How Much do Physician-Entrepreneurs Contribute to New Medical Devices?

Objectives:As recent public and private initiatives have sought to increase the transparency of physician-industry financial relationships (including calls for restricting collaboration), it is important to understand the extent of physicians’ contributions to new medical devices. We quantify the contribution of information from physician-founded startup companies to 170 premarket approval (PMA) applications filed by 4 large incumbent medical device manufacturers over the period 1978–2007. We ask: Are incumbents more likely to incorporate information from physician-founded firms than nonphysician-founded firms? Methods:We matched the text in 4 incumbent medical device firms’ PMAs (Medtronic, Johnson & Johnson, Boston Scientific, and Guidant) to the text in patent applications of 118 startup companies that received investment from these incumbents between 1978 and 2007. We use a text-matching algorithm to quantify the information contribution from physician and nonphysician-founded startups to incumbent firms’ PMAs. We analyze correlates of backward citations and degree of overlap between incumbents’ PMAs and startups’ patents using negative binomial and tobit regressions. Findings:On average, physician-founded companies account for 11% of the information in PMAs, compared with 4% from nonphysician-founded companies. Regression results show that incumbents are significantly more likely to cite physician-founded companies’ patents and to incorporate them into new devices. Conclusions:Physicians are an important source of medical device innovation. The results suggest that restrictions on financial relationships between providers and industry, while potentially improving patients’ trust, may result in reduced medical innovation if physicians found fewer startups or if incumbent firms reduce investments in physician-founded startups.

[1]  V. Gott,et al.  Mechanical heart valves: 50 years of evolution. , 2003, The Annals of thoracic surgery.

[2]  K. Eisenhardt,et al.  Swimming with Sharks: Technology Ventures, Defense Mechanisms and Corporate Relationships , 2008 .

[3]  David B. Resnik,et al.  Conflict of Interest in Medical Research, Education, and Practice , 2010, Environmental Health Perspectives.

[4]  Allan Afuah,et al.  Users as Innovators: A Review, Critique, and Future Research Directions , 2009 .

[5]  Sheryl Winston Winston Smith The Company They Keep: Innovation Returns To Corporate Venture Capital In The Medical Device Industry, Entrepreneurial Clinicians, and Competitive Coinvestors , 2009 .

[6]  Ayfer Ali,et al.  The Major Role of Clinicians in the Discovery of Off‐Label Drug Therapies , 2006, Pharmacotherapy.

[7]  J. Myles Shaver,et al.  Limitations to interorganizational knowledge acquisition: The paradox of corporate venture capital , 2009 .

[8]  V Parsonnet,et al.  Cardiac pacing, 1960-1985: a quarter century of medical and industrial innovation. , 1998, Circulation.

[9]  Paul C. Tetlock Giving Content to Investor Sentiment: The Role of Media in the Stock Market , 2005, The Journal of Finance.

[10]  B. Lo,et al.  Invited commentary--illuminating physicians' financial relationships with industry. , 2011, Archives of internal medicine.

[11]  Michael Simons,et al.  Medical Device Development: From Prototype to Regulatory Approval , 2004, Circulation.

[12]  B. Nahed,et al.  Device Innovation in Neurosurgery: Controversy, Learning, and Future Directions , 2012, Neurosurgery.

[13]  Eric G Campbell,et al.  Conflicts of interest in cardiovascular clinical practice guidelines. , 2011, Archives of internal medicine.

[14]  Thomas W. Fogarty How Do Product Users Influence Corporate Invention ? , 2009 .

[15]  Sheryl Winston Smith,et al.  Do innovative users generate more useful insights? An analysis of corporate venture capital investments in the medical device industry , 2013 .

[16]  R. Orlandi,et al.  Development and evaluation of new technologies in otolaryngology–head and neck surgery , 2007, Otolaryngology--head and neck surgery : official journal of American Academy of Otolaryngology-Head and Neck Surgery.

[17]  Gerard Hoberg,et al.  Product Market Synergies and Competition in Mergers and Acquisitions: A Text-Based Analysis , 2008 .

[18]  K. Schulman,et al.  Physician-industry cooperation in the medical device industry. , 2008, Health affairs.

[19]  Gerard Hoberg,et al.  The Information Content of IPO Prospectuses , 2009 .

[20]  Christopher D. Manning,et al.  Introduction to Information Retrieval , 2010, J. Assoc. Inf. Sci. Technol..

[21]  Effect of physician payment disclosure laws on prescribing. , 2012, Archives of internal medicine.

[22]  T. Stevens,et al.  An Overview of FDA Medical Device Regulation as it Relates to Deep Brain Stimulation Devices , 2007, IEEE Transactions on Neural Systems and Rehabilitation Engineering.

[23]  Sofus A. Macskassy,et al.  More than Words: Quantifying Language to Measure Firms' Fundamentals the Authors Are Grateful for Assiduous Research Assistance from Jie Cao and Shuming Liu. We Appreciate Helpful Comments From , 2007 .

[24]  Paul C. Tetlock,et al.  All the News That's Fit to Reprint: Do Investors React to Stale Information? , 2010 .

[25]  Iwan von Wartburg,et al.  Why are some independent inventors 'heroes' and others 'hobbyists'? The moderating role of technological diversity and specialization , 2009 .