8
Summary Of
Results From
Other Firms............................................................................................
8
General
Observations..................................................................................................................................
8
Recommendations...............................................................................................................................................
8
Appendix 1:
Data Requested From Firms........................................................................................................
8
APPENDIX 2:
Selected Case Studies.....................................................................................................................
8
3-M Company: Food
Warming Device................................................................................................
8
Bio-Merrieux-Vitek: Automated
Microbial Assay System.....................................................
8
Cox Rapid Heat-Transfer
Sterilizer.................................................................................................
8
Diatek: Infrared
Ear Thermometer................................................................................................
8
EDL: BaroCuff..............................................................................................................................................
8
Human Technologies: Temperature
Pill.......................................................................................
8
ILC: Cool Suits.............................................................................................................................................
8
Microsensor Technology: Gas
Chromatograph.....................................................................
8
Orbitron: Exercise/Amusement
Machine.......................................................................................
8
Synthecon: Bioreactor.........................................................................................................................
8
Tempur-Pedic: Foam
Support Surfaces...........................................................................................
8
Umqua: Water
Purification Device..................................................................................................
8
Appendix 3:
MeasuremenT TECHNIQUES IN NIH
ECONOMIC STUDIES.................................................
8
A survey of forty-one companies that reported
prior
commercial success in transforming NASA R&D investments in the life
sciences into marketable goods and services was conducted in late 1997
by the
Space Policy Institute, George Washington University. Fifteen of these firms provided useful
data
for this study. These firms alone have
cumulatively contributed over $1.5 billion in value added to the
economy over
the past twenty-five years. The
cumulative NASA R&D investment in the technologies represented by
the
products of these firms was approximately $64 million. An additional
$200
million in private R&D from those companies was stimulated by the
NASA
investment. This additional R&D was
necessary for the production, development, and marketing of the
commercial
products and represents the positive leverage of NASA life sciences
investments.
These are conservative estimates because they only
measure
the impact of NASA R&D on the companies that produce and market the
products. The results from personal
interviews conducted for this study also show that there are very large
benefits
that accrue to the purchasers and users of the life sciences products
produced
and sold by these companies. These social
benefits range from cost savings through the use of more efficient
medical and
research equipment to non-quantifiable benefits such as the
substitution of
non-invasive procedures for surgery.
These societal and downstream impacts and benefits are
documented and
described in this study, but are not included in the summary statistics.
Within NASA’s mission of conducting civilian space
activities for the United States Government, the life sciences
activities have
a primary goal of keeping human beings alive and healthy in the adverse
environment
of outer space. Economic benefits are
important,
but are secondary to the primary mission.
The findings of this pilot study are:
·
over $1.5 billion in value added can be
attributed to
the investment in life sciences from NASA in these fifteen firms alone,
·
the benefits are purposely understated by
not
quantifying social benefits (even when they have been identified),
·
other firms are known to have claimed
successful
commercial applications from NASA Life Sciences R&D,
·
there are many documented examples of
social benefits
from space life sciences research that are not associated with
commercial
products,
·
NASA’s life sciences total expenditures
over the past
40 years has amounted to approximately $3.7 billion (which includes
many
mission related projects that have made it possible for NASA to engage
in
manned space flight and for which there have been with no expected
commercial
benefits).
On the basis of these conservative estimates
taken with
mission success of the life sciences effort and ample evidence of other
social
benefits from the descriptions provided by the users of many specific
life
sciences spinoff applications, it can be concluded that NASA Life
Sciences
investments have more than “paid for themselves.”
Figure 1, below, illustrates that the economic
analysis
performed for this report is only a brief snapshot in time. It builds on the descriptions of spinoff
technologies that can be found in NASA and other documentation by
adding an
economic quantification based on interviews with the firms. The economy is a dynamic engine, constantly
changing. So, too, is technology. Most NASA documentation on technologies with
commercial potential focuses on cutting-edge research that is underway
or
recently completed. Commercial products
often follow years later. Some never
fulfill their market potential.
Figure 1: Tracking Commercial Spinoffs
Therefore, by looking at the cumulative effects of
life
sciences at any given point in time (in this case, late 1997) an
indication of
what has occurred “after NASA” is presented.
This type of study should be repeated periodically, as the
results will
be different each time. More than
likely, the economic and social impacts will become larger with the
passing
years, since each new technology builds on the last, and each new
commercial
product stimulates improvements and advances not previously imagined.
The
contributions of this study are:
1.
measuring a limited subset of economic benefits
from NASA Life
Sciences Program using a methodology that permits combining the
cumulative
benefits from different companies into an aggregate measure of economic
impact;
2.
documenting that these measures clearly show that
the private
sector realizes substantial leverage from the initial NASA R&D
investment;
3.
documenting these quantitative measures as
accurately as
possible because they are based on data obtained from the companies
themselves;
4.
providing evidence of large social benefits (both
measurable
and descriptive), which are so varied that they do not lend themselves
to
aggregate values;
5.
analyzing economic benefits from an historical
perspective
which clearly demonstrates that the NASA influence continues well
beyond the
cessation of the NASA project or the NASA R&D funding;
6.
revealing that there is a role for NASA technology
transfer
activities to continue to have an influence on benefits throughout the
life
cycle of a product.
The recommendations from this study are:
1.
NASA continuously monitor the economic impact of
spinoff
technologies.
·
the economic components of successfully
marketed
technologies have not been well documented
·
each year new products enter the
market-place and older
products may have reached the end of their life cycle
2.
NASA develop an institutional capability to
establish a
continuing relationship with firms that no longer are performing
R&D for
NASA, but have taken NASA-stimulated technologies into the
market-place.
·
these firms often have commercial products
that have
use in future NASA or other government endeavors, thus providing
benefits back
to the government,
·
these firms are often small and have
limited financial
and marketing skills, and therefore can benefit from having continued
access to
NASA technical expertise as well as the positive advertising and
promotional
benefits from being identified with NASA, and
·
NASA can act as a broker and matchmaker to
develop
partnerships between these firms and government agencies or larger
private
sector companies. Such partnerships can
help small firms overcome financing and distribution hurdles and enable
more
rapid growth of sales.
3.
In the life sciences and medical fields, NASA can
offer
assistance in the following ways:
·
provide opportunities for additional
testing of devices
that can aid a firm in acquiring approvals from regulatory agencies
such as the
Food and Drug Administration,
·
provide an interface with other government
agencies
that may offer markets for products (e.g. the Veterans Administration
hospitals, or the National Institutes of Health),
·
provide technical advice and other
assistance to firms
with federal and state agencies that set regulations for Medicaid and
other
related programs.
4.
NASA should implement these suggestions as
components of its
on-going and existing programs. The establishment of a new bureaucracy
or new
NASA programs to implement the recommendations should not be necessary.
The initiative for
requesting government assistance to industry should come from industry
itself. A specific NASA program to
“help” industry will not be as effective as an on-going cooperative
relationship between NASA and the firms.
Government assistance should come from a natural and comfortable
evolution of mutual trust and benefit between the government and the
private
sector.
There are definite and measurable returns to
government
investments. The problem is that the
standard framework for economic analysis is based on a private
enterprise that
is in existence to make a profit. An
investment’s contribution to the bottom-line profit is its rate of
return as
measured by its percentage yield compared to its cost, over a period of
time
and in relation to “average” returns in the economy for similar
investments. The government, however,
does not exist for the purpose of making, let alone maximizing, profits. The government does not even have a capital
account. And, by convention, the U.S.
government does not consider any expenditure an investment.
Therefore, any comparison between industry return on investment (ROI)
and
government rates of return must be very carefully analyzed. They are not the same, and there is no
reason they should be the same.
Therefore, the methodology used for calculating returns to
government
R&D expenditures should be different from the metrics that are used
by
corporate R&D efforts. The focus
for measuring government returns to its expenditures on R&D should
be on
the impacts on the beneficiaries of government R&D (firms and the economy in general) rather than solely
on the benefits that flow back to the particular government agency.
Government missions in science and technology
rarely are
designed for maximizing economic impacts.
They are either optimized for a mission such as national
security or, as
in the case of fundamental research, for generating knowledge. Only those specific programs oriented toward
the transfer of technology may qualify as having a mission that
dictates a
direct economic impact. Of course, when
the government expends funds, income and jobs are created in the
private
sector. However, those short-term
spending impacts only last as long as the funds continue to be expended. The economic benefits from the transfer of
technology may be more delayed, but will have much longer lasting
effects on
sales, productivity, profits, and international competitiveness of the
private
sector.
Capturing all of the broad objectives of various
mission-oriented federal R&D programs in simple economic measures
is not
possible. Because of the complexity and
vast differences in the missions of the agencies, any economic measure
is only
a very partial accounting of the impacts of any program.
And, since most technology transfer
activities involve pushing the results of federally-sponsored
technology into
other uses, many of the measures and models ignore larger aspects of
economic
impacts in favor of trying to understand how better to manage and sell
transfer
programs. In addition, economic
externalities
(impacts beyond the firm or industry that can be measured by standard
microeconomic
techniques) are often ignored. These
externalities can have positive and negative impacts on sectors of the
economy.
Many federally-sponsored R&D programs have
resulted in
major economic changes. Examples
include: the NACA in developing aircraft
technology; the Department of Agriculture in creating the extension
service to
disseminate research results on better farming techniques; the NIH
R&D
efforts that led to the creation of the biotechnology and
bioengineering industries;
the Department of Defense support of electronics, computers, and
software
which, in combination with the miniaturization needed for the space
program has
played a large role in making the United States a world leader in the
computer
industry; and the NASA R&D that provided access to space for
satellite
communications. Although it is possible
to measure the sales and growth of these industries, it is virtually
impossible
to calculate in economic terms the improvements and changes in the
quality of
life and the way we live as a result of the contribution of federal
R&D
programs.
Figure 2 illustrates the types of outcomes that
are possible
to measure and document. Other than the
direct job creation from any government spending or investment program,
most of
the impacts are somewhat removed from the mission objectives of the
programs. This is particularly true of
R&D programs such as NASA’s Life Sciences.
Life sciences and biomedical research and
development in the
Federal Government is a $13 billion per year investment (FASEB 1996). The National Institutes of Health account
for over 70% of the total, with most of the rest of the expenditures
spread
across the Departments of Defense, Agriculture, Energy, and Veterans
Affairs,
as well as the Environmental Protection Agency, and the National
Science
Foundation.
The NASA investment in life sciences and
biomedical research
and development is about $50 million per year, less than .05% of the
total of
Federal life sciences R&D. Even though this NASA investment is only
a very
tiny part of federal life sciences R&D, it involves access to and
research
in the microgravity environment of space, an endeavor very unlike that
of other
Federal agencies. As described in more
detail below, one of NASA’s main life sciences missions is to keep
healthy
people alive in an hostile environment.
Most other federal life sciences R&D is oriented toward
identifying
and treating diseases that have made people ill. This
difference is fundamental to understanding the different approaches
to measuring the economic impacts and benefits of R&D programs in
life sciences.
Figure 3, illustrates the similar but very
different flows
of NASA and NIH economic impacts. The
primary difference is reflected by the different missions of the two
agencies.
NASA considers non-space applications as spinoffs while NIH considers
only
non-medical/life sciences applications as spinoffs.
The NIH has created a model of the biomedical and
life
sciences R&D environment that is based on direct impacts on human
beings. Their literature, mission
statements, and outcome measures are described in human
terms--identifying,
diagnosing, and treating human diseases and measuring success through
increases
in human life span, number of patients treated, and increases in the
quality of
medical services delivered (NIH 1990). The economic models they use to
measure
quantifiable impacts are labor-oriented models that primarily measure
the gains
in productivity from people working as opposed to not working because
of
illness or diseases (NIH 1993). And,
for the treatment of diseases, the economic impact models center on the
economic savings to patients or society from the use of new medical
tests,
procedures, or instruments (NIH 1993 and Raiten 1983).
The mission goals of the National Aeronautics and
Space
Administration’s life and biomedical science division are very
different from
the research objectives of the NIH.
NASA is a government agency devoted to solving engineering and
science
problems in aeronautics and space. The
Life Sciences at NASA primarily are oriented toward supporting human
activity
in space. Zero gravity, extreme heat
and cold, exposure to radiation and other space environments that do
not exist
on earth, and other pre- and post-mission medical problems are those
that
concern the research NASA supports. The
measures of success are more like other engineering projects: instruments, equipment, and medicine to both
monitor the condition of astronauts and keep healthy astronauts alive
in alien
and different conditions. Applications
of space medicine and equipment to specific diseases and common
afflictions of
the general population are considered spinoffs of the research rather
than
direct mission requirements as with NIH-type medical research. Microgravity also creates a unique and
interesting environment for experimental research in the life sciences
(and
other fields as well).
The NASA mission objectives lean far more toward
the applied
and development end of the spectrum than toward fundamental research
(NASA
1997). The hardware needed in space is
complex and expensive. NASA often contracts with private industry to
perform
the R&D. The actual research
sponsored in life sciences is awarded through a peer review system,
which is
similar to the way other agencies, including the NIH, make awards.
The economic component of the NASA R&D is much
more a
capital model than a labor model.
Outcomes are measured by the success of the space mission, and
by the
performance of the instruments and equipment (NASA 1987).
Industrial spinoffs and the impacts of new
technology are expected and important elements of the NASA program
(NASA 1997). Whereas NIH regards spinoffs
to be
applications that are non-life sciences related (since life sciences
are the
mission focus), NASA defines spinoffs as any non-space use of the
research or
technology, including other medical applications (NASA 1995). Measurements such as sales and jobs created
through innovations from technological spinoffs, productivity gains
through new
capital equipment, and consumer’s surplus created by lower prices
through
innovations related to NASA technology have often been applied to
space-related
technological impacts. Such measures
would be commercial “benefits” or spinoffs to only the small sub-set of
NIH’s
portfolio of technologies that are used in non-medical applications.
It is quite interesting to note how two agencies
investing
in very similar areas can differ in approaches and in outcomes. Disregarding the huge variance in the size
of the life sciences investments by NIH and NASA as well as many NASA
and NIH
programs that overlap, one can summarize the essence of the differences
as a
labor approach and model of the economy for NIH and a capital approach
and
model of the economy for NASA.
This pilot study
was designed
to show that significant economic benefits can be measured from past
investments originating in the NASA Life Sciences program (as well as
selected
examples of benefits from general NASA R&D that have been
incorporated into
life sciences applications). Measurable
benefits can be found by analyzing the impact of the NASA R&D
investments
on the industrial firms that have received grants or contracts from
NASA to
perform R&D as well as firms that have licensed, adopted, or
developed
modifications of the existing body of knowledge that NASA has generated
in the
life sciences.
Thus, for purposes of this study, firms that have
acknowledged successful sales of products that can be traced to NASA
R&D
investments were selected for analysis. Calculating
the benefits that can be traced
and allocated to past NASA investments in an orderly and consistent way
for
each firm, discounting the stream of those benefits over time, and
combining
the data into a summary set of measures provides an indication of the
type of
leverage from government investments that has occurred in the past and
which
can be expected to continue into the future.
Not all sales attributed to these firms can be
counted as
NASA benefits, since NASA technology usually is only an initial
starting point
for the firm. Government-developed
technology
is frequently mission specific, and requires substantial technical
modifications before a commercial product can be produced.
In order to put a product on the market
successfully, a company must also invest in advertising, distribution
and
quality control, all of which may cost far more than the R&D
investment. NASA “benefits” should be
considered as the leverage of government funds—an initial infusion of
R&D
that then stimulates additional company investments toward a commercial
product.
Furthermore, the issue of the alternative
investments of the
firm must be taken into consideration.
Would the firm have followed the same R&D or marketing path
without
NASA investment and stimulation? If so,
then did the NASA work benefit the firm by providing the incentive to
speed-up
the production and introduction of the new technology?
If not, then did the government investment
alter their business plan, and would the alternative uses of the funds
have
provided more leverage elsewhere (i.e. a “negative benefit” from the
firm’s
perspective, but quite possibly a positive from society’s viewpoint)?
Following a methodology successfully used in
Europe to
measure the benefits of the European Space Program (Bach 1992), four
types of
benefits are recognized in this study:
1) development and sales of products based on NASA R&D; 2)
commercial
benefits resulting from increased sales due to the high-tech reputation
of
doing space research, and commercial benefits from joint ventures
brokered by
the space agency; 3) new methods of
organization and management from large scale space assignments applied
to the
commercial sector; and 4) the development of a critical mass of labor
skilled
in the particular demands of space R&D within the firm (and
industry) so as
to provide efficient production, continued successful space R&D, or
increased productivity to the firm.
Various types of measures are developed for each
category,
but most can be summarized and reported as an allocation of the value
added in
the firm’s production function. Value
added is defined as sales attributable to the product less the cost of
material
inputs. The benefits are historical. Future benefits can be estimated by the
firm, but are not reliable measures due to the cyclical nature of the
economy
and the unforeseen markets and risks facing all firms.
In addition, firms also provided additional
information about the benefits to the users (purchasers) of their
products. These benefits were very
diverse, ranging from cost savings to improvements in the quality of
care (e.g.
the development of non-invasive procedures to replace current surgery).
For purposes of this study, the value added type
benefits
could be aggregated across firms since this was a common denominator
among all
companies. Downstream social benefits are listed
separately for each firm that reported them, but they are not included
in the
aggregate summary results because doing so would be combining estimates
of
numbers that mathematically cannot accurately be added.
Some of the methodologies used by the NIH economic
models
that measure the quality of life and delivery of health care services
might be
used to broaden the scope of the downstream benefits calculated in this
study,
since they frequently emphasize the potential longer-term future
impacts on the
quality of life and/or productivity of workers. However,
many of those studies have focused on only one disease
or treatment and have not produced measures that can be added together
over
many different sectors. Therefore,
attempting to fit the information collected from this limited survey
into a
methodological framework similar to those used in various NIH studies
would be
difficult.
This study focuses on economic impacts and on the
leveraging
of government funds. This study is not a benefit/cost
analysis. The decision not to perform a
benefit/cost
analysis was made for two reasons:
1) the benefit/cost methodology
is very closely related to the return on investment framework which, as
described above, is not easily applied to government R&D
investments, and
2) the definitions and practical measurement of both benefits and costs
requires making many additional assumptions which could result in
misleading
findings.
Also, bearing on this analysis is the selection of
firms
that have been successful. More
appropriate for an all-inclusive measure of returns would be a
portfolio of
firms and projects that study failures as well as successes. The failures should be both technological
and commercial in order to present a balanced study.
However, this is virtually impossible because the universe in
this study includes not only examples from life sciences funding, but
also
examples from overall NASA funding that have found applications in the
life
sciences. The only possible way to have
an unbiased set of cases would be to randomly select from all NASA
R&D
since 1958. That would be a very
expensive and formidable task, well beyond the boundaries of this pilot
project.
The objective of this pilot study was to obtain
data from 20
firms that have been successful with a commercial product that could be
traced
to NASA Life Sciences R&D. The
relatively small number of firms contacted is a function only of the
time and
expense required to perform personal interviews. The
small number of firms in no way is meant to suggest that
there are only a small number of successes that can be attributed to
NASA Life
Sciences.
Because it may take anywhere from five to twenty
or more
years for a research product to become a commercial product (let alone
a
successful commercial product), we focused on identifying firms from
the
reports of successful R&D from historical documents.
It is even more important to allow
sufficient time from research to commercialization in the life sciences
field,
since many medical products need to go through the lengthy process of
U.S.
government approvals (most often the Food and Drug Administration of
the Department
of Health and Human Services) before a company is allowed to market it.
Starting with NASA’s
Spinoff and technology transfer publications, we then also scanned
on-line
searches and prior studies of NASA benefits for leads to existing
companies.
Interviews with current NASA personnel led to other companies and
contacts. Unfortunately, most of the
suggestions from
the NASA research offices reflected on-going R&D efforts, that,
although
exciting and having great commercial potential, are still in the
research stage
and therefore are not good candidates for this study.
The literature search produced 41 companies that
would be
possible candidates for this study. The
companies included not only those that received life sciences R&D
awards,
but also companies that had performed other NASA research which found
applications
in NASA life sciences work or even in life sciences applications in the
commercial sector. There were companies
that used NASA information and then developed different products, and
there
also were companies for which NASA tested and used existing products. In almost all cases, the companies received
added benefits through advertising and marketing by using NASA for its
name
recognition and cutting-edge, high-tech image.
Firms can be classified a number of ways. For this study, two major systems were chosen.
First, was a categorization based on the degree of
contact
the firm had with NASA.
1.
Firms that owe their existence to NASA & NASA
technology
2.
Firms that have a NASA spinoff as an important,
but minor part
of sales
3.
Firms that used the NASA technology transfer
programs
4.
Firms that have adopted NASA technology without
formal ties to
NASA
Second, was a categorization based on the source
of the
innovation.
1.
Innovations from NASA University R&D grants
2.
Innovations from former NASA employees
3.
Innovations from NASA contractors
4.
Innovations with no direct NASA R&D Investment
Not all of these categories are mutually
exclusive, and
there are many other ways of categorizing the firms and innovations in
this
study. However, for purposes of
measuring the impact of NASA Life Sciences R&D on the economy, and
for
suggesting policy improvements that might make technology transfer at
NASA more
efficient and effective, these categories are useful.
As detailed below, most of the forty-one firms
that were
contacted provided some information.
Fifteen firms were able to provide usable quantitative economic
data;
others provided either qualitative judgments and/or partial
quantitative
data. We were not able to locate five,
and thirteen others declined to participate either because they were
“too busy”
or they had corporate policies not to disclose information. No attempt
was made
to select the firms on geography, size, or major industry.
The firms were located in all regions of the
nation. Most were small companies but
several were larger firms. And, as
would be expected, the firms generally were in the medical
instrumentation or
aerospace sectors of the economy.
The following fifteen firms (listed alphabetically
with a
short description of the product) provided usable quantitative data for
this
study:
1.
Bio-Merrieux
Vitek
(automated microbial assay system)
2.
Cox Sterile
(dental
instrument sterilizer)
3.
Diatek
(infra-red ear
thermometer)
4.
EDL
(Baro-cuff)
5.
Exergenie
(Team America)
(exercise equipment)
6.
Flogiston
(relaxation
chair)
7.
Human
Technologies
(temperature “pill”)
8.
ILC (cool
suits)
9.
Microsensor
(gas chromatograph)
10.
3-M Company
(heating for
meal service)
11.
Orbotron
(exercise
machine)
12.
Synthecon
(bioreactor)
13.
Temper-Pedic
(foam
support surfaces)
14.
TQM (knee
brace)
15.
Umqua (water
purification: 2 products)
One firm provided a qualitative summary of the
benefits of
its products from NASA research.
Two firms provided information, but their products
were
either not mature enough to bring into the marketplace at present or
were
awaiting approvals from federal regulators.
1.
Topex
2.
Nanoptics
Two firms could not document their R&D
relationship to
NASA. Although the literature had
pointed to innovative products that were tied to NASA R&D funding,
representatives of the firms indicated that NASA and/or its grantees
may have
purchased off-the-shelf items for use in R&D programs.
1.
EG&G
2.
Philips
Medical Systems
The follow thirteen
firms either did not respond to our
letters and phone calls, or indicated that they were too busy to
respond in a
timely fashion.
1.
Abaxis
2.
Advanced
International
Systems
3.
BioBrite
4.
Black &
Decker
5.
General
Ionics
6.
Lorad
7.
Medical
Sciences
8.
Minimed
9.
Perkin-Elmer
(Orbital)
10.
Q-Med
11.
Quantum
Devices
12.
Siemens
Pacesetter
13.
Telesensory
Five firms were not listed in any phone book or
business
directory or were known to be out of business.
1.
Analytichem
2.
BioSafe
3.
Harshberger
4.
Foster Grant
5.
Healthmate
Three firms indicated that the product stemming
from NASA
R&D was long out of production and current personnel did not have
the old
records or data to provide the information we requested.
1.
Sartorious
2.
Sierracin
3.
Medrad
In summary, 23 firms (56%) responded to our survey. Useful data was obtained from 15 out of
these 23 firms (37%). Of the other 18
firms (44%), 13 of them refused to cooperate and 5 were out of business. For studies of this kind, the positive
response rate was high, primarily due to the fact that many of the
companies
continue to be involved with NASA and with NASA R&D programs. They wanted to participate and to receive
recognition
for their successes.
The most reliable data for measuring economic
impacts is
obtained from the companies themselves.
Each company was contacted by letter and then by phone and an
interview
was requested with either the President, the Vice President for
R&D, or
with a manager responsible for overseeing the innovation attributable
to
NASA. Before the interview was
conducted, introductory facts about the study were sent or faxed to the
person
responsible, and they were made fully aware of the type of information
we were
requesting. We made appointments and then conducted the
interviews either in person or by phone.
A typical interview lasted between one and two hours. There often were follow-up telephone calls
and/or data exchanges where either more information was requested or
where the
company wanted to clarify issues and data with us.
This proved to be a very effective method. Those companies that cooperated were willing
to provide a wealth of useful information and generally did not
withhold either
technical or financial data. As part of
the process, we assured each company that no critical financial or
production
information would be released and that our main interest was in
calculating
aggregate and summary statistics that combined data from many companies.
The interview procedure also permitted the
opportunity to
probe into the social benefits of the technologies and spinoff
applications. Most companies had a very
good concept of
who the users of their products were and how their products were
contributing
to the benefits and economic impacts of customers.
In most cases these economic benefits were not quantifiable. When they were, they were specific to the
use and could not easily be translated into social benefits that were
additive
with those of other technologies. The
following results illustrate the richness and broad scope of these
benefits.
A methodology for identifying and measuring firm
and
industry-level economic impacts of spinoffs from space R&D was
developed
and used by the Bureau d’Economic Théorique et Appliquée (BETA) of the
Louis
Pasteur University of Strasbourg, France.
They performed two major studies for the European Space Agency
(ESA); one
in 1978 and another in 1987 that measured returns from the European
space
program.
Their methodology primarily was based on personal
interviews
with firms and a statistical evaluation of the data collected. Economic benefits were divided into four
major categories:
·
technological
effects (new products and services, product improvements)
·
commercial
effects (joint ventures, international cooperation, advertising
benefits)
·
organization and
methods effects (quality control, project management, production
techniques,
other effects internal to the company)
·
work-factor
effects (improvement of work-force skills, formation of a critical
mass of
specialists).
In summary, the BETA methodology provides a very
useful
starting point for categorizing and quantifying economic impacts of
space
R&D. Calculating measures of these
impacts is difficult and does not lend itself to set formulae. What may work for large space system
contractors often will not yield the same results when applied to small
companies and individual technological innovations.
Economic measurement is still more of an art than a science.
A wide range of data would be essential for an
accurate
accounting of the benefits accruing to a company from its R&D
efforts. However, most companies themselves do not
keep the necessary information. Their
record-keeping focuses on the accounting, securities, and tax
requirements. Private records may be
used for inventory control, management purposes, etc., but rarely are
these
available to the public. Since this
study demanded a record of sales, R&D, contract information, and
other
pertinent information over time (often going back 30 years), most
companies did
not have precise records.
And because most companies produce many products, the separation of
costs,
inputs, R&D, etc. for just one product that resulted from the NASA
Life
Sciences work was equally unavailable.
Those companies that agreed to cooperate in the
study
usually did have some estimates of the information we were asking for. From those data, it was possible in many
cases to reconstruct and estimate a reasonably accurate set of
information
about the R&D investment, sales, and value added for the firm.
All data were then converted to 1997 dollars using
standard
deflator indices., The GNP deflator for government defense purchases
was used
for NASA contracts and grants and, the deflator for the industry in
which a
company was located was used for company sales.
Measurements of value-added by industry are
available from
the U.S. Department of Commerce. Since
it is not feasible to collect and apply value added figures
individually for
each company, an average figure was used for each industry included in
this
study and applied to the company.
Data for each company were then analyzed. Because of the importance of the
confidentiality
of the information collected, the results presented below are
aggregated across
all of the companies. In the text and
appendix specific references are made to estimates of benefits for
individual
products and companies where it was possible to do so without revealing
sensitive
information.
Where possible, sales are included only for the
product that
was identified as having a NASA origin or where NASA had some impact
through
its R&D programs. In the case of
companies that essentially owe their start and continued existence to
NASA as
either a source of R&D contracts or as their primary market, sales
for the
entire company were included in the results.
Each product that was identified is unique. Some products have run through their life
cycle
and are no longer in production. Some
continue to be sold in the marketplace.
And some never achieved enough sales to be counted in the
aggregate numbers. A few products are
included that have
potential future sales but are not profitable today.
This study is taken as a snapshot of the impacts of NASA’s Life
Sciences R&D as we found it in late 1997.
However, the generation of impacts from the program is a
continuous
process. New products will appear, old
ones will disappear, and those that are active in the marketplace
likely will
continue to have robust sales for some time to come.
Therefore, the figures presented in this study are unique to
1997. It is highly likely that the
cumulative
impacts and benefits of NASA’s Life Science program will be larger in
each
successive year, both as new products are introduced (some as advanced
designs
of existing products) and as the current successful products continue
to be
marketed.
Finally, it should be recognized that calculating
these estimates
is not an exact science. We have done
our best to be accurate. Since exact
numbers do not exist for many of the data points, we have tried to
reflect the
values given to us by the companies and have adjusted them according to
other
information obtained in the interviews.
Where necessary, public sources of company data, such as on-line
databases, filings with the Securities and Exchange Commission, annual
reports,
web sites, and advertising brochures also were used to supplement the
data
provided directly by the company.
Therefore, the following results are best
interpreted as
summary approximations of the magnitude of the leverage of NASA
investments
rather than as exact measures of the impact of NASA on the economy. Furthermore, this having been a pilot study,
it is representative of only a small sample of the many firms that have
been
involved with the NASA Life Sciences program.
The cumulative
value added to the economy from the
fifteen firms in this study that can be attributed to the investments
of the
NASA Life Sciences program was approximately $1.5 billion ($1997). This value added is based on total sales of
$2.3 billion (1997$) that occurred from 1960 through 1997.
These fifteen firms received a total of
approximately $64 million
to perform research for NASA. However, in order to market a commercially
successful product, a significant amount of additional R&D was
necessary. We estimate that these
fifteen firms added approximately another $200 million in R&D funds
to the
initial NASA R&D contracts or grants.
This $200 million clearly shows that the leverage of NASA Life
Sciences
R&D is a powerful and significant factor in this segment of the
economy.
These results are very conservative.
The impact of NASA’s Life Sciences
investments runs farther and much deeper than these figures indicate. First, as described below, we collected a
tremendous amount of evidence that points to a large societal gain
(benefits
derived from using the innovative products as well as non-quantifiable
health-related gains) from this small sample of successful life
sciences
products. Second, there is evidence
that many other firms and innovations are in some part derived from
NASA’s Life
Sciences R&D. Some firms that chose
not to participate in this study have demonstrated products and
benefits. Others have yet to be identified
from the
historical database. And, as evidenced
in other reports, on-going NASA R&D continues to generate ideas and
innovations
with vast potential.
To put the data from these fifteen firms in
perspective, we
estimate that NASA has invested approximately $3.7 billion ($1997) over
37
years in life sciences R&D programs.
Many thousands of research grants and contracts have been
awarded to
universities, not-for-profit firms, and industry throughout this
program. Therefore, our sample of firms
represents an
extremely small percentage of the NASA Life Sciences investment. Yet, with a cumulative value-added measured
at $1.5 billion from these firms alone, it is evident that the life
sciences
programs have generated robust returns in addition to their mission
success. And, since we have taken a
very conservative approach to measuring benefits by not including in
the
reported aggregate numbers any downstream, or social, benefit measures,
it can
safely be concluded that this NASA program has returned at least its
cumulative
investment to the United States. It is
highly probable that further research and analysis of the program would
show
economic impacts far greater than the $3.7 billion investment.
The interviews with the companies in the sample
provided a
unique insight into the types of social benefits derived from these
NASA-stimulated innovations. We will
use a broad definition of social benefits for purposes of this study. They are the returns from the technology
that accrue to the users of the innovations.
Appendix 2 provides a detailed account of both the
private
and social benefits that have been reported by the firms that were
interviewed. A summary of the social
benefits follows. As mentioned above,
virtually each type of
benefit is unique. Any attempt to translate them into monetary terms
and
aggregate them together, as was done with private benefits, would
result in a
very misleading metric—much like adding the proverbial apples and
oranges
together. However, it is very clear
from the examples of social benefits listed below that the potential
magnitude
of these benefits may far exceed the less complex and easier to
aggregate firm-level
benefits.
Social benefits from these life sciences projects
can be
divided into three groups:
·
benefits to firms that purchase from the
innovator
·
benefits to the medical establishment and
health
providers
·
benefits to patients and to the welfare and
productivity
of human beings
The companies in this study that have developed
innovations
sell their products in many different markets.
Many of these products are devices that are used by other
companies or
by medical practitioners to save money in their operations, perform
operations
that couldn’t be performed before, or to generate new revenues and
business
opportunities. The Cox Sterilizer, for
example, is a device that can sterilize dental instruments very quickly. The inventor claims that a dentist using
this device can dramatically reduce his inventory of tools since he can
reuse
the same tools more quickly in his practice.
The Baro-cuff is a research device.
It is an instrument used for measuring the
pressure in the carteriod artery. In
its present configuration it is too expensive to be mass produced and
sold as a
routine instrument for doctors or hospitals. But, it
is extremely valuable as a research
tool, permitting faster and more accurate measures than otherwise
available. Its benefits are in making
research more efficient and more productive.
This benefit does not easily translate to monetary measures of
social
benefits, but there is no doubt that these benefits exist and are very
important to the users of this instrument.
The gas chromatograph which has been used by NASA
in its
space missions, is also used by the non-space and non-medical industry. It has a number of applications.
For example, one of its customers is Fairfax
Co., Va. where the instrument is used to monitor gases that are emitted
from
trash disposal facilities. It also is
used by a pharmaceutical company to analyze and separate gases and
other
components of the manufacturing process in order to reuse some
chemicals. They estimated that the
pharmaceutical
company may have saved over $1 million using this device.
Another type of industry benefit is the creation
of new
business opportunities from these spinoffs.
The Orbitron is an example of a device that has been tested by
NASA for
use in astronaut training but is now sold by the company as an
amusement park
“ride.” The company claims that a
purchaser of the Orbitron can recoup his investment in about three
months and
generate about $150,000 per year in revenue by selling the rides at
parks and
fairs. Jobs are created, taxes are paid
on the revenues, and overall benefits to the economy are created. Although this type of spinoff application
may have virtually no connection to health care, medicine, or even the
space
program, the fact that NASA tested and used the device is an important
factor
in its acceptance in the business world and the advertising goodwill
generated
by the connection to the space program. In addition, astronaut training
was
very valuable to the company and to those small businessmen who are now
employed
because of this machine. The makers of Orbitron indicate that they are
doing
additional medical-related research, using the device to test for its
effect on
free-radicals, seasickness, and other health-related problems.
Social benefits include the use of these
innovations by the
medical community. Several of the
companies selling spinoff medical products have demonstrated that the
devices
produce much faster measurements than prior devices used in hospitals
and
doctors’ offices. The automated microbial
bioassay system marketed by Bio-Merrieux/Vitek, for example, produces
results
within 24 hours rather than several days as with traditional techniques. It also can be operated by less skilled
technicians saving the higher wage costs as well as saving time. Other time saving medical spinoffs include
the Diatek ear thermometer and the gas chromatograph.
The market for these devices may be relatively small, since they
are not products normally bought by the general public, but their value
is in
decreasing the operating costs and increasing the efficiency and
productivity
of the hospitals and laboratories that purchase the equipment.
Social benefits also accrue directly to the
general
public. These may be the hardest to
measure because they often are benefits that improve the quality of
life. For example, the temperature “pill”
that can
be swallowed by a patient enables doctors to monitor and test for
conditions
internal to the body without having to perform surgery.
Not only are hospital and other costs saved,
but the patient is much more comfortable and does not have to undergo
invasive
procedures that may entail other risks.
The cool suit technology (ILC) that owes its development to the
original
space suit research is another device that has had numerous medical and
industrial uses. It has been adopted to
be worn by patients suffering from multiple sclerosis (by cooling the
body,
more movement and less pain occurs). It
also is used in some industrial situations where employees must work in
high temperature
situations (e.g. steel furnaces). It
also has been used in helmets used by race car drivers.
There is even a company that is using the
technology to keep beer kegs cool.
Although some of the spinoff uses are not medical
and not
even related to space, they do generate jobs, income, and productivity
benefits. Nonetheless, the major
benefits are to the medical establishment and to human beings. The more advances that are made and the
better the diagnosis and treatment of diseases and illnesses, the more
spinoff
benefits accrue to these NASA-stimulated innovations.
People using these devices and advances often can continue
working, or return to the work force faster.
They may need fewer medical procedures, and they often may even
live
longer as a result. Measuring these
types of social benefits is controversial and difficult—it often
involves
valuing human life and assessing the net benefits of increasing the
life span
of human beings. We have not attempted
to perform those measures in this study, but we do recognize that some
of the
metrics developed by economists and others have calculated very
significant economic
impacts from medical R&D.
There is another factor of great importance that
has to be
considered when assessing the impact of NASA Life Sciences R&D on
the
economy. That is, much of the NASA work
has involved research, experiments, and equipment developed for the
medical
research community. Since the market
for products sold to researchers is quite small, the direct company
benefits
that have been the focus of this study will not be significant. However, successful medical research may
generate social benefits that may be very large. Thus,
by the very nature and design of this study, a number of
very important medical-related NASA contributions have been ignored. This, as pointed out above, was not an
oversight,
but only reflects the narrow and conservative nature of the measures we
set out
to develop for this analysis. Our
premise was that economic benefits are best measured by direct impact
on
private companies in the stream of commerce in the economy. If those measures alone indicate sizable and
robust benefits, then the social benefits that follow can be described
qualitatively and will provide ample evidence of the additional
magnitude of
NASA’s contributions without subjecting those benefits to controversial
measurement
techniques.
The results presented for the private benefits
alone in this
small sample of firms that have been influenced by NASA R&D in the
life
sciences proves that our assumptions were correct.
Additional research will confirm that the social benefits are
equally large, if not greater than the private benefits.
Having a large and varied portfolio of investments
is
essential to any Research and Development program. R&D is, by
definition,
delving into the unknown. It is an
investment in knowledge and in future returns.
It also is expected that some investments will yield higher
returns than
others. Failure is as much a part of
R&D as is success. And even with an
unsuccessful R&D project, much is learned--even if it is in the
form of
learning what not to do in the future.
Another aspect of a portfolio of investments is
that often one
or two large “winners” can push the entire program to yield positive
and robust
overall economic returns. This is a
strength of having a portfolio, not a weakness. Because
outcomes are not easily predicted in R&D, the high
leverage and high potential returns from an investment are
characteristic of
these types of investments. And because
it often is impossible to predict which investment will yield the high
return
(and when), having many such projects in the portfolio increases the
potential
for at least one to pay off handsomely.
The sample of fifteen firms represents a portfolio
of firms
that have had some reported success in developing and selling a
commercial
product resulting from NASA Life Sciences involvement.
The degree of commercial success for
individual firms is very uneven. The
three most successful spinoffs in this study account for over 90% of
the reported
sales and value added. The products
were: the automated microbial assay
system (originally developed by McDonnell-Douglas/Vitek), the cool suit
(ILC),
and the food warming tray (3-M).
It is interesting to note that two of the three
companies
originally responsible for the technology development were very large
Fortune
500 firms. The third company (ILC) is
smaller and has its origins in the space program, but its corporate
history can
be traced to the DuPont company. Particularly
in the case of
McDonnell-Douglas and 3-M, having the financial and corporate support
along
with an existing R&D establishment within the company may account
for the
development of products with broad commercial and market potential that
have
successfully been marketed.
The fact that only a few spinoff technologies
account for
most of the economic benefits does not indicate that NASA has been a
failure in
successful technology transfer or that it is not valuable to encourage
spinoffs
to be marketed commercially. In fact,
just the opposite conclusion is warranted.
As mentioned above, an historical look back at spinoffs in a
portfolio
of technology investments (such as this study) would be expected to
generate
just this type of distribution--one or two big winners and a number of
other
spinoffs that have registered strong, but more moderate commercial
success. Evaluating spinoffs (or any
portfolio) ex post is
quite different from projecting returns
in advance of making the investments.
Many of the smaller firms have been successful in
marketing
commercial spinoff products. Even
though the sales totals may not appear large on a national scale, their
contributions
are frequently very significant within the expertise of the firms’
industry and
in their local economies. The “typical”
smaller firm in our sample had between 25 and 40 employees and
generated
between $5 million and $10 million in annual sales. Some of these firms
“owe
their existence” to NASA and to the space program, in that the origins
of their
R&D and commercial product line are largely traced to the needs of
the
space program. Because of this history,
many of the firms are founded, owned, and operated by engineers or
scientists
with a NASA background.
These firms tend to be profitable.
In the interviews, managers appeared to be satisfied with the
development and progress of their companies.
They tended to focus on the R&D aspects and on the potential
for
large future expansion, often identifying both new technologies and new
markets
for their products and expertise.
However, they also expressed a natural reluctance to “bet the
firm” on a
large expansion effort. These companies
did not have the capital resources or the technical expertise to launch
a
national marketing, advertising, and distribution program for the
expansion
they often envisioned, and they did not
seem willing to give up a large portion of their equity or ownership in
the company
to generate the capital needed for the expansion. In
effect, they were operating profitable companies, they were
comfortable in their markets and market position, and had little
motivation to
take the large risks associated with a major expansion.
·
Most life
sciences R&D benefited life sciences in commercial applications. Virtually
all of the technologies that were developed into
commercial products have at least one life sciences related application. Even the company manufacturing the Orbitron
(which has most of its benefits measured by sales to the amusement park
industry)
was performing medical studies about its use in alleviating problems of
nausea
in weightlessness and its potential for helping Alzheimer’s and other
diseases
of the aged. ILC, which today considers itself a “materials” company
because
its main R&D focus is in producing fabrics for special industrial
purposes,
is a company that is also working on a highly manipulative glove for
astronauts
to wear while constructing the space station.
This glove may also have medical/commercial uses.
There are also many
examples where
NASA R&D that was not directed toward life sciences has benefited
the life
sciences. The Cox Sterilizer, for
instance, was a spinoff of work NASA did in researching various
sterilization
techniques. The gas chromatograph was
an instrument developed for the Viking Mars landing program, but that
has
applications in both life sciences and other areas.
·
Most profitable
companies used hardware as a basis for disposable components. One of the most successful methods to
generate income is to sell hardware that needs replacement parts for
each
use. The sales of the hardware
eventually are dwarfed by the sales of the disposable components.
The
Bio-Merrieux/Vitek automated
microbial assay system requires the use of a new tray each time a test
is run
on the hardware. It is the sale of
trays and other associated materials that account for the majority of
the sales
associated with this machine.
Similarly, the ear thermometer made by Diatek requires a new
cover for
each patient. The covers account for a
large part of sales, well beyond those of the thermometer itself.
·
Some companies
identified downstream profit opportunities or cost savings as larger
than their
own sales. For a variety of
reasons, companies may elect only to make and sell part of the product,
leaving
their customers to add more value to the product and sell to final
users. Umpqua, a company specializing in
water
purification techniques, makes the hardware, but the resins that are a
large
and integral part of their system are sold by others.
Umpqua suggested that the total sales generated by their
hardware
are far greater than what they have reported to us.
·
Some companies,
although successful, were not as successful as NASA claimed in
publications. NASA publications are
generally well written
and researched. However, we encountered
some spinoffs described in detail in publications as successful, which
were
actually not successful commercial products. Or, at least, they have
not been
successful to date. TQM, a company in
New Hampshire that was developing both a knee brace and seat lift using
NASA technology
developed at Marshall Space Flight Center, reported to us that their
efforts so
far have failed. They are a very small
company that purchased the patent rights from MSFC and invested their
own funds
to commercialize the products. Mainly
because of technical problems (the action of the knee is very
complicated and
the braces did not move correctly), the product has not been perfected.
Another example is the relaxation chair
made by
Flogiston. It was not a NASA product,
but it has been tested and used for flight simulation purposes by NASA. Commercial products were produced, but
because of a high price did not sell profitably. The
inventor is now using the idea in combination with virtual
reality computer simulations and hopes to have a product on the market. But, contrary to the implications in
NASA
publications, the product is not commercially available today.
·
The NASA
connection was almost always used in advertising and in opening doors
for
cooperative ventures. One of the
often overlooked benefits for these companies is the value of the NASA
connection. NASA has a public image of
a high-technology, cutting-edge, do-it-right, successful government
agency. Those who have worked for the
agency, and those who have been contractors to NASA have a very
marketable intangible
benefit. There are two ways companies
have capitalized on this. First, they
have advertised their products as directly linked to space situations. Images of astronauts dressed in space suits
using a company’s product are frequently part of logos and advertising
campaigns. The link, whether it is selling
something as
mundane as a cover for a beer keg that keeps it cool or a piece of
exercise
equipment being used aboard the Shuttle, creates an aura of
respectability for
the company. Although not measurable in
dollar terms, this type of advertising has contributed to sales and to
the
competitiveness of U. S. industry.
The second benefit from the NASA link is
in the
company’s relationship with investors, banks, and joint venture
partners. The credibility of the company
is enhanced
by having done business with NASA and, in particular, by having had
NASA use
the product in space. Virtually all the
companies interviewed mentioned this as crucial to their success. It opened doors and provided the company’s
with an entrée where there might not
have been one otherwise. Again,
documenting and measuring this type of benefit accurately is not
possible. But, it was one of the subtle
benefits that
was brought up in almost every interview by the company officials. Even they were often unable to give specific
examples, they clearly felt that the NASA presence was extremely
important.
·
Generally firms
were very cooperative, which indicates that they value their NASA
relationship. Finally, most of the
companies that provided data (as well as many that didn’t) were
genuinely
interested in the study, in NASA, and in understanding the technology
transfer
process. Because the NASA relationship
was important to the firm, the executives that we spoke with were quite
open
and willing to provide information.
They most likely also saw the potential of future R&D
contracts,
sales, and work with NASA, and therefore were graciously willing to
spend time
on this study. Rarely were those interviewed critical of the technical
office
(in this case, life sciences) providing the R&D funds.
Most firms enjoy contributing to the
high-tech space program.
The information gathered in the interviews with
the firms
provides many clues and keys to the successful private sector use of
government
mission-developed technology. There are
a number of lessons from the cases selected that indicate that, even
though
benefits are measured, the benefits could have been larger if NASA had
managed
its various programs differently. The complex and time-consuming
federal
government procurement procedures, some intellectual property issues,
and various
inconsistencies in the technology transfer programs often impede or
slow the
successful introduction of technology, resulting in less than optimal
benefits,
and/or a significant slowing of the introduction of a new technology
into the
commercial stream.
NASA technology transfer focuses on
technologies now in
the pipeline, not those already in commerce.
Much of NASA’s technology R&D is on the
cutting-edge,
developing unique solutions for space applications.
Many of the inventions and innovations have no apparent
commercial
use. The general NASA approach to technology transfer is to identify
potential
commercially valuable technologies from on-going R&D efforts and
use a
number of different methods to try to push these technologies toward
commercial
use. Whether it be through the
contractor that developed the technology, through intellectual property
(patent)
incentives to NASA employees, or through publications such as Tech Briefs or Spinoff, an attempt is
made to disseminate information and
encourage some form of commercial initiative.
However important this forward-looking approach is
to future
commercialization, the fact remains that most commercial success today
can be
traced back to R&D performed many years ago. There
are many firms marketing goods and services that, in whole
or part, are based on NASA investments in R&D.
These firms now in the commercial market place often have no
current
NASA funding or formal connection with the agency.
Yet, these are the firms that are NASA’s best examples of
successful spinoffs and provide the role models and set the standards
for those
firms that may take today’s technologies and be successful in the
future.
This study recommends that NASA should consider
being more
proactive with these “alumni” firms.
Not only will there be better documentation of the spinoff
connections
available to NASA for public relations use, but there may be actual
benefits
for both NASA and for those firms.
In particular,
NASA can:
·
establish an on-going relationship with the
companies,
providing opportunities for the firms to show their products at open
houses,
workshops, and trade fairs,
·
be available as a broker and financial
“match-maker”
·
be available for on-going technical
assistance, and
·
for medical and life sciences firms,
provide
ombudsman-type services for the companies in their relationships with
other
government agencies such as
·
the NIH for joint research ventures,
·
the FDA for helping to speed-up the
regulatory
approval,
·
other agencies that purchase life sciences
goods and
services (the DOD, VA, etc.)
During the interviews a number of executives
identified
areas ripe for expansion of their product development and markets. These firms, particularly the smaller
companies, often have engineering and technical expertise, but lack a
background in marketing and distribution.
Also, financial constraints that face small firms may preclude
expansion
without giving up significant independence and/or ownership control.
NASA can provide
services to these firms in a variety of ways. First,
the agency can act as a matchmaker—helping these “alumni”
firms find potential partners for expansion.
Depending on the situation, a partner could be another small
company
with different expertise, a larger company with the muscle and
distribution
system for entering new markets, or a financial institution.
Second, NASA can, if asked by the company, provide
additional technical assistance (either for a fee or without charging,
depending on the situation). NASA
laboratories are available to industry for a variety of purposes. This recommendation is aimed more at creating
a mechanism for letting these companies know about the possibilities
rather
than initiating a new NASA program.
Third, NASA can act as an interface for the firms
with other
government agencies. All companies face
both marketing and regulatory barriers when dealing with the United
States
Government, but these barriers are particularly burdensome for smaller
companies. It often is difficult to
find the “right” person in an agency to solve a particular problem. It also is expensive and difficult to
negotiate the regulatory maze. Large
companies have the in-house expertise (or hire specialists) to breach
these
hurdles. Small companies will sometimes
forgo opportunities.
In the medical and
life sciences field, there are several particular concerns that NASA
could help
address. If there is a spinoff
product that is used by NASA which is also a potential commercial
product that
needs some form of government action, NASA can act as an agent for the
company. For instance, if the problem
is one of obtaining an agency’s approval for the purchase of a product,
NASA
can support the firm’s requests and perhaps speed-up the process. If the product has cost-saving advantages
and/or other social benefits, the government will benefit as well as
the
company from an earlier introduction and use of the product.
Another example would be to have NASA become
involved in new
joint ventures with the company and other R&D agencies. NASA personnel have many research
connections with the NIH, the DOD, and the Department of Energy as well
as
other R&D laboratories within the government. Where
there is mutual interest, NASA can aid in the preparation
of joint proposals and in finding areas of interest for the firm.
One other area that NASA could provide assistance
is in
helping a firm in the FDA process with approval of a drug or a medical
device. NASA’s role in this effort
could be three-fold. First, the agency
could provide detailed information about the Agency’s use of the device
in
space or space-related programs.
Presumably, firms already have this information, but additional
detail
and documentation may be helpful.
Second, NASA may be able to perform additional tests for the
company
that would advance its case to the FDA, while still adding value to the
NASA
R&D programs. Finally, NASA could
provide useful information about the regulatory process to the firm.
These recommendations should be viewed as methods for NASA to
implement its
on-going work. The needs of industry
vary greatly. When there is a dialogue
between firms and the government—one that does not just begin and end
with a
grant or contract, but continues well beyond the end of a formal
process—technology transfers more easily and the process of the growth
and
development of technologies and commercial products is enhanced. The government should be available and
accessible
to industry. A cooperative rather than
an adversarial relationship is far more productive the benefits flow in
all directions.
Therefore, NASA should not establish
a new formal program to implement these recommendations. An announcement to the effect that “the
government is here to help you” will probably not result in industry
rushing in
to take advantage of a specific program, unless there is a large amount
of
funding that goes with a new program.
What has been suggested requires very little funding. It does require several actions:
·
that the government be proactive with firms
that
perform R&D in encouraging commercial development,
·
that the government continuously monitor
the
development of commercial spinoffs,
·
and that the government make it clear
through its
actions that it clearly is available to industry to help in developing
joint
ventures, establishing technical assistance to the firms, and in
providing
services to the firms after formal funding programs have ended.
There are many such programs that exist within
NASA and
other government agencies today. They
have registered only moderate success for a number of reasons, but
mainly
because there is a general reluctance for industry to work with the
public
sector when proprietary technologies are involved.
A change in the system will not occur quickly.
The government must work toward developing
programs and policies that instill a measure of trust between industry
and
government personnel. One successful
method is to demonstrate success on a project by project basis. As NASA works more closely with industry and
benefits are registered for firms as well as for the government and the
economy,
trust will develop and additional firms will be willing to work with
the
government for the betterment of all.
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This appendix includes the letter of introduction
sent to
the firms, and follow-on forms that detail the data that were requested. Firms were instructed that they could use
their own format if the tables did not match their methods of data
collection
and presentation. Also included in this
appendix is a sample of the questions and information that was
developed for
the interview. Because lengthy
questionnaires are often ignored by companies, the firms were not
provided with
this form—it was solely used as a guide in preparation for the
interview. A thank-you letter was
also sent to the
firms after the interview.
Date
Company
Address
Dear
:
Thank
you for agreeing to participate in the study of economic benefits from
NASA
life sciences research. The objective
of this pilot study is to develop economic measures of the outcomes of
NASA
research in as accurate and documentable way as possible.
Therefore, we will concentrate on measures
of corporate activity that can be traced in whole or in part to some
degree of
NASA-sponsored R&D. The theme of
life sciences extends to both the origin of the funding from NASA
(Office of
Life Sciences and its predecessors), as well as other NASA R&D that
is now
applied to life sciences products and services.
In
order to get the best possible data, I will need your cooperation,
recognizing
that some of the data I will be asking for may be proprietary. This is a voluntary survey, and I hope you
will be able to provide me with accurate information.
You can rest assured, that we will keep any data you give us in
strict confidence. The raw data will remain here at George Washington
University,
and will not be provided to the Government.
Even if you are not able to give me complete data about your
company,
any relevant information that will help identify and quantify these
economic
benefits will be greatly appreciated.
The
type of data that will be of the most help includes:
annual sales by product (only those products linked to NASA
R&D); total employment and R&D employees; a history of NASA
contracts
and grants (life sciences and other); detailed case studies of how the
technology
has been developed and transferred, both within the company and through
sales,
licenses, and other users.
In
addition, we are interested in the “opportunity costs” of this research. Did the NASA work change the direction of
the R&D within the company? Would
the company have done the same type of R&D if there was no NASA
funding?
Finally,
we are interested in any other economic benefits, such as the
opportunity to
participate in joint ventures with other firms, both domestically and
internationally; the effects on quality control within your firm; and
the
“advertising” or other commercial benefits that your firm may have
realized
from being on the cutting edge of space technology.
I
look forward to meeting or speaking with you and to learning more about
your
work. I will, of course, be pleased to
share any findings and results of this study with you.
My e-mail address is:
hrh@gwis2.circ.gwu.edu, and my direct phone number is (202) 994-6628.
Sincerely
yours,
Henry
R. Hertzfeld,
Senior
Research Scientist
Sales and R&D
Expenditures:
|
Year
|
Total Sales
|
Space Spinoff
Sales
|
NASA R&D Contract
|
Company
R&D
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Est. 2000
|
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Est. 2005
|
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|
Employees
Year Firm Space
R&D
BACKGROUND
SURVEY QUESTIONS
What year did NASA work begin?
What year did NASA work (contracts/grants) end?
What year did first commercial sales begin?
When did firm reach break-even?
In performing the
NASA work:
1. What was the
technical challenge for the firm?
2. Did the firm
develop new products? How much was sold
back to NASA and how much was sold commercially? How
much to other government agencies?
3. Did you acquire
new technical skills from the contract/grant?
4. Did you develop
new production techniques as a result of the work?
5. Did you develop
new business partners or joint venture opportunities?
6. Did you develop
new management or quality control methods?
7. Did you increase
overall sales because of the marketing benefits or advertising acquired
through
the reputation of doing “cutting-edge” work for NASA?
8. Did you develop
new foreign or export business as a result?
9. Did you acquire
patents, or other intellectual property rights as a result of the work?
10. Did your
employees publish articles in journals, magazines, or engage in other
professional
reputation-building activities directly as a result of research
findings?
11. Would your
normal research activities have been in the same direction
(disciplines, areas)
if the NASA work had not been undertaken?
12. What would
estimate is the “downstream” (i.e. social) value of your NASA R&D
work?
13. Did you
“spin-off” any of the work to others.
(i.e.: licenses, sales of knowledge, actual spin-off firms, etc.)
DEFINITIONS OF ECONOMIC BENEFIT CATEGORIES
Technological
benefits:
·
sales of NASA-funded products to others
·
sales of copies of NASA products
·
sales of products requiring further R&D
(what %)
·
increased sales of existing products
Commercial benefits:
·
new collaborations -- research and/or
production
·
domestic
·
international
·
new market perspectives
·
marketing/advertising due to NASA
involvement
Organization and
Management benefits:
·
new research laboratory
·
new ties to other parts of the firm
·
internal transfer of
technology/methodologies
·
improvements in quality of firm’s products
·
other cost reductions--productivity effects
Work Factors
benefits:
·
increased competence/knowledge of employees
·
enabled a “critical mass” for a space
division or space
R&D operation
The following case study descriptions are
representative of
the impacts that NASA Life Sciences R&D has had on the companies
involved
in producing commercially successful spinoffs.
Not all companies that participated in this study are included
in this
appendix.
In order to protect the confidentiality of the
data provided
by the companies for this study, sales and R&D statistics for
individual
firms are presented as broad ranges.
They have all been converted to 1997 dollars using deflators
produced by
the Bureau of Economic Analysis, U.S. Department of Commerce. All data represent cumulative sales of the
company’s products associated with the NASA R&D.
Some products have run the full course of their life cycle and
are no longer being produced and sold.
Others have only recently been introduced on the market and
future sales
may be far greater than those reported here.
No attempt has been made to measure expected future sales or
value added
in this analysis, although some of the descriptions indicate the
company’s stated
plans for new products and future applications of the technologies.
3M Health Care
St. Paul, MN
History
This product is a food warming device developed
for the
Apollo spacecraft consisting of plates and bowls that serve as both
heating
unit and serving dish.
The fundamental research behind this product was
performed
by Thomas Shevlin at the University of Washington.
He later joined 3-M as a ceramic engineer and was the principal
investigator for 3-M on this project for NASA.
For a one year period in the 1960’s 3-M worked
under a small
NASA contract. It was their only
contract with NASA for this device. 3-M holds patents on the invention. In the 1970’s, the product was spun-off into
hospitals and nursing homes. It was
introduced into the commercial market in 1974, sales peaked in 1989. The sales began to decline in 1992, and 3-M
now only services previous customers.
They have ceased marketing the device.
The life cycle of this successful product has
virtually
ended. 3-M indicated no plans to sell
the rights to the invention to another company. There
was a fear of potential legal liability to 3-M if a company
that purchased the rights to this technology did not support the
products
correctly. The sales of the warming
trays, although historically robust, are a very small part of the 3-M
company
and this product is outside of their main line of business.
Company Benefits
Cumulative sales between 1974 and the mid-1990s
were over
$100 million. A very small
NASA R&D contract realized very high leverage,
including
a large multiple of NASA R&D funds invested by 3-M to commercialize
the
product.
Social Benefits
The benefits include the contribution to the
mission success
of the Apollo program through sales back to the government, as well as
the
reports of greater efficiency in providing warm meals in hospitals and
nursing
homes to patients.
bio-Merieux Vitek, Inc.
595 Anglum Rd
Hazelwood, MO 63042-2320
History:
The product is an automated microbial assay
system. The
objective of the R&D was to remotely and automatically monitor the
atmosphere and to test for microbes and contamination.
(Later NASA applications of improved
versions were used by NASA on the Shuttle.) The original technology was
developed by McDonnell-Douglass in the 1960s under a NASA contract for
use in
the Viking lander program. The patent on the system was originally held
by
McDonnell/Douglas.
The small team of engineers and scientists working
on the
project for McDonnell-Douglas also saw the commercial potential for the
system. The company independently
invested the project and began marketing a commercial version to the
medical
community in 1972. An independent
subsidary was formed, Vitek, which was then purchased by bio-Merrieux,
a French
firm, in 1989. They continue to market
the product.
Company benefits:
Today, there are 500 employees manufacturing and
marketing
this system. The market is mainly
hospitals and microbiology labs. The product comes in different sizes
(depending on the number of assays it can perform at once) and costs
$50,000 to
$100,000 per unit. The current system
uses disposable cards to hold the samples; a change from the original
product
which used a plastic film.
Cumulative sales of this system since the
introduction of
the product in 1972 amount to well over $500 million.
The most profitable aspect is in the sales of the disposable
cards and reagents that must be replaced with each use of the assay
system.
NASA’s modest R&D investment of approximately
$2 million
in the late 1960s stimulated a large multiple (in the $10s of millions)
in the
form of additional private R&D investment to develop the commercial
version
of the assay system. The major R&D
effort by McDonnell-Douglas was in the 1970s.
McDonnell-Douglas reported that they found
resistance in the
marketplace for the product since it was a new way of performing tests
done
mostly by highly skilled doctors and Ph.D. researchers.
Use of the NASA name was instrumental in
breaking down this resistance and increasing sales.
Social benefits:
The company reported that there are significant
cost-saving
benefits associated with the use of these machines.
First, patients get results of tests within 24 hours, rather
than
several days using the traditional methods of testing.
This means shorter hospital stays and
quicker diagnosis of both the bacteria and the proper antibiotic to use
to
treat the problem. Second, it frees up
the time of a highly paid technician since the test is automated and a
lower
level technician can perform it. The
company
estimated that it could reduce laboratory costs for these tests by as
much as
20%, meaning that it would save “one good technologist and one and a
half
assistants per year.”
CoxSterile Company
1343 S. Henderson Avenue
Dallas, Texas
History
The Cox Sterilizer was aimed at the dental
instrument
market. It utilizes a more rapid method
of sterilizing instruments than existing technology and also uses less
electricity. This was another spinoff of
the Viking
lander project. The idea came from a
1978 NASA publication “Advances in
Sterilization and Decontamination,” which was perpared for NASA by
Bionetics
Corporation, Hampton, VA. The
publication itself was the mechanism for the transfer of this
technology; no
NASA funding was involved in the product developed by CoxSterile
Products,
Inc. The company owned the patent on
the device.
The NASA publication had discussed using a dry
heat system
for sterilization. This product combined dry heat and high velocity,
and the
company developed a small table top model for doctors and dentists. It was cleared by the FDA for use. The
product was sold to Bowman Company, then Bowman sold it to Alpha
Medical. He sent some instruments to
missionary
clinics, but it was too complicated to go into exports.
Company Benefits
Total sales from 1988 through 1994 were over $10
million. After the company sold the
product, sales declined. CoxSterile
invested over $1 million to develop the product and produce it for the
commercial market.
Social Benefits
Productivity and savings in dentists and doctors
offices –
they estimate that the sterilizer could reduce the number of
instruments needed
by a factor of 10. Also, because it
uses only a small amount of power it is practicable for use in mobile
or remote
areas.
The inventor is now working on using an adaptation
of the
technique for sterilizing medical waste.
The processes now in use cost $30 to $40 dollars pound, but he
claims
that his new method may reduce the cost to $.07 per pound.
Welch Allyn, Inc.
7420 Carroll Road
San Diego, CA 92121
History
Diatek (part of Welch Allyn) produces medical
instruments
including several different types of thermometers.
They approached the Jet Propulsion Laboratory (JPL) for help in
refining the infrared technology so it could be used in developing a
commercial
ear thermometer, The company transferred funds to JPL for this purpose. Space technologies were employed in this
project, but this device is an indirect spinoff of NASA since it
involved
knowledge gained from the space effort but did not involve a space
mission directly. And, it is not known
just how much of NASA’s
life sciences programs were involved as compared with technologies
developed
for other NASA programs. However, this
application is clearly a life sciences product.
The original IR research yielded the Model 7000,
which NASA
helped develop in 1987-88. It was updated to the Model 9000 in 1993.
Since
1995, total sales of the infrared thermometer have remained flat with
more sold
abroad than in the U.S. Diatek also has
another thermometer on the market using a different technology (the
thermistor). The accuracy of the infrared thermometer can vary
according to the
skill of the technician, dirt or debris on the sensing lens, or
individual
differences in patient physiology.
Thermistor thermometry is not as subject to those variables.
Most of the sales and profits came from
resupplying the
disposable covers, and not from the hardware itself.
Company Benefits
Diatek has had cumulative sales in the period
1992-1995 (of
the IR thermometer and related accessories) that have exceeded $10
million. They have invested in R&D,
but it is not appropriate to consider their company R&D a
leveraging of
NASA funds. In fact, their combined
R&D includes the contract Diatek gave to the JPL.
Social Benefits
The IR ear thermometer was a better and faster
system for
temperature taking than prior methods.
It was also more comfortable for patients. The
sales also created jobs and income.
EDL
720 Thimble Shoals Blvd.
Newport News, VA 23606
History
The founder of EDL, Ross Gobel, worked at NASA
Langley,
Research Center and in 1984, left the government for industry and
eventually
founded EDL. The company makes customized, high-quality circuit boards.
The BaroCuff was invented at NASA by Dr. Ekberg. It is a device for measuring the pressure in
the carteroid artery. The cuff is an instrument used primarily in
research, but
EDL thinks new markets will open if price goes down (they are working
on using
new materials which may radically lower the product’s price). The company has sold approximately 200 units
over the years. The cuff itself costs
about $5,000 dollars, and the associated electronics and measuring
equipment
costs about $14,000.
Company Benefits
Cumulative sales of the BaroCuff have been over $1
million. However, this product and
other associated technologies can be traced directly to the company’s
continued
relationship with NASA. The company is
known for specialized electronic circuit boards manufactured for
testing and
research purposes and the BaroCuff adds to the reputation and sales of
other
products produced by EDL.
Social Benefits
The BaroCuff is used for life science research
purposes. Many sales have been to the
government for research. The social
benefits are found in making the performance of research more efficient
and
better through using this instrument.
These benefits are not easily measured.
There are potential future social and commercial benefits if the
price
of the product is reduced enough to make it feasible for use in
doctor’s
offices.
Human Technologies, Inc.
7183 30th Avenue North
St. Petersburg, FL 33710
History
This product is a pill that is swallowed and will
transmit
information about the temperature and other internal body functions to
a unit
outside of the body. It does not
require surgery, and is a more accurate measuring device than other
existing
methods.
The company received both NASA and Advanced
Physics
Laboratory of John Hopkins University
funding in the 1984-85 time period.
They received a license from NASA in 1987.
Industry sales are increasing. Industry
use is in food production, etc., where they imbed the
pill in the manufacturing process, and use it for constant temperature
monitoring. The company reported
significant leveraging of NASA R&D into company spending for the
development of the commercial product.
Company Benefits
Sales of the medical technology have been
relatively
small: less than $10 million. The NASA
connection has increased credibility, sales, and the opportunity for
joint
ventures with other firms. The NASA work has also stimulated
significant
company R&D to manufacture a product that has industrial
applications.
Social Benefits
Examples provided by the company include
monitoring
temperatures in the food industry, in the production of paper, and in
pharmaceuticals. Sales potential in
these fields may be much higher than in the medical/life sciences field.
ILC
P.O. Box 266
Frederica, Delaware 19946
History
ILC (originally the International Latex Company)
received
the contract to develop the Apollo space suit in the 1960s and at one
point had
1000 employees. The company shrunk after the Apollo missions to 25
people and
has since restructured and now employs about 400. ILC
is very dependent on its NASA history and continues to
perform R&D on materials and products for space activities. It has expanded into other R&D work for
the government, including the DOD. The NASA R&D in life sciences
today is
for making gloves for extra-vehicular activity (space station program),
and
partial-gravity soft suits. The
power-assisted gloves are likely to have future commercial applications.
They now consider themselves to be a materials
research
company, working in composites, bullet-proof vests, fire-retardant
suits,
insulation covers, etc. They make pressurized systems as well. They market themselves as a space company,
often using space logos and space suits in their advertising. Currently, they do about 50% NASA work, and
about 30% for the DOD—the remainder being commercial product sales.
Cool suits themselves are now less expensive and
are
produced by many companies. ILC doesn’t hold the patent for the
manufacture of
cool suits, and has essentially left that business.
The JSC makes the cooling system for space suits in-house.
Company Benefits
Cumulative sales since the early 1970s have been
well over $100
million. ILC has received NASA R&D
continuously over the years. The
company has leveraged this and has invested its own funds in commercial
R&D
as well. These private R&D funds
may be equal to or greater than the sum of the NASA R&D.
Social Benefits
Benefits have flowed back to the government; the
government
remains a primary customer. Spinoffs
range from industry to medical applications (cool suits for multiple
sclerosis patients, helmets for race car
drivers,
protection for workers in high temperature situations, etc.). They also advertise an effective insulation
for beer kegs using their technology, but it is manufactured and
marketed by
another company.
MTI Analytical Instruments
41762 Christy St.
Fremont, CA
94538-5106
History
The gas analyzer has evolved from research
conducted at
Stanford University, for the study of the Mars atmosphere.
Three researchers (eventually 4) left
Stanford and founded MTI. Stanford
University holds the patent on the analyzer;
MTI has the license from Stanford.
Their goal was to develop a gas chromatograph on a chip. In
addition to
NASA, the company also had received DOE, and DOD research funding.
They now have 40-50 employees.
Pyland corporation acquired MTI, but the majority shareholder
today is Japanese--Nipon Thailand.
MTI is a single product company, but the product
has many
different uses. They are continuously
investing their own money into R&D to improve the product. The U.S. Government remains a client, with
sales to the government estimated to be between 5% and 10% of the
company’s
total sales. The U.S. market in
total
is slightly under half of their sales.
Several years ago NASA asked them to develop a
system for
the shuttle flight in summer of 1997.
MTI collaborated with the JPL and others and developed a fire
warning
system. The product is expected to be
used for the space station as well. The
company has not received NASA R&D funds directly.
Company Benefits
Cumulative sales since the product was put on the
commercial
market have been over $50 million. MTI also estimated that the company
invested
4 times the original government R&D (at Stanford) to commercialize
and
improve the product.
Social Benefits
The product performs analysis of gases quickly (in
less than
3 minutes). Competitors products
typically take over 10 minutes for similar tests.
Examples given by MTI of the product’s use
include: Fairfax
county monitoring gases in trash disposal; monitoring insulin
manufacturing for
the reuse of reagents; by monitoring by-products, drug companies using
the
product save about a million dollars a year.
Orbitron/Fantasy Factory
2905 A Ocean Side Blvd.
Ocean Side, CA 92054
History
The Orbitron was originally designed as an
exercise
machine. It is a device with several
rotating rings where the individual remains in the center while being
rotated
in several directions. The company claims that the device helps train
the inner
ear, to prevent motion sickness. NASA
has tested the device, but did not invest in R&D to develop it. The major market today is as an amusement
park “ride.”
The founder started the company in 1990, their
peak sales
year was 1993. There are about 800 that
have been sold worldwide. They sell for
between $11,000 and $17,000 per unit.
All R&D was private.
Company Benefits
Total sales have been greater than $10 million.
Since the product was not built from NASA R&D funds, it is
unlikely
that significant additional R&D has been leveraged from this device.
Social Benefits
The company estimates that a unit purchased for
use as an
amusement ride can generate $150,000 a year in income to the operator;
the
buyer can break even after three months.
Since many are in use commercially, this device has created
jobs,
income, and enjoyment for users.
The developer has sold units to the U.S. Armed
Services for
use in training. And, they have a unit
in use at the space camp.
The company claims that using the Orbitron has
other medical
benefits such as creating free radicals in the body which may be good
for
treating patients with Alzheimer’s and other diseases.
We have no evidence that these claims have
been medically tested and substantiated.
Synthecon, Inc.
8054 El Rio
Houston, TX 77054
History
The bioreactor (rotary cell culture system) was
designed as
a ground support system, to keep experiments fresh while in transit to
the
shuttle. Krug international was the
original NASA contractor working on this project.
The founders of Synthecon worked for NASA and for the
contractor. The company has grown to
about 11 employees.
The company has sales to other government agencies
including
the NIH. The Bioreactor is an
instrument primarily used for research purposes. However,
Synthecon is working on new systems that will be larger
and may have significant life sciences uses on a larger scale and with
commercial potential.
The company has had a legal dispute with NASA over
intellectual property (patent) rights.
This has resulted in costs that they claim have reduced profits. However, they have, since being in business,
developed new products and have patents on the newer technologies.
Company Benefits
The cumulative sales have been over $1 million. This is a small company and their projections
show rapid and continuous growth. The
company has spent more than twice what they have received from NASA in
R&D
on R&D to develop their commercial products.
Social Benefits
Synthecon has identified research applications of
the
bioreactor in cancer, HIV, and in tissue modeling.
The bioreactor technology will enable even small laboratories to
conduct tissue research under simulated microgravity conditions. It can
be used
in tissue regeneration as well as in the production of monoclonal
antibodies,
proteins, and pharmaceuticals.
Tempur-Pedic, Inc.
(also) Tempur-Medical, Inc.
848G Nandino Blvd.
Lexington, Kentucky 40511
History:
The original NASA R&D was done in the 60’s. A foam cushion that molded to the shape of
the body and recovered to its initial form was developed by NASA
engineers for
astronauts, airline pilots and others who had to remain in one position
for a
long time. Although several companies
did manufacture a commercial version, it was a product for very
specialized and
limited-use medical purposes.
Apparently the original NASA formulation did not have a long
life-time
and was not suited for the mass market.
In the early 1990s, a Swedish foam company,
Fagerdala, had a
scientist work on the NASA idea and eventually succeeded in finding the
materials and production methods to manufacture Tempur-pedic, a product
based
on NASA work that is commercially viable.
Today, the product is manufactured abroad, but marketed and
distributed
in the United States by Tempur-pedic.
The mass-market selling advantage over conventional pillows,
cushions,
and mattresses is comfort.
Tempur-med is the medical subsidiary of
Tempur-pedic. They describe their
“pressure relief
products” as “a visco-elastic, temperature-sensitive, open-celled foam.” Its major medical selling point is that it
provides long-term relief from bed sores.
Markets include the VA hospitals, nursing homes, and other
locations
where patients are bed-ridden over long periods of time.
Benefits to the company:
The company makes extensive use of the NASA origin
of the
idea in its advertising.
According to Tempur-pedic, their 1997 sales were over $30 million and
growing
rapidly. The product was first introduced in
1992. These sales are for the
commercial markets; there is no separate data for the medical markets
described
below.
Social benefits:
Most benefits are in preventative medicine. Tempur-pedic estimated there could be a return
as high as 4-1 back to government, in the use of their mattress in
places such
as VA hospitals. Tempur-foam is cheaper
than electrical power mattresses, and is also a better solution to the
bed sore
problem for long-term patients than existing mattress pads. The company has received VA approval for use
in hospitals. It has also recently
received approval from Medicaid in California and is applying for
approval in
other states.
Umpqua Research Co.
125 Volunteer Way, PO Box 791
Myrtle Creek, OR 97457
History
Umpqua is a company that owes most of its
existence to NASA.
The founders of Umpqua started their careers at the Johnson Space
Center. They started with a water testing
lab, then
went on to water purification. The
connection with NASA gave them and the company prestige and credibility. They have at least two NASA-related products
which are water purification devices.
They sell the purification machines (hardware); other companies
sell the
resins, except for some custom government orders.
The company has about 28 employees.
They have expanded to water and air
purification devices. Now Umpqua also
does work for the DOE, NSF, and the Army.
The Unibed was developed for the space station. Umpqua believes that it has future
commercial spinoff potential. The MCV
(microbial check valve) is a water disinfectant system.
They have done recent work for the NIH under the
SBIR
program. Currently, they collaborate
with other institutions such as Oregon State University and the NASA
Ames Research
Center.
Company Benefits
Cumulative sales of hardware have been well over
$10
million. This includes sales back to
NASA and the U.S. Government.
Additional research has been generated by their reputation and
successful past research; much of it
for the government. They have invested
their own funds in R&D, but the largest share of R&D is still
from the
government.
Social Benefits
Since they only sell the hardware, other
manufacturers sell
the consumable resins, thus many additional direct sales of other
companies can
be tied to the relatively modest hardware sales of Umpqua.
In addition, the uses of the water
purification products are mainly in foreign markets, thus creating
valuable
export trade for the U.S. They recognize
that there may be additional commercial uses for some of their products
in
industries such as beverage bottling, but they have not as yet
exploited those
markets.
ECONOMIC
ANALYSIS OF HEALTH AND LIFE SCIENCES R&D:
MEASUREMENT TECHNIQUES
The following section was written by Angeliki
Mourtzikou, a
graduate student and research assistant at the Space Policy Institute. It reviews a number of studies on the benefits
from research in life sciences, medicine, and health services. These studies generally focus on the
research work performed by the institutes of the National Institutes of
Health. The work was reviewed primarily
from a perspective of describing and comparing the different types of
measures
that have been developed to quantify the results of medical research.
The
sources referred to in this Appendix have been incorporated in the
References
Section, beginning on page 32, above.
ECONOMIC
ANALYSIS OF HEALTH AND LIFE
SCIENCES R&D: MEASUREMENT
TECHNIQUES
Following are the main
types of
comparative health economic analyses:
·
Cost
identification analysis (CIA), which is performed in conjunction
with a
longitudinal and observational clinical study and enumerates all the
costs of
applying the technology or a set of services to a specified population.
This
sort of analysis is usually referred to as cost-of-illness
analysis.
·
The
cost-minimization analysis (CMA), which assess the least-cost
method of
achieving a particular outcome. Neither CEA nor CMA assigns values to
both
costs and outcomes across alternative interventions (OTA, 1994).
·
Cost-effectiveness
analysis (CEA), where the analyst calculates the costs per
specified health
effect of a technology or program--e.g., cost per lives saved, or cost
per
cases of cancer avoided--and compares this cost-effectiveness ratio
with ratios
from other interventions. In order to use the technique for comparing
different
interventions, all interventions must have their effects expressed as
similar
units.
·
Cost-utility
analysis (CUA) is used in cases where the outcomes of the
interventions
compared are not similar. In a CUA, the outcomes are expressed as
uniform units
of health that are presumed to have similar values across across all
conditions--"healthy days", "healthy years of life", or
"quality-adjusted life years" (QALYs)--years of life saved by the
technology, adjusted according to the quality of those lives (24). Unlike other CEAs, cost-utility analyses
quantify not only the costs per relevant outcome, but the value to be
placed on
that outcome.
According to
many
authors CUA is considered a variant of CEA, whereas to others CEA and
CUA are
separate types of analysis. In the case that both analyses are
considered to be
different entities the following holds: CEA is used to compare the
relative
costs of achieving a single, common effect in alternative ways, with
the effect
usually calculated in natural units (e.g. lives). CUA is considered by
those
analysts to be a method of comparing costs of achieving either a single
or
multiple effects, where the value of the effects are specified in terms
of
their worth of a particular level of health status. In the OTA report CUA is considered to be part of CEA
analysis.
·
Cost-benefit analysis, which enumerates and
compares
both the costs of applying the technology and the net savings from its
therapeutic benefits. Both costs and benefits are expressed in dollars,
enabling the analyst to compare a summary measure, such as the
cost-benefit
ratio or net cost (or savings), across any number of interventions. CBA
is the
oldest form of comparative economic evaluation, and is frequently used in fields such as engineering and defense
Overall, the
literature
addressing cost-effectiveness and cost-benefit in health care is no
longer
small. Over 3,000 articles and letters on the topic were published from
1979
through 1990 alone, of which 2,000 were analyses of particular
interventions. The NIH has convened conferences
to develop
statements of consensus about important management issues in medical
care. Cost
issues were discussed at 53 of the 93 consensus development conferences
held
between 1977 and 1992.
Applied
frameworks to measure benefits and costs
The Peat Marwick
Policy
Economics Group (1993) identifies three approaches as the most
well-developed
in an effort to analyze the economic returns to biomedical research:
·
The human capital
approach, which is used primarily to measure the costs and benefits
in
medical research. In this case the benefits of disease prevention are
calculated
by reference to the earnings in the marketplace, presumably reflecting
their
human capital. Under this perspective the benefits of prevention of
disease are
the avoided income losses and treatment and rehabilitation costs.
In the
cost-of-illness studies based on a human capital
approach, morbidity costs are the value of goods and services
not
produced in a given year because of the illness. Mortality costs
are the
lost life-time earnings to the national economy.
·
The willingness
to pay approach attempts to measure
the non-market benefits such as the value of life. Hence it measures
what
people are willing to pay or really have paid to improve their
probabilities of
survival or of avoiding illnesses.
·
The consumers'
surplus approach measures the
willingness of individuals to pay for particular goods or services in
cases
where we can quite figure out the demand for the good or service. This
approach
can not be applied easily in case that a new good or service is brought
to the
market.
The common thread
linking these
methodologies is the delineation of appropriate costs and benefits.
While
economists agree that both pecuniary and non pecuniary costs and
benefits are
essential elements of the puzzle, they differ on how to quantify them.
Some
have attempted direct measurement of costs and benefits: others believe
it is
appropriate to infer them from actions actually undertaken by people.
Overall,
one should not equate the economic benefits of biomedical research with
financial
costs alone. The effects on hospital-fees, out-of-pocket medical
expenses and
earnings` of those affected by these products are, of course, among the
potential consequences that should be valued. But individual health,
which is
not generally treated in markets, should be valued and should be an
explicit
component of any assessment of biomedical research outcomes.
The medical and non-medical resources that are
consumed
and the costs of those resources can be collected from:
·
reviewing the medical records of the
patients
enrolled in a trial (reviewing charts). One serious limitation is
that they
do not always provide data on direct-non medical resources or on the
resources
used to estimate indirect costs
·
examining patients’ bills (more
useful from the
perspective of a third-party payer than from the perspective of the
provider)
·
interviewing providers or patients
·
conducting time-and-motion studies
(although
they yield very accurate results they are expensive to perform, because
they
require intensive observation by the researchers)
Which approach is most
useful
depends on the characteristics of the technology, the patient
population, the
clinical setting and the perspective of the analysis.
With regard to the large administrative
databases there
are many types that can be used as a valuable source of information in
economic
analyses. These are: Practice databases, claims for insurance
databases,
discharges abstract databases, disease registries, procedure
registries,
databases gathered as part of a separate research project. The total
value of resources
consumed for health care can be categorized as :
·
Direct medical costs (the costs
associated with
the consumption of medical resources in applying a technology to
produce health
care services)
·
Direct nonmedical costs (associated
with the
application of technology but do not result from the consumption of
medical
resources, e.g. expenditures for travel or parking, food, lodging, or
child
care in conjunction with medical treatment)
·
Indirect economic costs (resulting
from the
excess morbidity or mortality associated with the application of a
technology
or with its side effects)
·
The cost savings can be measured in
terms of the
expenditures that are obviated by the technology. Under this
perspective, the
costs associated with a choice of an inferior technology that we pass
over,
should be part of the costs savings accrued due to the new technology.
Two different methods can be applied in order to
assign
the proper costs to the proper resources.
·
Microcosting , where investigators
working with
the staff of a hospital or clinic identify the expenses for various
resource
inputs, such as capital, labor and supplies. A detailed and
well-documented
centralized cost accounting system helps a great deal. The allocation
of
overhead costs (indirect accounting costs) differs among researchers.
Standardization is lacking.
Costs of
aggregated resources , where costs-to-charge
ratios are commonly used to estimate the actual costs for medical
services from
the charges to payers.
Overall the
extent to
which the characteristics of a technology dictate the best approach to
collecting data on resources and costs is unclear (OTA, 1994).
·
Value of life:
This methodology for estimating the economic value of human life
was
first developed by Rice and others. According to this methodology earnings are
taken to be the appropriate measure of economic worth to society. The
present
value of an individual's expected lifetime earnings is the indirect
economic
cost to society of his death. Future earnings are converted into
present value
by the use of an arbitrary chosen discount, such as 4 to 6 percent,
reflecting
the fact that the dollar available for use now is worth more than the
dollar
available sometime in the future. Overall, this is how Fudenberg (1972)
described the methodology that he applied in his effort to measure the
dollar
benefits of biomedical research.
During the last three
decades
since the application of Rice's methodology to measure the benefits of
health
care advances it rapidly became clear that this context raised
considerable new
issues and controversies. Experts and stakeholder groups disagreed
about what
constituted appropriate outcome measures in such analyses, and valuing
health
and life in dollars--necessary to cost-benefit analysis--was
controversial and,
some maintained, unethical. As a result, the subsequent analysis in
health care
tended to be on cost-effectiveness analysis, comparing health outcomes
directly, rather than on cost-benefit analysis.
As a result CEA has
been applied
in most case studies in health economics.
Most CEAs have
traditionally
been performed as retrospective analyses, using pre-existing data on
the costs
and effects of the different alternatives being compared, and a model
created
by the analyst that relates all of the components of the analysis.
A cost-effectiveness
analysis of
500 life-saving interventions conducted by the Center for Risk Analysis
in the
Harvard School of Public Health illustrates this common kind of CEA.
The
researchers selected 229 documents from a list of 1200 documents
retrieved from
on-line databases, the bibliographies of textbooks and articles and the
manuscripts of conference abstracts and applied seven definitional
goals in
order to bring into compliance the estimates of the costs sporadically
presented
in this literature. The 229 documents provided cost/life saved
estimates for
417 interventions as well as cost/life-year saved estimates for 587
interventions. The interventions covered different sectors in the
society, from
medicine and transportation to occupational health and environment.
The eight definitional
goals set
to bring the estimates into compliance are:
1.
Cost-effectiveness
estimates should be in the form of "cost per life saved", and/or
"cost per year of life saved".
2.
Costs
and effectiveness should be evaluated from the societal perspective.
3.
Costs
should be "direct". Indirect costs, such as foregone earnings, should
be excluded.
4.
Costs
and effectiveness should be "net". Any resource savings or mortality
risks induced by the intervention should be subtracted out.
5.
Future-costs,
lives, and life-years saved should all be discounted to their present
value at
a rate of 5%.
6.
Cost-effectiveness
ratios should be marginal, or "incremental".
7.
Both
costs and effectiveness should be evaluated with respect to a
well-defined baseline
alternative.
8.
Costs
should be expressed in 1993 dollars using the general consumer price
index.
In studies like this
that rely
on the results of previous studies (perspective analysis or the
so-called
counter-factual approach) the accuracy is highly dependent on the
accuracy of
the data and assumptions that the original analyses were based. In case
that
the authors in the original studies fail to mention explicitly all the
assumptions supporting their analysis the CEA is likely to lead to the
wrong
estimates. Additionally just using averted deaths to measure cost per
life
saved is of limited scope.
The future trend in
CEA is the
increasing use of prospective cost-effectiveness analyses (OTA, 1994).
Within
this framework clinical trials are designed to measure costs as well as
health
effects. The most prominent use of clinical-economic trials has been in
the
area of new pharmaceuticals, with regard to FDA approval. A recent study indicates that few economic (0.2
percent)
include economic analyses and that no relationship has been established
between
the methodology for economic analysis and the quality of research.
Furthermore, a potential pitfall of
incorporating an economic component into a clinical trial is that the
sample
size needed to test economic hypotheses may exceed that needed to test
clinical
hypotheses because of differences in the clinical and economic
variables. Apart
from that there are cases where clinical trials are terminated earlier
than
scheduled because they demonstrate efficacy at an earlier stage than
expected.
Consequently the level needed for examining important economic outcomes
is
never reached.
Reports
Produced by the National Institutes of Health
On the whole,
National Institutes of Health (NIH)
appears to view itself as a source of new technologies and information
on the
efficacy of health-related technologies.
Studies of the costs or cost-effectiveness of those technologies
have
not been the primary focus of the NIH. (OTA (1994).
At an agency-wide
level, some efforts
have been made to study the economic impacts of NIH technology. A pamphlet developed in 1993 shows that NIH
research can sometimes lead to reduced costs to the health care system.
(20,24). The publication refers to 34 examples, each demonstrating a
single
innovation such as a new vaccine, a new diagnostic test or a particular
therapy. Each example includes the estimated value of savings and the
costs
associated with the disease or condition over the remaining lifetime of
the
patients who initiated the screening or treatment during one year. The
estimates refer to the prospective savings with regard to a particular
disease
or condition for the cohort of patients who are expected to initiate
treatment
during one year.
The estimated savings
are based
on the difference between estimated direct plus indirect costs for a
particular
disease or condition before and after the innovation. The listed annual
savings
are heavily based on experts' estimates about the possible rate of
adoption of
the health care innovation. These estimates are generated by a
prospective
analysis of future use.
According to the NIH
publication
the approach used to value costs of illness in terms of
resources used
for treatment and lost earnings yields a conservative estimate to the
true
social costs of illness and benefits of biomedical research. Both the
NIH
research costs and costs such as lost earnings of patients and their
families
due to the time required to seek and receive health care are not
included in
the costs provided. Furthermore, out-of-pocket costs for
transportation, food,
and shelter away from home as well as the avoided costs of undesirable
side
effects are not included in the cost or saving estimates.
The omission of these
costs in
the calculation of total costs or savings is part of the greater
problem that
exists in all types of analyses where depending on the available and
existing
data strong assumptions can heavily influence the results obtained.
Simplified assumptions
notwithstanding, the NIH publication is a promising beginning in a time
that
both costs and benefits in health care issues have become a matter of
increasing
practical concern in most federal agencies.
The NIH report on
biomedical
innovations are the
guidelines for the estimation of the cost-savings in NIH studies. These
cost-savings represent the primary benefits from innovation.
The FASEB study of the
Life
Sciences Research is characteristic of one series of studies that
integrate
historic tracing of an important scientific development that led to a
specific
research discovery and a case study analysis of the economic impact of
one of
the diagnostic uses of this discovery.
In this study primary benefits are measured in terms of the
avoided
income losses from lower production as a result of lost days of work
and lost
production or work due to accelerated mortality, and in terms of the
reduction
in medical care costs which would otherwise be incurred as a result of
blood
supply transmission of the HIV and the subsequent development of AIDS.
The secondary
benefits are expressed in terms of expanded output and employment and
calculated by a final demand multiplier generated by the U.S.
Department of
Commerce.
Within NIH, the
National Cancer
Institute has been the most active in conducting economic analyses of
its
activities. Part of the research that the NCI has sponsored over time
includes
analyses of the cost-effectiveness of prostate cancer screening, the
development of a detailed cost-effectiveness model for cancer screening
generally, and a series of activities relating to the
cost-effectiveness of
mammography screening for breast cancer (OTA, 1994).
Studies that the NIMH
has funded
generally address the issue of reimbursement. This is the case of the
special
report found in the American Journal of Psychiatry and prepared by the
National
Advisory Mental Health Council (13). In this report both the costs
incurred by
people with severe mental illness as well as the benefits of providing
insurance coverage commensurate with other illnesses are calculated.
The
economic benefits of the commensurate coverage are calculated with
regard to
the reduction in mortality and morbidity costs (a human capital
approach). What is noteworthy is that this
study
accounts for the savings resulting for both direct and indirect costs.
As a
result, the savings resulting from the reduction in some indirect costs
(such
as the crime-related costs of these disorders, the welfare
administration
costs, the incarceration costs, and the cost of general medical care)
are also
calculated. The total savings resulting from commensurate coverage are
reported
to be $8.7 billion.
The assumptions are derived from previous studies by Rice et al., and
unpublished studies by the NIMH. In an effort to support reimbursement
for
patients with severe metal illness the economic impact of other
diseases
(respiratory diseases and cardiovascular diseases) that are covered by
insurance are delineated. To better display the similarity of mental
illness to
medical illness the economic impact of schizophrenia is comapred to the
impact
of diabetes. While cost estimation techniques differ and certainly
contain some
errors, the estimated total economic cost of schizophrenia is within
$500 per
patient of the cost of severe diabetes. Building on this number they
report
that mental illness is quite similar to medical illness and that there
is no
reason why it should not be part of the insurance coverage system. In
studies
like this, and especially in illnesses like mental illness where there
is an
enormous emotional cost and pain borne by the patients and their
families we
need types of analyses that transcend the usual economic impact profile
to
account for the "not easily quantifiable" measures of the quality of
life. Costs of shortened lives and lost productivity, it is argued, not
only
result from treating mentally ill people but are also borne by their
families.
At least two other
Institutes,
the National Institute on Aging and the National Heart, Lung, and Blood
Institute, have also performed intramural and extramural economic
analyses.
Measurement
of Economic Utility
The method used to
derive the
individual's utility function has resulted in a recent controversy in
the
health economics in terms of the QALY (Quality-Adjusted-Life-Year)
approach and
the HYE approach (Healthy Years Equivalent).
From the time that
Zeckhauser
and Shepard (1976) proposed that a quality-adjusted life year measure
be used
to value life, significant progress has been made in the medical
economics
field. The quality-adjusted life year approach has been associated with
various
pragmatic techniques for obtaining an assessment of the QALY value
associated
with different health outcomes.
The risk neutral QALY
equates
the utility U(Q,T) of some health state Q with associated number of
life years
available T as being equal to some function that reflects the quality
of the
health state V(Q) multiplied by the number of years of life remaining,
or
(Q, T) = V(Q) T
This definition rests
on three
assumptions:
5.
Life
years (T) and quality of life are mutually independent
6.
There
is a constant proportional trade-off i.e. the proportion of remaining
life that
one is willing to trade-off for a specified quality improvement in
independent
of the amount of remaining life.
7.
There
is risk-neutrality
These necessary and
sufficient
assumptions are used to equate the utility-weighted QALY index with
utility for
the case of a permanent chronic health state.
Additional assumptions
are
needed when we deal with the more general case of a lifetime health
profile
i.e. an individual who might experience several different health states
during
his or her remaining life. In this case the QALY index assumes that the
utility
function of the individual over his or her lifetime health profile is
additive.
But intertemporal additivity has never been empirically proved.
What we should keep in
mind
though is that in general QALY is a health status index where several
different
methods are used to measure the weights and that only under very
restrictive
conditions is a utility-weighted QALY. As a result the QALYs use a wide
range
of underlying methods to value those years; itself a source of
considerable
differences among studies.
Hornberger et al
(1992) compared
six methods of assessing preferences as a basis for QALY weights. The study reports poor correlation
among the
six methods. Discrepancies among indices can cause substantial
variability in
the calculated cost-effectiveness ratios.
In recent years there
has been
an increasingly substantial literature with other approaches to
assessing
quality of life masures instead of using QALY.
Health Year
Equivalents (HYE)
were introduced in 1989 by Gafni et al. Their theoretical supremacy
according
to Gafni et al. lies on the fact that
HYE, unlike QALY, avoid many of the assumptions about an
individual’s
utility function which underlie the utility-based version of the QALY
model.
The HYE approach makes no assumption about the form of the individual’s
utility
function and thus better reflects the individual's preferences.
According to Viscusi
(1995) "all the techniques should be viewed as approximations to the
more
fundamental objective of eliciting the willingness to pay for the
associated
risk reduction explicitly.”
In his 1995 paper
"Valuing
the Health Consequences of Biomedical Research" Viscusi reviews the
techniques that have been applied to elicit the associated willingness
to pay or willingness
to accept in order to value the health outcomes of a certain
innovation.
Even though valuing improvements in individual health may appear to be
outside
of the realm of usual economic analysis meaningful empirical estimates
on
health outcomes are needed in order to appropriately allocate public
funds in
biomedical research.
Market-based evidence
has often
been used to assess the implicit value of life and job-related injuries
but
Viscusi claims that we must use surveys and elicit the answers from the
target
populations. The most common approach to valuing health risks in the
literature
has been an examination of wage-risk tradeoffs. Using data on worker
wages and
linking these data to worker characteristics and job characteristics,
including
job risks, economists have estimated the wage premiums workers receive
for
risk. On average the result from these labor market studies is that the
estimated
rates of tradeoff is in the range of $3 million to $7 million per
statistical/life. Labor market studies though fail to take into account
risk
outcomes, except for acute accidents which translate into immediate
deaths. In
the case of illnesses such as chronic bronchitis and other causes of
death such
as cancer which do not represent immediate deaths it is more difficult
to
elicit the value that people place on them with market-based evidence.
Viscusi and O'Connor
(1984) were
the first researchers to go beyond the hedonic labor market studies of
risk.
They utilized a survey approach to value changes in job risk. Since
then survey
results have been used to value not only job-related outcomes but other
health
consequences as well.
Some of the estimates
are the
results of risk-money tradeoffs, whereas some others are the result of
risk-risk tradeoffs. In general the risk-risk approach avoids the
utilization
of a monetary metric in surveys.
The choice between a
risk-money
trade-off and a risk-risk tradeoff rests on the various reference
points for
policy acceptability. Furthermore, there is always a possibility in the
risk-money trade-offs that the respondents will underestimate their
willingness
to pay or overestimate their willingness to accept.
Quality
of Life in NIH Studies
In October, 1990 the
NIH
sponsored a workshop on the practice, problems and promise of quality
of life
assessment in NIH studies. The
necessity to incorporate quality of life measures in NIH studies stems
from the
following fact:
Because many life-threatening diseases have
been
eliminated or made preventable non-life threatening chronic conditions
absorb a
great amount of the research funds available. Prevention and treatment
of the
latter aim at improving both the quality of life and extend the length
of life.
Hence, the health-related quality of life concept accounts for all
these not
easily measurable characteristics that are associated with a full range
of
positive or negative health states.
The
executive summary from that workshop we find that:
Health-related Quality of Life can be
conceptualized as a three part model that includes:
·
clinical status or biological functioning
assessed by
measures of disease patholology and organ system impairment;
·
disease-specific and treatment-specific
symptoms and
problems; and
·
generic health measures that focus on
health concepts
(including various aspects of functioning and general health
perceptions)
valued regardless of a person's age or health
Until recently the
traditional
clinical measurement has focused on the functioning of the body organs,
routinely using measures that correspond to the first part of the model
and
less often to the second part. In recent times though the observed
change in
the impact of diseases and alternative therapies on patients' total
welfare
call for a greater need to incorporate measures that correspond to the
second
and third part of the model.
Such need is the
manifestation
of a greater need to use measures that deal with the person as a whole.
Health
related quality of life is only one dimension of the general term of
quality of
life which in a dynamic framework past and anticipated quality of life
affect
present quality of life.
The Health Policy
Model (HPM) is
one way to aggregate HQL dimensions into a single index. It expresses
improvements less unanticipated side effects in a measure that
represents a
healthy year of life. Apart from incorporating information on
mortality,
mobility, duration of illness it also copes with different health
preferences.
Under this
perspective, the HPM
model can be used to compare results between studies that investigate
treatment
effects for different diseases and conditions. A small battery of
generic
measures on all studies, as well as disease-specific components
designed for each
individual study should be used.
Quality of life
variables have
been used in different ways:
1.
As
outcome variables (usually found in clinical trials as in
research aimed
at testing the effects of drugs or other health care interventions on
patent
populations)
2.
As
independent variables (in the case of effects of various
lifestyle
factors on the development of early coronary disease or alcoholism)
3.
As
mediating variables interacting with other variables. An example
can be
seen in longitudinal studies of diabetic patients or hypertensive
patients that involve, first,
consideration of
interacting effects of quality of life factors that might influence
whether the
patients were actually taking the drugs.
4.
As
descriptors at various stages in the progression of a disease
5.
In
clinical and health policy decision making. The construct is used
as a
component in cost-benefit analysis and as an indicator withing the
quality-adjusted life years approach.
As a whole, the number of empirical comparative studies
and clinical trials centering on quality of life in a systematic way is
still
relatively small. Over a 5-year period beginning in 1986, MEDLINE
listed 2600
articles in which quality of life was discussed. Within this large
array of
publications only 72 were empirical studies comparing one type of
medical or
other health care intervention with another. Of these reports about
one-third
were concerned with relief from symptoms as the principle
measure of
quality of life and gave little or no attention to the multidimensional
nature
of the quality of life.
The
author
would like to thank the Office of Life and Microgravity Sciences at the
National Aeronautics and Space Administration for their support of this
research (NASA Grant #NAGW-4646). In
particular, Joan Vernikos has been extremely helpful and supportive
during the
process of this research. In addition,
John Logsdon, Nicholas Vonortas, and Ray Williamson at the Space Policy
Institute, George Washington University, have provided valuable advice
and
helpful suggestions. Finally, the very
able research assistance of Brant Sponberg, Angeliki Mourtzikou, and
Juliet
Salvati contributed greatly to the success of this study.
Costs, for example, are not easily
defined. Is the proper cost all of NASA’s
budget,
only the life sciences budget, the funds spent on technology transfer,
or the
funds invested by the company after the NASA work was completed? Selecting the proper cost depends on what is
to be measured in a benefit/cost analysis.
Since this can be a very judgmental decision, this analysis does
not
select a cost.
Rice D.:
Estimating the Cost of Illness. Health Economics Series (No. 6), U.S.
Dept. of
Health, Education and Welfare, Public Health Service Publication, No.
947,
1966, Rice D: Measurement and application of illness costs. Public
Health Rep
84:95-101, 1969,Rice D and Cooper B: The economic value of human life.
Am J
Public Health 57:1954-1966, 1967
