Measuring the Returns to NASA Life Sciences Research and Development

Dr. Henry R. Hertzfeld



Measuring the Returns To NASA Life Sciences Research and Development









Dr. Henry R. Hertzfeld


Space Policy Institute

George Washington University

Washington, DC 20052

(202) 994-6628







September 30, 1998










Table of Contents


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


                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


Summary of Results


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.[1]   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.







Returns to government investment


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.[2] 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.[3] 


Mission objectives


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.


Economic Effects of Government Programs in Life Sciences Research and Development


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.[4]


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.


Measuring Economic Benefits of Life Sciences R&D


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.[5]



NASA Benefits:  Methodological Approach to Measurement


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.[6] 


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.[7]  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.[8] 


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.[9]  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.[10]   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.[11]


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.


Firms in Study:  The Sample


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.

1.        Hamilton Standard


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 Interview Process


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.[12]  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.[13]


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.



Data Methodology




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).


Each category was analyzed based on the data collected from the firms.  First, the sales attributed to each category was determined, and then the sales figure modified by the percentage that could be attributed to the ESA R&D funding.  Finally, the rate of value added was applied to the estimate.[14]


Each of the categories required some special modifications of the general methodology.  For instance, where the benefits were internal cost savings to the firm, those cost savings were directly estimated (the value added concept would not apply). Another example was in the impacts of the ability to advertise a close connection with the high-tech space program.  This type of benefit to the firm was not possible to measure because of the subjective nature of the interview responses to this question.  The importance of the commercial benefits from advertising, as well as from the increased ease of initiating joint ventures, was described in the case study section (Appendix 2).


Improvements in management and organization and the work-force training impacts were not particularly important to the firms interviewed for this study.   (However, these factors likely would be important to the large U.S. firms doing major contract work for NASA, just as they were in Europe for the large firms that make the space systems under contract to ESA.) 


Furthermore, most life sciences research in Europe is part of the funding of each nation’s space program, not the ESA program. (Though ESA is responsible for coordinating this research.)  Thus, a similar study using the BETA method in Europe on life sciences R&D for ESA would omit many of the smaller firms and research efforts that were the focus of this pilot study.[15]


There are many other differences between space R&D in the United States and in Europe.  The U.S. space program is older, more comprehensive, and many times the size of Europe’s.  The U.S. invests over $12 billion per year in civilian space, while Europe invests about $3 billion.  In Europe, each nation that contributes to ESA receives a proportionate share of contract funds back from ESA.  In the U.S. there is no requirement that funds be distributed on a regional basis by any formula.  The U.S. has a manned space program and though Europe has trained astronauts for flights on the Shuttle and on Mir, it has no vehicle capable of manned space flight.  This alone is a crucial difference in the focus of space research, but most significantly, in the focus of a life sciences research program.


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.



G.W. Interview Data


A wide range of data would be essential for an accurate accounting of the benefits accruing to a company from its R&D efforts.[16]  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.[17]


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.[18]  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.[19]


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.[20]


Evidence of social benefits


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.[21]


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.[22]  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.[23]


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.



The Portfolio of Investments:  Returns from the Three Top Performers


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.[24] 


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.[25]  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.


Summary Of Results From Other Firms


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.




General Observations


·        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.[26]


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.[27]  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.[28]


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.[29]


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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Appendix 1




Data Requested From Firms





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.




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:, and my direct phone number is (202) 994-6628.


                                                Sincerely yours,

                                                Henry R. Hertzfeld,

                                                Senior Research Scientist



Sales and R&D Expenditures:



Total Sales

Space Spinoff Sales

NASA R&D Contract

Company R&D












































































Est. 2000





Est. 2005








                                                                              Year          Firm      Space R&D




Space R&D

























































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.)







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















Selected Case Studies




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.



3-M Company:  Food Warming Device


3M Health Care

St. Paul, MN




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-Merrieux-Vitek:  Automated Microbial Assay System


bio-Merieux Vitek, Inc.

595 Anglum Rd

Hazelwood, MO 63042-2320




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.”



Cox Rapid Heat-Transfer Sterilizer


CoxSterile Company

1343 S. Henderson Avenue

Dallas, Texas




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.


Diatek:  Infrared Ear Thermometer


Welch Allyn, Inc.

7420 Carroll Road

San Diego, CA 92121




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: BaroCuff



720 Thimble Shoals Blvd.

Newport News, VA 23606




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:  Temperature Pill


Human Technologies, Inc.

7183 30th Avenue North

St. Petersburg, FL 33710




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:  Cool Suits



P.O. Box 266

Frederica, Delaware 19946




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. 



Microsensor Technology:  Gas Chromatograph


MTI Analytical Instruments

41762 Christy St.

Fremont, CA  94538-5106




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:  Exercise/Amusement Machine


Orbitron/Fantasy Factory

2905 A Ocean Side Blvd.

Ocean Side, CA 92054



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:  Bioreactor



Synthecon, Inc.

8054 El Rio

Houston, TX 77054




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:  Foam Support Surfaces


Tempur-Pedic, Inc.  (also) Tempur-Medical, Inc.

848G Nandino Blvd.

Lexington, Kentucky 40511




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.[30] According to Tempur-pedic, their 1997 sales were over $30 million and growing rapidly.[31]  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.


Umqua:  Water Purification Device


Umpqua Research Co.

125 Volunteer Way, PO Box 791

Myrtle Creek, OR 97457




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.






Appendix 3:









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.






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.

[1] 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.

[2] Formally, the U.S. government considers all purchases to be in the year expended.  Although the Bureau of Economic Analysis of the U.S. Department of Commerce has, in recent years, begun to issue special reports of government capital and R&D expenditures, the official GNP statistics still do not recognize the concept of a return on investments.

[3] There should be, if possible, an accounting of two governmental benefits:  the contribution to the mission success of the agency funding the R&D work, and any eventual returns to the U.S. Treasury in the form of tax revenues from profits that can be traced back to the stimulus from the investment.  Both of these measures may be very difficult to isolate and measure, particularly for recent R&D expenditures.  For a more detailed account of these problems, see  (Hertzfeld 1992).

[4] There has been a thirty-year trend in both the United States and in Europe of steadily increasing R&D investments in life sciences R&D.  These increases have been in both the absolute investment and the relative share of national R&D dedicated to life sciences.  NASA’s life sciences, however, has fluctuated since it is directly associated with investments in manned space flight programs.

[5] However, a capital and economic development model is not a substitute for a lack of concern for the quality of human life by NASA or other agencies.  In fact, increased economic growth and industrial productivity feeds directly back into higher incomes, more leisure time, and additional disposable personal income that may be devoted to improved education and health, just as a healthier population will better support a dynamic and productive work force.  And, as mentioned above, there is overlap in the research efforts of NIH and NASA, with both agencies having similar goals, but often using different approaches.

[6] Not all of the firms in our sample were direct recipients of NASA R&D.  Some firms had developed products and services using NASA publications and information; some had contracted with NASA through technology transfer activities; and some had already developed products which NASA then modified, tested and used in space activities.

[7] This is a non-random sample of  firms and NASA R&D investments.  Since the study was a “pilot” and test of the methodology for measuring economic impacts, successful cases were selected.  (As described below, not all of the cases that were supposed to have been successful were.)  A larger and more comprehensive study design should include a sample of all NASA Life Sciences R&D grants and contracts and unsuccessful and well as successful cases should be studied.

[8] Most life sciences R&D benefits fall into the first two categories.  The later two were important in the European methodology because the firms studies tended to include many large contractors to the European Space Agency that developed major space systems and employed many people, had significant R&D laboratories, and had many different divisions.  This study, by the nature of the smaller R&D grants and contracts from NASA Life Sciences, had many small firms that did not report benefits such as the formation of new R&D laboratories or the use of new methods of organizing the work force.

[9] One other measure that proved useful to add together is the amount of private R&D that was stimulated by the NASA Life Sciences R&D.

[10] Leveraging being defined as the additional expenditures of private funds for R&D and product development resulting directly from the stimulation provided by the government R&D funds.

[11] 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.


[12] Appendix 1 includes copies of the introductory letter and the data request that was made.

[13] As is evident in the data presented below, there is a wealth of unpublished information behind the published numbers.  Unfortunately, because of the confidentiality restrictions and the fact of the very large success of a few of the products prevents us from publishing all of the useful quantitative data.  However, the results do indicate the types and general magnitude of the benefits from each of the companies.  Appendix 2 describes in more detail the results of the interviews that were conducted with the companies that reported successful commercial sales.  Specific company information on sales, value added, and private R&D is presented in approximate data ranges to preserve confidentiality.  Actual numbers were used in the calculation of the summary statistics.

[14] Value added by a firm is defined as sales less the cost of purchases made by the firm from its various suppliers.  It represents the actual contribution of the firm to gross national product. 


[15] A parallel study to this one was conducted in Europe by BETA in 1995-96.  It focused on research laboratories and was descriptive rather than quantitative. The study looked at the RADIUS and PROMEDUS research programs as well as the field of telemedicine.  See:  L. Valignon, H. Sylla, Transfert de Technologie Entre L-Espace et Les Sciences de la Vie en Europe,” Final Report, Dec. 1996, ESA Contract No. C11791/96/F/GG.

[16] Appendix 1 includes a table of all types of firm-level data that would be useful to generate accurate results.  Following that is a sample of the data series that were actually requested from the firm.  Other information was obtained through notes taken during the interview and through follow-on written communications.

[17] Some assumptions had to be made.  For example, when we were only given two or three years of sales data spread over a ten year time period for the product on the market, we had to extrapolate and estimate intermediate years.  This method would not show the differences between good and bad years, but it was reasonable for estimating the cumulative sales over time.  Similarly, when a company received a R&D contract from NASA that was a fixed amount over several years, we allocated the money equally among those years. Other simplifying assumptions were necessary to construct a profile for a company.

[18] All of the firms in this study benefited directly from NASA R&D.  However, some firms that successfully marketed products tied to NASA-sponsored programs or technologies were not recipients of formal R&D contracts or grants from NASA.

[19] See, for example, the Life Sciences Applications Database compiled by R. Mains Associates, Berkeley, CA.  This report is currently in progress under a contract to NASA.

[20] Further economic analysis could take several approaches.  First, a survey could be conducted of all R&D recipients since 1960.  The survey would attempt to track forward in years the results of the research and development from what those performing the research know about the subsequent uses of the results.  This survey could be followed by industry interviews where products and sales were reported.  A second approach would be expanding this pilot study to many more firms identified through NASA publications and other sources.  This approach would add more examples to the ones reported here, but it would probably not significantly alter the findings.  A third approach would be to apply the types of models that NIH has developed to measure the impact of these life sciences products on the quality of human life and on the effective delivery of health care services.  These are the most difficult benefits to measure quantitatively, but are also probably the benefits with the largest measurable impact.  It is also most difficult to aggregate these social benefits into cumulative or summary statistics.

[21] There is no precise economic definition or  measure of social benefits.  Essentially, social benefits are those benefits that are not private benefits.  In terms of this study, private benefits are the measurable impact on the company that produces the innovation.  All other benefits, therefore, are social.  What is significant for this study are the incremental social benefits that have occurred from government investment.  These range from having a product on the market at a price that is lower than it may have been before the innovation (additions to consumer surplus) to non-quantifiable benefits such as better or faster delivery of health care services and the reduction of patient discomfort (e.g. the use of a noninvasive procedure as compared to surgery).

[22] The company indicated that it is working on a system to reduce the cost of this device so that it could be adapted by practicing physicians at an affordable cost.

[23] Much of this research has been sponsored by the National Institutes of Health.  See, for example, Cost Savings Resulting from NIH Research Support, Second Edition, U.S. Department of Health and Human Services, Public Health Service, National Institutes of Health, NIH Publication 93-3109, September, 1993.  A n excellent review of economic studies in the life sciences can be found in: A Few Basic Economic Facts About Research In the Medical And Related Life Sciences, Samuel Silverstein, Howard Garrison, & Stephen Heinig, The FASEB Journal, Vol. 9, Pages 833-840, July, 1995.

[24]This is particularly true for government investments in R&D.  In business, a typical investment portfolio might be purchase of different pieces of machinery.  Each one can be analyzed before hand based on expected returns from the income stream generated by production.  Engineering specifications will be reasonably accurate for each machine, and comparisons can be made.  The portfolio’s return is relatively easy to predict.  Even commercial R&D is more toward the development end, and markets and sales are more predictable than with  portfolio consisting of basic research projects.  The latter is more typical of a government portfolio, which will focus on both basic research and mission-targeted applied research.  Both actual success of the research effort (knowledge gained) and commercial success is far less predictable.

[25] ILC originally stood for International Latex Company

[26] The classic business school case study is razor blades.  Companies gave away razors and made fortunes on the sale of the blades.


[27] This was suggested by Tempur-Pedic.  They needed to obtain approval of their product for purchase by the Veteran’s Administration for use in VA hospitals.  They also cited the need for Medicaid approval in the various states.

[28] For example, Nanoptics is performing R&D in detection of breast cancer detection.  They have research funds from the NIH.  The NASA involvement is through supplemental funds to Nanoptics through the NIH, where NASA interests in the area are also involved.

[29] Since obtaining regulatory approval from the FDA involves a number of complex legal as well as technical issues, NASA should not become part of the actual approval process.  The recommendation is limited to NASA acting as an aid in testing and proving the technology and as a source of information that may be of value to the company in the approval process.  In this type of assistance, NASA should avoid any actions that could subject the U.S. Government to future legal liability.

[30] However, they carefully give NASA credit only for the origin of the heat/pressure sensitive foam idea; they take credit for additional R&D to bring out a commercial product that is different from the NASA product.   This should be contrasted to the recent NASA technology transfer office claims that imply the Tempur-foam product is a NASA product.

[31] Source: Tempur-pedic web page.

* Lixhauser, A., Luce, B.R., Taylor, W.R., et al., "Health Care CBA/CEA: An update on the Growth and Composition of the Literature", Medical Care 31(7) (suppl.):JS1-JS11, 1993

* 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

* Adams, M.E., McCall, N.T. Cray, D.T., et al., "Economic Analysis in Randomized Control Trials", Medical Care, 30(3):231-243, 1992

* National Institutes of Health, (1990) and described by Schuttinga in an internal NIH "Guidelines for the preparation of Cost-savings examples" (1992).

* This figure is the result of assumptions concerning the number of deaths averted (2/3 of the deaths will be averted), the average annual wage loss per person with a severe mental illness ($6,442), the percentage that the crime-related costs will be reduced, etc.

* The methods to assess preferences were : Standard Gamble, Time-Trade-off, Categorical Scaling, Sickness Impact profile, Campbell Index f Well-Being, Kaplan-Bush Index of Well-Being.

* Generic health measures are less often included in clinical trials whereas measures of the first type are routinely included as end points in clinical studies. Disease-specific and treatment-specific measures are also included in trials