Networks of Innovation: Vaccine Development at Merck, Sharp & Dohme, and Mulford, 1895-1995
Authors: Louis Galambos, Jane Eliot Sewell, Louis Galambos, Jane Eliot Sewell
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Overview
Networks of Innovation tells the story of a century of vaccine and antitoxin development through the lens of three interconnected companies: H.K. Mulford Company, Sharp & Dohme, and Merck & Co., Inc. Our focus is on how these companies developed the scientific, technological, and organizational capabilities to create these essential preventive medicines. But we also looked at the broader network of institutions—both public and private—and individuals that were essential to successful innovation in this industry.
We target our book to readers with an interest in medicine, business, science, and technology, particularly those seeking an understanding of the dynamics of innovation in science-based industries and how vaccines have transformed public health. Beyond the historical narrative, our work offers important insights into the process of innovation, the interplay of institutions and networks, and the forces that shape corporate and scientific capabilities.
Our study contributes to several important bodies of scholarship and addresses issues that remain highly relevant in the 1990s. As our title suggests, we examine how firms acquired, sustained, and sometimes lost the ability to innovate. Our primary emphasis is on the development of organizational capabilities, and in that respect, our book builds upon the work of Alfred D. Chandler and other scholars. We use recent advances in business policy research to place in historical context the complex evolution of capabilities at these three firms. To our knowledge, this is the first study to draw extensively on internal company sources in analyzing long-term patterns of innovation in vaccines and antitoxins, and our work thus complements studies based upon public health sources. By placing a specific science-based industry in its historical context, we also contribute to the history of medicine, the history of technology, and the social history of science. Finally, we address public policy issues related to regulation, public health programs, and the roles of government, nonprofit institutions, and private companies in promoting and sustaining the process of innovation. We focus specifically on how America’s ‘mixed system’ evolved in this one industry, thereby offering an alternative perspective on issues currently being debated in connection with healthcare reform.
Our narrative follows the evolution of the American vaccine industry from the late nineteenth century when the H.K. Mulford Company pioneered in the development of serum antitoxins and vaccines to the 1990s when recombinant DNA technology was changing the industry in fundamental ways. We show how the first wave of innovation in this industry centered around the ‘bacteriological revolution,’ establishing a network of scientists, public health officials, and pharmaceutical companies with overlapping interests in fighting infectious diseases. We then examine the development of virology as a new field in vaccine science, documenting Merck’s successful investment in that science under the direction of virologist Dr. Maurice R. Hilleman. We analyze how changing scientific knowledge, increasing public health concerns, and economic and political forces shaped the development of a number of key vaccines, including those for polio, measles, mumps, rubella, and hepatitis B. Finally, we follow Merck through an era of intensifying competition, rapidly evolving biotechnology, and public confrontations over immunization policy into the 1990s when the company once again was poised at the beginning of another long cycle in the history of vaccine innovation.
Book Outline
1. 1894: “The foremost medical question of the day”
This chapter sets the stage for our story, introducing the social and medical context of the late nineteenth century in which innovation in vaccine and antitoxin production would take place. The late nineteenth-century American public was intensely concerned about the ‘social problem,’ which encompassed a wide range of issues including the ‘immigrant menace’ and the rise of infectious diseases in urban centers. This context of anxieties created both challenges and opportunities for innovator.
Key concept: In 1894, widespread anxieties about labor violence, economic depression, and the perceived negative impacts of mass immigration intersected with real concerns about the lack of effective therapies for infectious diseases like tuberculosis, pneumonia, and diphtheria. This context of social and medical anxieties created both demand for and resistance to solutions proposed by scientists, public health officials, and for-profit pharmaceutical companies.
2. The Mulford Story
This chapter tells the story of the H.K. Mulford Company, a small Philadelphia pharmaceutical firm that became the first in the United States to produce and market diphtheria antitoxin. The firm’s success was due in large part to the entrepreneurial decision-making of its leadership, specifically Henry K. Mulford and Milton Campbell.
Key concept: Neither Campbell nor Mulford was trained in the new medical science, but they recognized the opportunities embodied in the ‘clamor’ for diphtheria antitoxin and moved decisively to position the H. K. Mulford Company to become a leader in the new field.
3. A Sharp & Dohme Interlude
This chapter examines the history of the Sharp & Dohme Company, a Baltimore-based pharmaceutical firm that acquired Mulford in 1929. Despite its successful marketing and sales operations, Sharp & Dohme’s relatively small R&D organization lagged behind competitors in the rapidly developing field of biologicals in the 1930s-1950s. The company’s pursuit of new product opportunities in medicinal chemistry and blood products, combined with the prevailing enthusiasm for antibiotics, further contributed to the relative neglect of vaccine research.
Key concept: While John Zinsser was attempting to build up Sharp & Dohme’s research and development organization, the world of medicine was being revolutionized by the discovery of anti-infectives and antibiotics.
4. The Virology Network and a New Program at Merck Sharp & Dohme
This chapter details how, after merging with Sharp & Dohme in 1953, Merck & Co. made a strategic decision to invest heavily in vaccine research and development, with a specific focus on virology. This shift was driven by a combination of factors, including the growing importance of scientific and technological prowess in the pharmaceutical industry, the emergence of virology as a promising new field of medical science, and the recognition of new market opportunities.
Key concept: Merck’s growth was based largely on its research and development efforts in vitamins and steroids, as well as antibiotics.
5. Hilleman’s Innovations: First Phase
This chapter explores Merck’s recruitment of Dr. Maurice Hilleman, a highly accomplished virologist and vaccine innovator. Hilleman’s unique combination of scientific expertise, managerial skills, and ability to navigate complex networks proved crucial for Merck’s vaccine program. His recruitment underscored Merck’s increasing commitment to vaccine innovation and research leadership in virology.
Key concept: Tishler and Connor were convinced that in addition to being ‘a great scientist’, Hilleman was the ‘great mover’ they needed.
6. Dangerous Interlude
This chapter describes a period of challenges and transitions for Merck’s vaccine program during the 1970s. Factors such as economic downturns, liability concerns, and the rise of antibiotics created uncertainties for vaccine development. These challenges underscored the inherent risks and uncertainties associated with vaccine innovation in the context of rapidly changing scientific, economic, and political landscapes.
Key concept: While Gadsden was not a scientist, he understood what this development meant for the pharmaceutical industry and especially for Merck. He launched a search for a scientist/science manager capable of quickly positioning Merck at the front edge of the biochemical revolution.
7. Transforming Bacteriology: A Second Phase
This chapter focuses on the development of Merck’s bacterial vaccines, specifically the successful development of vaccines for pneumococcal infections and Haemophilus influenzae type B (HIB) meningitis. This phase of innovation demonstrates Merck’s ability to successfully transition to a new scientific paradigm in vaccine development, overcoming technical challenges and navigating complex regulatory processes.
Key concept: Without challenging the economic data indicating that Merck should follow several of its former competitors and leave the vaccine business, Vagelos argued strongly that Merck should stay the course.
8. New Networks, New Leadership: The Hepatitis Vaccines
This chapter explores the development of the first commercially successful vaccine for hepatitis B. This achievement marked a significant milestone in vaccine innovation, showcasing Merck’s ability to develop new capabilities in research and development, manufacturing, and marketing in the face of scientific and economic challenges. The development of Recombivax HB helped the company transition away from a dependence on innovations in medicinal chemistry.
Key concept: This new capability [bacterial vaccine development] was all the more important because the firm was nearing the end of a long cycle of successful innovation in medicinal chemistry.
9. Vaccine Innovation in the Nineties: New Strategies, New Opportunities, and Public Confrontations
This chapter discusses vaccine innovation in the context of the evolving pharmaceutical industry of the 1990s. It addresses the challenges and opportunities associated with new technologies, changing market dynamics, and evolving public health policies. The chapter underscores the importance of corporate strategy, strategic alliances, and public-private partnerships for promoting vaccine development in this new environment. Merck’s emerging leadership in combination vaccines helped solidify its position in this changing market.
Key concept: Merck was now a close second [in global vaccine sales], and SmithKline Biologicals was fourth, with approximately 12 percent of world sales.
10. Historical Perspectives on the Process of Innovation
This chapter summarizes the book’s key themes and offers broader perspectives on the process of innovation in the pharmaceutical and biotechnology industries. By examining the interplay between scientific breakthroughs, institutional networks, and market forces, the authors provide insights into the factors that drive successful vaccine development over the long term. A key theme of the book is that innovation in vaccines takes place over long cycles that both create opportunities and raise challenges for the major players.
Key concept: There have been four long cycles in the past century [of vaccine innovation]: the original, bacteriology cycle…; the virology cycle…; a third, less prominent long cycle… associated with the new bacteriology of polysaccharide capsules; and a fourth, more prominent long cycle… grounded in recombinant DNA technology…
Essential Questions
1. What role did the private sector play in the development of vaccines and antitoxins?
The private sector played a crucial, but often overlooked role, in the development, production, and distribution of vaccines and antitoxins. The H. K. Mulford Company, a small pharmaceutical firm, exemplifies this entrepreneurial spirit, being the first to produce diphtheria antitoxin in the United States. Their success, and Merck’s subsequent triumphs, highlight the importance of entrepreneurial vision, network collaboration, and a commitment to scientific rigor in driving medical innovation.
2. How does innovation in the vaccine industry unfold over time?
Innovation in vaccines follows a cyclical pattern, characterized by periods of intense activity followed by lulls. The emergence of bacteriology in the late 19th century and the rise of virology in the mid-20th century are prime examples of these long cycles, with their own network dynamics, scientific advancements, and organizational transformations within companies like Merck and Mulford. Recognizing and understanding these cyclical patterns is crucial for sustaining innovation in this industry. Companies need to prepare for the inevitable transitions and downturns.
3. What are the key factors that contribute to successful vaccine development and implementation?
Several factors contribute to the successful development and implementation of vaccines. Scientific breakthroughs are crucial, as demonstrated by the work of researchers like Koch, Pasteur, Jenner, Enders, and Hilleman. Entrepreneurial initiative and business acumen, as seen in Mulford and Merck, are equally important. Public health infrastructure, clinical networks, and effective communication with the public and healthcare providers are essential for widespread adoption of vaccines. Finally, the industry is sensitive to the regulatory environment, which is shaped in the United States by its distinctive public-private nature and by political interventions that can either accelerate or stifle the process of innovation.
4. How do political and economic factors influence the vaccine industry?
The political and economic climate significantly impacts the vaccine industry. Resistance to vaccination, regulatory hurdles, liability concerns, and funding issues all influenced decisions about vaccine development and marketing. The tension between commercial viability and public health needs, particularly in pricing and distribution of vaccines, created an ongoing challenge for companies like Merck, as did the issue of ensuring affordable access for populations in developing countries.
1. What role did the private sector play in the development of vaccines and antitoxins?
The private sector played a crucial, but often overlooked role, in the development, production, and distribution of vaccines and antitoxins. The H. K. Mulford Company, a small pharmaceutical firm, exemplifies this entrepreneurial spirit, being the first to produce diphtheria antitoxin in the United States. Their success, and Merck’s subsequent triumphs, highlight the importance of entrepreneurial vision, network collaboration, and a commitment to scientific rigor in driving medical innovation.
2. How does innovation in the vaccine industry unfold over time?
Innovation in vaccines follows a cyclical pattern, characterized by periods of intense activity followed by lulls. The emergence of bacteriology in the late 19th century and the rise of virology in the mid-20th century are prime examples of these long cycles, with their own network dynamics, scientific advancements, and organizational transformations within companies like Merck and Mulford. Recognizing and understanding these cyclical patterns is crucial for sustaining innovation in this industry. Companies need to prepare for the inevitable transitions and downturns.
3. What are the key factors that contribute to successful vaccine development and implementation?
Several factors contribute to the successful development and implementation of vaccines. Scientific breakthroughs are crucial, as demonstrated by the work of researchers like Koch, Pasteur, Jenner, Enders, and Hilleman. Entrepreneurial initiative and business acumen, as seen in Mulford and Merck, are equally important. Public health infrastructure, clinical networks, and effective communication with the public and healthcare providers are essential for widespread adoption of vaccines. Finally, the industry is sensitive to the regulatory environment, which is shaped in the United States by its distinctive public-private nature and by political interventions that can either accelerate or stifle the process of innovation.
4. How do political and economic factors influence the vaccine industry?
The political and economic climate significantly impacts the vaccine industry. Resistance to vaccination, regulatory hurdles, liability concerns, and funding issues all influenced decisions about vaccine development and marketing. The tension between commercial viability and public health needs, particularly in pricing and distribution of vaccines, created an ongoing challenge for companies like Merck, as did the issue of ensuring affordable access for populations in developing countries.
Key Takeaways
1. Vaccine innovation is characterized by distinct eras and scientific paradigms.
The book traces the development of vaccine science through several distinct eras, each marked by its own scientific paradigms, technical challenges, and network dynamics. The late 19th century bacteriological revolution laid the foundation for early vaccines, while the mid-20th century saw the rise of virology as a major force in vaccine development. The emergence of recombinant DNA technology in the late 20th and early 21st centuries marked another significant shift, presenting both new opportunities and new challenges for vaccine innovators.
Practical Application:
AI models can be trained on historical vaccine data, epidemiological information, and public health trends to predict future outbreaks, optimize resource allocation, and tailor public health interventions.
2. Networks are critical for driving vaccine innovation.
Innovation in the vaccine industry depends heavily on networks of scientists, public health officials, medical professionals, commercial firms, government agencies, and other stakeholders. The H.K. Mulford Company’s success with diphtheria antitoxin in the late 19th century and Merck’s subsequent success stemmed from their leaders’ ability to establish and utilize collaborative partnerships with researchers, institutions, and regulatory agencies.
Practical Application:
In developing AI products, it’s essential to foster a collaborative environment that brings together experts from different fields, much like the networks described in the book, to address complex challenges and achieve breakthroughs.
3. Scientific and technological capabilities are key to success in the vaccine industry.
Firms like Mulford and Merck invested strategically in R&D to develop scientific and technological capabilities essential for vaccine innovation. They established research laboratories, recruited talented scientists and engineers, and built close relationships with leading medical institutions. Merck’s early success with vaccines came in virology, and it was only later under the leadership of Dr. Maurice Hilleman that the firm broadened its R&D capabilities to encompass bacterial vaccines.
Practical Application:
Successful companies must invest strategically in both basic and applied research, ensuring alignment between their R&D efforts and the evolving scientific and technological landscape. They must be alert to the danger of having investments and careers of research managers and executives dictate the organization’s investments.
4. Political, social, and economic forces influence the vaccine industry.
The book highlights the significant influence of politics and markets on vaccine innovation. Political decisions such as the passage of regulations on biological products, government funding priorities, and public debates over vaccination policies all shaped the course of vaccine development and adoption. Likewise, market forces including competition, patent protection, and pricing strategies significantly influenced the activities of commercial vaccine producers like Merck.
Practical Application:
AI product managers must be adept at navigating the complexities of regulation, public opinion, and market forces. They must also be alert to the political implications and consequences of innovations in science and technology.
1. Vaccine innovation is characterized by distinct eras and scientific paradigms.
The book traces the development of vaccine science through several distinct eras, each marked by its own scientific paradigms, technical challenges, and network dynamics. The late 19th century bacteriological revolution laid the foundation for early vaccines, while the mid-20th century saw the rise of virology as a major force in vaccine development. The emergence of recombinant DNA technology in the late 20th and early 21st centuries marked another significant shift, presenting both new opportunities and new challenges for vaccine innovators.
Practical Application:
AI models can be trained on historical vaccine data, epidemiological information, and public health trends to predict future outbreaks, optimize resource allocation, and tailor public health interventions.
2. Networks are critical for driving vaccine innovation.
Innovation in the vaccine industry depends heavily on networks of scientists, public health officials, medical professionals, commercial firms, government agencies, and other stakeholders. The H.K. Mulford Company’s success with diphtheria antitoxin in the late 19th century and Merck’s subsequent success stemmed from their leaders’ ability to establish and utilize collaborative partnerships with researchers, institutions, and regulatory agencies.
Practical Application:
In developing AI products, it’s essential to foster a collaborative environment that brings together experts from different fields, much like the networks described in the book, to address complex challenges and achieve breakthroughs.
3. Scientific and technological capabilities are key to success in the vaccine industry.
Firms like Mulford and Merck invested strategically in R&D to develop scientific and technological capabilities essential for vaccine innovation. They established research laboratories, recruited talented scientists and engineers, and built close relationships with leading medical institutions. Merck’s early success with vaccines came in virology, and it was only later under the leadership of Dr. Maurice Hilleman that the firm broadened its R&D capabilities to encompass bacterial vaccines.
Practical Application:
Successful companies must invest strategically in both basic and applied research, ensuring alignment between their R&D efforts and the evolving scientific and technological landscape. They must be alert to the danger of having investments and careers of research managers and executives dictate the organization’s investments.
4. Political, social, and economic forces influence the vaccine industry.
The book highlights the significant influence of politics and markets on vaccine innovation. Political decisions such as the passage of regulations on biological products, government funding priorities, and public debates over vaccination policies all shaped the course of vaccine development and adoption. Likewise, market forces including competition, patent protection, and pricing strategies significantly influenced the activities of commercial vaccine producers like Merck.
Practical Application:
AI product managers must be adept at navigating the complexities of regulation, public opinion, and market forces. They must also be alert to the political implications and consequences of innovations in science and technology.
Memorable Quotes
Chapter 1. 1
In 1894, many Americans were deeply concerned about labor violence, about an economy sliding into the worst depression the country had ever experienced, and about the adverse impact mass immigration seemed to be having on urban life.
Chapter 2. 9
Philadelphia had a well-established pharmaceutical industry in the nineteenth century, but it was not at all clear that one of the city’s firms would become the early commercial leader in the biological network that was beginning to develop in the United States.
Preface. 11
All of those readers who were rendered nervous by Richard Preston’s bestseller, The Hot Zone, may find comfort in the following account of a century of increasingly successful efforts to develop vaccine and serum antitoxin defenses against infection.
Chapter 1. 17
Many private organizations and individuals established close ties with the emerging public health institutions and contributed to the ability of this loosely integrated network to foster innovation.
Chapter 4. 77
Tishler and Connor were convinced that in addition to being “a great scientist”, Hilleman was the “great mover” they needed.
Chapter 1. 1
In 1894, many Americans were deeply concerned about labor violence, about an economy sliding into the worst depression the country had ever experienced, and about the adverse impact mass immigration seemed to be having on urban life.
Chapter 2. 9
Philadelphia had a well-established pharmaceutical industry in the nineteenth century, but it was not at all clear that one of the city’s firms would become the early commercial leader in the biological network that was beginning to develop in the United States.
Preface. 11
All of those readers who were rendered nervous by Richard Preston’s bestseller, The Hot Zone, may find comfort in the following account of a century of increasingly successful efforts to develop vaccine and serum antitoxin defenses against infection.
Chapter 1. 17
Many private organizations and individuals established close ties with the emerging public health institutions and contributed to the ability of this loosely integrated network to foster innovation.
Chapter 4. 77
Tishler and Connor were convinced that in addition to being “a great scientist”, Hilleman was the “great mover” they needed.
Comparative Analysis
Innovation is discussed broadly as a socio-technical revolution, and this books focuses on one revolution in one industry: vaccines and antitoxins. The focus on networks in this books brings to mind network science which may provide useful quantitative tools to analyze the networks discussed in this book. This book can be compared with the works of other business historians such as Alfred Chandler, who focuses on capabilities but does not historicize them, and with business policy analysts who often ignore the historical context discussed at length in this book. This book also differs from many studies in history of medicine and history of technology because of its detailed focus on a single industry.
Reflection
This book shows that the process of vaccine innovation is complex, nonlinear, and shaped by a variety of interacting forces. The authors’ detailed account of the scientific discoveries, technical challenges, and corporate and organizational changes associated with the development of various vaccines reveals the long-term nature of this process. From the initial stages of basic research to the final stages of clinical trials, licensing, manufacturing, and marketing, the successful implementation of a new vaccine requires not only scientific breakthroughs but also entrepreneurial vision, strategic decision-making, and effective collaboration within complex institutional networks. In its emphasis on the critical role of leadership, particularly within the private sector, the book pushes back against the social-historical trend toward examining only the roles played by institutions and networks. As such it provides a complement to other studies in the field. One might however ask if the authors have placed too much emphasis on the internal Merck accounts of these events and thus overlooked critical information available elsewhere, for example, in the archives of the federal regulatory agencies.
Flashcards
Which company produced the first commercial diphtheria antitoxin in the United States?
H.K. Mulford Company
Who led Merck’s vaccine research and development efforts, making key contributions to the development of measles, mumps, rubella, and hepatitis B vaccines?
Dr. Maurice Hilleman
What pattern does the history of vaccine innovation follow, as characterized by periods of intense activity and lulls?
Long cycles
What are the key factors that determine the success of vaccines?
Scientific breakthroughs, entrepreneurial initiative, effective communication with public and healthcare providers, robust public health infrastructure, and sensitivity to regulatory environment.
What was the primary tension within Merck regarding its vaccine business?
Balancing the need for profits with the affordability of essential medicines for populations around the world.
What are some of the non-economic factors influencing the vaccine industry?
Resistance to vaccination, regulatory hurdles, and liability issues.
How did Merck ultimately solve the organizational problem of its vaccine division being overlooked?
By organizing a separate business unit headed by a dedicated ‘champion’ who could advocate for the division’s resources.
Which company produced the first commercial diphtheria antitoxin in the United States?
H.K. Mulford Company
Who led Merck’s vaccine research and development efforts, making key contributions to the development of measles, mumps, rubella, and hepatitis B vaccines?
Dr. Maurice Hilleman
What pattern does the history of vaccine innovation follow, as characterized by periods of intense activity and lulls?
Long cycles
What are the key factors that determine the success of vaccines?
Scientific breakthroughs, entrepreneurial initiative, effective communication with public and healthcare providers, robust public health infrastructure, and sensitivity to regulatory environment.
What was the primary tension within Merck regarding its vaccine business?
Balancing the need for profits with the affordability of essential medicines for populations around the world.
What are some of the non-economic factors influencing the vaccine industry?
Resistance to vaccination, regulatory hurdles, and liability issues.
How did Merck ultimately solve the organizational problem of its vaccine division being overlooked?
By organizing a separate business unit headed by a dedicated ‘champion’ who could advocate for the division’s resources.