# The Value of Innovation in the Medical Device Industry

> **NIH AHRQ R36** · UNIVERSITY OF MINNESOTA · 2020 · $32,563

## Abstract

Abstract
The United States relies on the $171 billion medical device industry to produce life-saving and life-improving
innovations for millions of patients every year. While research shows medical device firms spend less on
research and development (R&D) when they experience financial hardship, research has not established how
those reductions in R&D affect patients’ access to new and clinically valuable technologies. This is due in part
to a lack of firm-level measures that directly describe the development of life-saving and life-improving medical
devices. To address these gaps, in this study I will 1) generate new firm-level measures of the clinical value of
innovation in the device industry and 2) determine the effect of a change in a firm’s finances on their production
of clinically valuable technology. To measure clinical value, I will use concepts from the cost-effectiveness
analysis literature to examine how firms develop devices that extend and improve patients’ lives. The current
standard measures of clinical value are incremental quality-adjusted life years (QALYs) and incremental cost
effectiveness ratios (ICERs). QALYs measure a patient’s additional years of life weighted by the quality of
those additional years of life, while ICERs compare those health gains to the cost of treatment. My study will
also develop new “citation-weighted” measures of firm-level clinical value. The US Food and Drug
Administration (FDA) approves most medical devices based on whether a new device is at least as safe and
effective as a cited pre-existing device. My proposed citation-weighted measures will consider the QALYs and
ICERs for a firm’s devices as well as the QALYs and ICERs of later devices that cite the given firm’s devices in
their FDA applications. After creating my new “citation-weighted” measures of clinical innovation, I will
determine how random “shocks” to firms’ finances affect their production of innovative devices by examining a
natural experiment: hurricanes in Puerto Rico. Many device companies have production facilities spread out
across Puerto Rico. Thus, hurricanes create a natural experiment in which some firms randomly experience
larger increases in production costs compared to other firms due to the location of production facilities. Using
this natural experiment will allow me to produce causal estimates of how changes in firms’ financial status
affect their development of clinically valuable devices. Part of AHRQ’s stated mission is “to produce evidence
to make health care safer, higher quality, more accessible, equitable, and affordable”. Medical device policy
involves a fundamental trade-off between these goals. Governments can levy taxes or place more regulations
on firms to promote higher quality or improved safety, but these policies may decrease patients’ access to
future life-saving and life-improving innovations by increasing costs for manufacturers and slowing the
development of new devices. My study estimates the tra...

## Key facts

- **NIH application ID:** 10088705
- **Project number:** 1R36HS027522-01A1
- **Recipient organization:** UNIVERSITY OF MINNESOTA
- **Principal Investigator:** Alexander Oljace Everhart
- **Activity code:** R36 (R01, R21, SBIR, etc.)
- **Funding institute:** AHRQ
- **Fiscal year:** 2020
- **Award amount:** $32,563
- **Award type:** 1
- **Project period:** 2020-09-01 → 2021-07-31

## Primary source

NIH RePORTER: https://reporter.nih.gov/project-details/10088705

## Citation

> US National Institutes of Health, RePORTER application 10088705, The Value of Innovation in the Medical Device Industry (1R36HS027522-01A1). Retrieved via AI Analytics 2026-05-23 from https://api.ai-analytics.org/grant/nih/10088705. Licensed CC0.

---

*[NIH grants dataset](/datasets/nih-grants) · CC0 1.0*