Taking the Patient's History: Industry Overview, 1900–1940
Barriers to Device Innovation in the Private Sector
Throughout the eighteenth and nineteenth centuries there was no continuous scientific tradition in America. Medical science depended upon foreign discoveries, which were dominated by Britain in the early nineteenth century, France at midcentury, and Germany in the last half of the century. The lack of research has been attributed to the dearth of certain conditions and facilities essential to medical studies.[5]
Richard H. Shyrock, American Medical Research, Past and Present (New York: The Commonwealth Fund, 1947).
The absence of dynamic basic science obviously limited the possibility of technological breakthroughs.However, the early part of the twentieth century witnessed a rise in private sector commitment to basic medical science. Philanthropists, intrigued by possibilities of improvements in health sciences, began to endow private research facilities. The first was the Rockefeller Institute, founded in New York City in 1902. A number of other philanthropic foundations were established in the Rockefeller's wake, including the Hooper Institute for Medical Research, the Phipps Institute in Philadelphia, and the Cushing Institute in Cleveland. This period has been called the "Era of Private Support."[6]
Ibid., 99.
These efforts improved the scientific research base in America, but it was still weak.Compounding this weakness were barriers between basic science and medical practice. During the nineteenth century, practicing physicians had little concern for, or interest in, medical research. Most doctors practiced traditional medicine, relying on their small arsenal of tried-and-true remedies. However, in the first decades of the twentieth century, medicine began to change profoundly, which led to organizational permutations through which the medical profession became more scientific
and rigorous.[7]
Paul Starr, The Social Transformation of American Medicine (New York: Basic Books, 1982), 79-145. This comprehensive study of American medical practice is a classic.
University medical schools began to grow as the need for integration of medical studies and basic sciences was acknowledged. Support for medical schools tied research to practice and rewarded doctors for research based medical education. By the end of this period, then, many of the problems associated with lack of basic medical science research had begun to be addressed. However, by modern standards, the commitment to research was extremely small.As our discussion of innovation revealed, basic scientific research must be linked to invention and development. In other words, there must be mechanisms by which technology is transferred from one stage in the innovation continuum to another. In the nineteenth century, there were serious gaps between basic medical science and applied engineering, which is an essential part of medical device development. American engineering education rarely involved research.[8]
Leonard S. Reich, The Making of American Industrial Research: Science and Business at GE and Bell, 1876-1926 (Cambridge: Cambridge University Press, 1985), 24.
Engineers were trained in technical schools but had few university contacts thereafter. Furthermore, manufacturers had little patience for the ivory towers of university science; they looked instead for profits in the marketplace. Engineering practitioners emphasized applying knowledge to the design of technical systems. Thus, engineers based in private companies were cautious about the developments of advanced technology, preferring to make gradual moves in known directions.[9]Ibid., 240.
Producers were slow to take advantage of any advances in research in the United States or abroad. Established industries tended to ignore science and to depend on empirical inventions for new developments.[10]John P. Swann, American Scientists and the Pharmaceutical Industry: Cooperative Research in Twentieth-Century America (Baltimore: Johns Hopkins University Press, 1988).
Patents for medical products did accelerate at the turn of the century, but a majority of them represented engineering shortcuts, not true innovations.[11]Shyrock, American Medical Research, 145.
A few very large corporations addressed this problem through the creation of in-house research laboratories that combined basic science and applied engineering. These institutions focused primarily on incremental product development, but innovative technologies did appear. Thus, while the gap between universities and corporations did not close, some firms became research-oriented through the establishment of independent laboratories. Companies with large laboratories included American
Telephone and Telegraph and General Electric (GE). One major medical device, the X-ray, emerged from GE's research lab. It will be described at greater length shortly.
Further barriers to product development arose from the uneasy relationship between product manufacturers and both university researchers and medical practitioners. A rash of patents were applied for following the development of aseptic surgery. Between 1880 and 1890, the Patent Office granted about 1,200 device patents. The debate that raged over patents of medical products illustrates the tension between health care and profits. Universities generally resisted patenting innovations for several reasons. They valued the free flow of scientific knowledge among scholars. They faced hard questions raised about how to allocate profits of the final result because of the interconnectedness of basic scientific research. They were also concerned that a profit orientation within academia would discourage the practice of sharing scientific knowledge for the betterment of all.[12]
The debate about the appropriate role of academic scientists within universities and about private sector profits continues to this day. For a discussion of the current debate and the relevant public policy on these issues, see chapter 3.
Innovations produced by medical inventors raised additional ethical problems. Often the physician-inventors stood by while commercial organizations exploited remedies based on their work. The medical profession had a traditional ethic against profiting from patents, and the debates about the ethics of patenting medical products continued through this period.[13]
Shyrock, American Medical Research, 143.
For example, the Jefferson County Medical Society of Kentucky stated that it "condemns as unethical the patenting of drugs or medical appliances for profit whether the patent be held by a physician or be transferred by him to some university or research fund, since the result is the same, namely, the deprivation of the needy sick of the benefits of many new medical discoveries through the acts of medical men."[14]Ibid., 122.
Dr. Chevalier Jackson, a noted expert in diseases of the throat, developed many instruments to improve diagnostic and surgical techniques. In his autobiography in 1938, he wrote:
When I became interested in esophagoscopy, direct laryngoscopy, and a little later in bronchoscopy, the metal-working shop at home became a busy place. In it were worked out most of the mechanical problems of foreign body endoscopy. Sometimes the finished instrument was made. At other times only the models were made to demonstrate to the instrument maker the problem and the method
of solution. This had the advantage that the instrument was ever afterward available to all physicians. No instrument that I devised was ever patented. It galled me in early days, when I devised my first bronchoscope, to find that a similar lamp arrangement had been patented by a mechanic for use on a urethroscope, and the mechanic insisted that the use of such an arrangement on a bronchoscope was covered. Caring nothing for humanity, the patentee threatened a lawsuit unless his patent right was recognized during the few remaining years it had left to run.[15]
Chevalier Jackson, The Life of Chevalier Jackson: An Autobiography (New York: Macmillan, 1938), 197.
Not all physicians and scientists shared these views, but there was clearly a conflict between the perception of medical technology for the public good and the pursuit of profits, one that created a possible barrier to a full exploitation of the marketplace.
The last barrier to innovation in the medical field was the absence of a sizable market for the available products. In 1940, on the eve of World War II, total spending on health care in the United States amounted to $3.987 billion, or $29.62 per person per year. Health care spending accounted for only 4 percent of GNP. Patients paid directly for about 85 percent of costs. A small number of people received public assistance in city or county hospitals; there was virtually no private insurance coverage.[16]
Department of Commerce, Bureau of the Census, Historical Statistics of the United States, Colonial Times to 1970, bicentennial edition, pt. 2, ser. 221, 247 (Washington, D.C.: GPO, 1975).
There was no buffer for individuals and families in hard times, and health care was often sacrificed when family income was limited.The market for medical technology remained small by modern standards. The number of hospital beds was low in comparison to present population-to-bed ratios. Doctors' offices had little technological equipment. Fortunately, the small market did not deter researchers in some cases. For example, a 1914 study by engineers at General Electric concluded that new X-ray tubes would be more expensive than earlier ones and that the market would be too small to justify manufacture. Nonetheless, the management insisted that production proceed, noting that "the tube should be exploited in such a way as to confer a public benefit, feeling that it is a device which is useful to humanity and that we cannot afford to take an arbitrary or even perhaps any ordinary commercial position with regard to it."[17]
Reich, American Industrial Research, 89, citing George Wise, The Corporations' Chemist (Unpublished manuscript, 1981), 237.
Because of this altruistic view, General Electric soon dominated
the X-ray market and later turned a tidy profit on the enterprise. Obviously, however, most producers and inventors could not afford to ignore "ordinary commercial" considerations.
Bridging the Gaps
Innovation did occur despite the severe limitations in the private sector. Several examples of device innovation illustrate how these limitations were overcome.
Individual Initiative
One way to overcome institutional barriers to technology transfer was for an individual to fulfill several essential roles. Arnold Beckman, the founder of Beckman Instruments, was a scientist, engineer, and entrepreneur and thus had expertise in all the necessary stages of innovation.[18]
Most of the information on Arnold Beckman and the founding of his company appears in Harrison Stephens, Golden Past, Golden Future: The First Fifty Years of Beckman Instruments, Inc. (Claremont, Calif.: Claremont University Center, 1985).
As an assistant professor of chemistry at the California Institute of Technology in the early 1930s, he was called upon to solve technical problems that involved chemistry and then engaged in entrepreneurial activities with the results. His first business venture was to create a special ink formula that would not clog the inking mechanism in a postal meter. Because existing companies would not make the special formula, Beckman founded the National Inking Appliance Company in 1934.Beckman soon undertook additional projects with applications for science and medicine. At the request of agricultural interests, he invented a meter to measure the acidity of lemon juice that had been heavily dosed with sulfur dioxide. Using electronic skills he had developed at Bell Labs as a graduate student, Beckman designed the first acidimeter to measure the acidity or alkalinity of any solution containing water. He formed Beckman Instruments in 1935 to produce these acidimeter and discovered a market among some of his former professors at a meeting of the American Chemical Society.
In recalling the founding of his company, Beckman noted, "We were lucky because we came into the market at just the time that acidity was getting to be recognized as a very important
variable to be controlled, whether it be in body chemistry or food production."[19]
Stephens, Golden Past, 14.
In 1939 he quit teaching to run the business fulltime. Beckman's substantial contribution to the war effort, and the benefits the firm reaped as a consequence, will be discussed in a subsequent section. His company later became one of the major medical technology firms in America.[20]Much of the history of Arnold Beckman's contributions were summarized in Carol Moberg, ed., The Beckman Symposium on Biomedical Instrumentation (New York: Rockefeller University, 1986). This volume celebrates the fiftieth anniversary of the founding of Beckman Instruments.
Beckman's career illustrates how a multifaceted individual, with scientific, technical, and marketing skills, could successfully produce scientific instruments despite the significant barriers to innovation in the early twentieth century.Industrial Research Laboratories
Industrial research laboratories also served as bridges between science and technology and the market. Generally set apart from production facilities, these laboratories were staffed by people trained in science and advanced engineering and who were working toward an understanding of corporate related science and technology.[21]
Reich, American Industrial Research, 3.
By setting up labs, large firms could conduct scientific research internally and profit from the discoveries. These laboratories were possible only after the period of consolidations and mergers in the late 1890s and early 1900s that led to the growth of industrial giants that had sufficient resources to fund them. Research was vital, and product development formed a large part of their competitive strategy. These large firms were well aware of scientific developments in Europe, particularly in the fields of electrochemistry, X-rays, and radioactivity, and they knew they had to stay abreast of technological change.[22]Ibid., 37.
General Electric Company, founded in 1892, created a research laboratory that was firmly established within the company by 1910. William Coolidge led research efforts on the X-ray tube, which had been discovered in Germany in the 1890s. It was widely known that X-rays had medical value in that they allowed doctors to observe bone and tissue structure without surgery. Two-element, partially evacuated tubes generated the X-rays. As they operated, the tubes produced more gas, changing the pressure and making them erratic. Coolidge substituted tungsten for platinum. It could be heated to a greater temperature without
melting, while emitting less gas than platinum to achieve higher-powered and longer-lived tubes.
By 1913, the laboratory was manufacturing Coolidge's X-ray tubes on a small scale, selling 300 that year and 6,500 in 1914.[23]
Kendall Birr, Pioneering in Industrial Research: The Story of the General Electric Research Laboratory (Washington, D.C.: Public Affairs Press, 1957).
When the government began to place large orders of tubes for portable X-ray units for military hospitals during World War I, GE began to make significant profits. After the war, GE's management decided that the company would become a full-line X-ray supplier. GE bought the Victor X-ray company, switched its production of Coolidge tubes to Victor, and soon held a dominant position in the new and increasingly profitable medical equipment supply business.[24]The government's role in World War I represents the beginning of a transition to government involvement in medical device innovation. In this case, the government's demand for X-ray equipment as a purchaser significantly benefited the firm.
Problems of Medical Quackery
Along with these exciting breakthroughs in medical technology, a very different side of the industry flourished. The popularity of fraudulent devices, and concern about the consequences of that fraud, tainted public perception of the industry. Many people associated medical devices with quack products.[25]
The term quack dates to the sixteenth century and is an abbreviation for quacksalver. The term refers to a charlatan who brags or "quacks" about the curative or "salving" powers of the product without knowing anything about medical care. From the Washington Post, 8 July 1985, 6.
When medical science offers no hope of treatment or cure, people have traditionally turned to charms and fetishes for help.[26]
Warren E. Schaller and Charles R. Carroll, Health Quackery and the Consumer (Philadelphia: W. B. Saunders, 1976), 228. This volume contains many descriptions of a variety of fraudulent devices. It makes for amusing reading, but deceptive activities left a lasting legacy on the medical device industry.
The desperate search for cures was a major factor in the success of all forms of health fraud, including tonics, drugs, potions, and quack devices. Indeed, it is estimated that the public spent $80 million in 1906 on patent medicines of all kinds. The proliferation of quack devices helped to generate subsequent government intervention to protect the public.Innovative developments in scientific fields, such as electromagnetism and electricity, were often applied to lend credence to these health frauds (see figure 5). At the turn of the century, Dr. Hercules Sanché developed his Electropoise machine to aid in the "spontaneous cure of disease."[27]
James H. Young, Medical Messiahs (Princeton: Princeton University Press, 1967), 243.
This device, consisting of a sealed metal cylinder attached to an uninsulated flexible cord that, in turn, attached to the wrist or ankle, supplied, according to the inventor, "the needed amount of electric force to the system and by its thermal action places the body in a condition to absorb oxygen through the lungs and pores."[28]Ibid.
The Oxydonor was a subsequent "improvement" that added a stick of
Figure 5. A quack device.
Source: The Bakken Archives.
carbon to the sealed, and incidentally hollow and empty, cylinder and "cured all forms of disease." The success of the Oxydonor spawned a whole cadre of imitations. There was a death knell for these "pipe and wire" therapies when the inventor of the Oxypathor was convicted of mail fraud. Evidence collected at the trial revealed that the company had sold 45,451 Oxypathors at $35 each in 1914. Considering that as late as 1940 per capita spending on health was only $29.62, the consequences of wasted expenditures seem serious.
Another fraud was based on the new field of radio communications. Dr. Albert Abrams of San Francisco introduced his "Radionics" system, which was based on the pseudomedical theory that electrons are the basic biological unit and all disease stems from a "disharmony of electronic oscillation." Dr. Abrams's diagnoses were made by placing dried blood specimens into the Radioscope. Operated with the patient facing west in a dim light, the device purported not only to diagnose illness but also to tell one's religious preference, sex, and race. At the height of its use, over 3,500 practitioners rented the device from Abrams for $200 down and $5 a month.[29]
Schaller and Carroll, Health Quackery, 226.
One of Abrams's followers was Ruth Drown. She marketed the Drown Radio Therapeutic Instrument, which she claimed could prevent and cure cancer, cirrhosis, heart trouble, back pain, abscesses, and constipation. The device used a drop of blood from a patient, through which Drown claimed she could "tune in" on diseased organs and restore them to health. With two drops she could treat any patient by remote control. A larger version of her instrument was claimed to diagnose as well as to treat disease. Thousands of Californians patronized her establishment.[30]
Drown v. U.S., 198 F.2d 999 (1952). Drown was prosecuted for grand larceny and died while awaiting trial. See Joseph Cramp, ed., Nostrums and Quackery and Pseudo-Medicine, vols. 1-3 (Chicago: Press of the American Medical Association).
Unfortunately for legitimate medical device producers, the prevalence of device quackery tainted the public's perception of the industry. Indeed, initial state and federal efforts to regulate the industry were in response to problems of fraud. Device fraud continues, especially for diseases like arthritis and cancer and for weight control.[31]
Concern about fraudulent drugs and devices surfaces periodically. Congress has held hearings investigating health frauds, particularly frauds against the elderly. See, for example, House Select Committee on Aging, Frauds Against the Elderly: Health Quackery, 96th Cong., 2d sess., no. 96-251 (Washington, D.C.: GPO, 1980). In 1984, the FDA devoted only about one-half of 1 percent of its budget to fighting quack products. Under pressure from the outside, it set up a fraud branch in 1985 to process enforcement actions. See Don Colburn, "Quackery: Medical Fraud Is Proliferating and the FDA Can't Seem to Stop It," Washington Post National Weekly Edition, 8 July 1985, 6. For a description of past and present device quackery, see Stephen Barrett and Gilda Knight, eds., The Health Robbers: How to Protect Your Money and Your Life (Philadelphia: George F. Stickley, 1976).
Fraud in the industry can be seen as a market failure that subsequent government prescriptions sought to correct.Industry Status in 1940
Despite the successes of some firms and some individuals, the medical device industry remained relatively small even as late as 1937. The Census of Manufactures, the best source of information about producers, categorized all industrial production into Standard Industrial Codes. Before 1937, the Census contained only one primary industrial category for medical products. This was SIC 3842—surgical appliances and supplies—which included items such as bandages, surgical gauze and dressings, first aid kits, and surgical and orthopedic appliances. Both the number of producers and the value of their sales in SIC 3842 were quite small until the 1930s. For example, in 1914 there were 391 establishments that shipped products valued at about $16.5 million. The number of producers rose to 445 during World War I, dropped to below 300 until the midtwenties, fell further to 250 during the depression, and reached 323 in 1937. Sales reflected the same ebb and flow, dropping from $71 million in 1929 to $51 million in 1933, and recovering to $77 million by 1937.
In the late 1920s a second classification—SIC 3843—was added for dental products and supplies. In the 1937 data, three important classifications emerged. SIC 3693 included X-ray and therapeutic apparatus. Sales of these products had occurred before this time; however, they were buried in other, nonmedical industrial categories. The industries that produced these products engaged primarily in manufacturing X-ray tubes and lamps for ultraviolet radiation. By the 1950s, the name of the code changed to X-ray, electromedical, and electrotherapeutic apparatus, reflecting the growing innovation in this field. By 1937, SIC 3693 accounted for $17 million in sales with forty-six companies producing equipment. A second new code was SIC 3841—surgical and medical instruments—which included products such as surgical knives and blades, hypodermic syringes, and diagnostic apparatus such as ophthalmoscopes. In 1937, thirty-nine companies were producing devices in this code. In that year, records began to be kept for a fifth medical product category, SIC 3851, ophthalmic goods, which included eyeglass frames, lenses,
and industrial goggles and included seventy-nine companies selling about $43 million worth of goods in 1937. In all five relevant SIC codes, there were only 588 establishments with total product shipments valued at $200 million.[32]
In addition to the extensive data gathered by the Census, see R. D. Peterson and C. R. MacPhee, Economic Organization in Medical Equipment and Supply (Lexington, Mass.: D. C. Heath, 1973).
As we have seen, there was some innovation and modest, though inconsistent, growth in the medical device industry from 1900 to 1940. New products emerged despite barriers to technology transfer at the various stages of the innovation continuum. However, innovation was frequently serendipitous, dependent on individuals and not institutionalized sufficiently to ensure a steady stream of progress. Creative entrepreneurs and industrial laboratories did play a role in overcoming obstacles for some technologies. On the other hand, the device industry was plagued with quackery and fraud.