|ESCAPING THE PRISONER'S DILEMMA|
Medical Device & Diagnostic Industry
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An MD&DI May 1997 Column
In the managed-care marketplace, medical device companies may increasingly find cooperation more beneficial han competition.
One of the benefits of making mistakes in print is learning from the readers who correct you. For instance, a misleading statement I made in last month's column ultimately gave me a renewed appreciation of device industry history and of the complex relationship between competition and cooperation.
What I had written was a summary of a remark made by Harvard law professor Arthur Miller in the course of a panel discussion at HIMA's annual meeting last March. In trying to capture the gist of it, I attributed the invention of the pacemaker to Medtronic cofounder Earl Bakken.
This statement caught the attention of two readers, both connected with the codevelopers of the implantable version of the pacemaker, Wilson Greatbatch, William Chardack, and Andrew Gage. As both pointed out, these men were the inventors of the first successful implantable pacemaker. A call to Medtronic confirmed this, but added the information that Bakken was the inventor of the first successful wearable pacemaker.
As I subsequently read in one of the references I consulted, "there is much controversy over who was the first to invent the artificial pacemaker." This statement refers not to Greatbatch et al., however, but to other inventors active several decades earlier.
Ultimately, it seems, the pacemaker was a team effort, whether intentionally or not. No doubt the pacemaker pioneers were driven by competition. But it succeeded in the end by virtue of cooperation, one advance building on another.
This conclusion brings me back to the HIMA panel discussion. In considering the implications of managed care, one of the panelists, Barbara McNeil of Harvard Medical School, described the quandary facing medical device companies. If managed-care organizations demand expensive cost-effectiveness studies of new products, who will fund them? she asked. If one company does so, its competitors will benefit without bearing any of the cost. If they jointly sponsor the studies, however, each loses the competitive advantage of getting into the market first. The result might be that no studies are done, and no one will benefit.
This scenario reminds me of the Prisoner's Dilemma, a philosophical problem that pits self-interest against cooperation. Two prisoners held in separate cells for a jointly committed crime are offered a deal: confess, implicating the other, and go free. If only one prisoner accepts this deal, the other will be sentenced to three years. If each implicates the other, each will receive two years. If neither takes the deal, both get one year in prison.
In this scenario, the best outcome is the last, in which the total time served jointly is two years. This result depends on cooperation. The worst outcome is the second, in which a total of four years is served. This result is driven by self-interest. Human nature being what it is, the latter result is the most likely.
In the real world, the relationship of self-interest and cooperation is usually more complex. As in the case of pacemaker development, the best results will come from a mix of competition and cooperation. But as the market changes and managed care becomes more dominant, dilemmas like McNeil's may become more common.
In such cases, is cooperation clearly the best choice? For medical device companies, the answer will increasingly be yes.