The primary dynamic altering the pharmaceutical field during the interwar period, 1920-1940, was changes in organizational strategy as pharmaceutical companies in the United States began creating in-house research departments and forming collaborative
research relationships with universities. Prior to World War I, most large pharmaceutical manufactures in the United States had no interest in developing new drugs and were concerned primarily with the profitable production of known chemical compounds discovered by European chemists (Swann 1990). This led to a negative relationship between industry and research universities highlighted by the American Society for Pharmacology and Experimental Therapeutics’ ban on membership for individuals employed by industry that lasted from the association’s founding in 1908 until 1941. One reason American firms had little interest beyond reproduction based manufacturing was that the German and British pharmaceutical industries dominated drug development and production, but when World War I cut off the supply of European medicines,
American pharmaceutical corporations realized that increasing production capacity could be economically beneficial (MacGarvie and Furman 2005). The strengthened patent and intellectual property laws combined with the auctioning off of German intellectual property at the end of the First World War served as additional factors influencing the creation of in-house research laboratories within America pharmaceutical corporations.
4.3.1 In-House Research Laboratories
Swann (1990: 79) wrote, “If American firms learned anything from their German counterparts after the war, they learned that to remain at the cutting edge of practical therapeutics research was essential.” Pharmaceutical companies after the war began strategically investing internally by building in-house laboratories and hiring trained scientific staff to conduct research on new products. By the early 1930s, the annual investment in research and development at the largest firms in the country was regularly over $100,000 (Swann 1990). Initiating successful strategies for developing research labs
proved challenging since many of the executives at large firms had business
backgrounds, as opposed to scientific backgrounds, which meant that they understood little about the research process. To overcome this lack of knowledge, industry leaders adopted two strategies: recruiting heavy from the already developed research programs in the university system and developing collaborative research relationships with
universities.
Jeffrey L. Furman and Megan MacGarvie’s (2005, 2008, and 2009) detailed analysis of industry-university relationships during this time revealed several key mechanism shaped the strategies of these collaborations. Furman and MacGarvie (2009) noted geographic proximity influenced these relationships through:
“a pattern in which firms with limited (or no) R&D capabilities are generally constrained to work with local partners while firms with greater internal R&D capabilities seek primarily local partners for smaller-scale projects and projects for which general skills are appropriate and distant partners for larger-scale projects an extraordinary projects.” (p. 937)
At the same time, the rise of in-house research labs also benefited local universities by providing jobs for graduates. This labor market connection between universities and industry served to strengthen the scientific legitimacy of industrial research and
development as evidenced by membership movements within the American Society for Pharmacology and Experimental Therapeutics during the 1920s to end the ban on industry employees (Parascandola 1990).
The developing relationship between industry and academics was reciprocal. Industry shaped academic strategies directly by funding research at universities through
faculty fellowships, grants, and renting laboratory space (MacGarvie and Furman 2005). Not all corporate financial donations were unrestricted; companies acted strategically in some cases by dictating the research agenda to grant recipients as a method for
supplementing or substituting for in-house research and by constructing grant agreements that established the company’s legal claim over discoveries (Swann 1990). Despite the fact such tactics reinforced the negative image of the industry researcher in academic circles, a sentiment famously portrayed in Sinclair Lewis’s 1925 novel Arrowsmith, universities welcomed the money to expand their research programs. In the other direction, hiring trained academics led to changes in organizational strategy within pharmaceutical companies as these new employees brought scientific ideology into commercial research and development. At some companies, former academics had considerable leeway in setting up the laboratory and determining the research agenda (MacGarvie and Furman 2005).
4.3.2 Increasing Federal Regulation
A highly publicized incident of product adulteration marked the end of this period. The deaths of over 100 individuals by a contaminated patent medicine facilitated to the passage of the 1938 Food and Drug Administration Reform Act, which
significantly restructured the field by strengthening the federal government’s role as a regulator. Sulfanilamide product use, established by the late 1930s for the treatment of common colds, pneumonia, and venereal diseases, was common throughout Europe and the United States. Dr. Massengill’s Elixir Sulfanilamide was a patent medicine produced in Bristol, Tennessee and distributed across the country, with higher usage among blacks in the Tennessee and Midwest plains region (Carpenter 2010). Even though the S.E.
Massengill Company was a patent medicine company, the Elixir Sulfanilamide was distributed to patients by prescription.
During the summer of 1937, the S.E. Massengill Company began producing and distributing a liquid form of Elixir Sulfanilamide that contained diethylene glycol, an anti-freeze component, to improve the taste. In the following months over 100 people died from using the product. The media coverage and public outcry that followed this incidence focused on how no product safety evaluation was required prior to sale so the only law the S.E. Massengill Company violated was fraudulently mislabeling the elixir as containing alcohol.
This incident illustrates the larger dynamics between stakeholders in the field at the time, because physicians made the first reports of illness and death directly to the AMA, not the FDA (Carpenter 2010), underscoring the dominant role of the AMA in drug regulation. The AMA immediately sent a request to the company for product samples and tested them at the AMA Chemical Laboratory, which concluded the diethylene glycol additive was the cause of the death. The FDA started its own investigation three days after the AMA received the first death notification, and the agency’s analysis of the elixir reached the same conclusion.
Coincidently, debate on a bill reforming the 1906 Pure Food and Drug Act had begun in early 1937 but had failed to lead to any legislative changes. The coverage of the sulfanilamide incidence generated publicity that the FDA capitalized on to lobby for stronger provisions than those contained in the initial revision proposals. While Carpenter (2010) cautioned against assigning too much credit to this sulfanilamide incidence for influencing congress, the passage of the 1938 Food, Drug, and Cosmetic Act expanded
the FDA’s power by giving the agency the authority to formally regulate drugs through pre-market review. Nonetheless, industry lobbying efforts were successful in limiting this provision to the evaluation of product safety only, leaving the evaluation of efficacy solely to the AMA (Carpenter 2010, Greene & Podolsky 2009).
In summation, during the interwar years the dominant strategy of American pharmaceutical companies shifted from manufacturing known chemical compounds to researching new products. This change was made possible in part because of the prior investments by universities in building research programs which provided the industry with access to the skilled scientist necessary to construct and run in-house research departments. This new strategy provided the possibility for logics of science to be incorporated within a pharmaceutical corporation. The differing capabilities of
pharmaceutical companies to invest in scientific research also led to the emergence of a strategic division within the industry between research organizations and compound manufactures (Chandler 2005). The coexistence of different organizational strategies within the same organizational type is an indicator institutional pluralism within the field.
Despite the creation of the FDA in 1906 through the Pure Food and Drug Act, the
organization lacked the authority to directly influence field development and occupied a mostly reactionary role during this period. The passage of the 1938 Food, Drug, and Cosmetics Act laid the foundation for the FDA to gain authority and direct influence in the field. The stakeholder interests of the FDA and professional medicine aligned during this period with both advocating for stronger scientific evaluations on pharmaceutical products against industry arguments based around the logic of commerce. Public concern over the safety of pharmaceutical products also indicates a source for legitimizing
organizational strategies based on the logic of care. The developing power of the FDA was an important mechanism that shaped the field during the next few decades, but significant scientific advancements also heavily influenced the next period of field restructuring.