Fifty Years of Organ Transplants: The Successes and The Failures

By Kaserman, David L

ABSTRACT: More than fifty years have now passed since the first successful human organ transplant. During that time, substantial progress has been made in both surgical techniques and immunosuppressive drug therapy. As a result, transplant success rates have improved dramatically, and thousands of recipients of kidneys, hearts, livers, and lungs have been granted both longer and healthier lives. At the same time, however, many more thousands of patients have died while waiting in vain for a cadaveric donor organ to become available due to a severe and persistent shortage of such organs. That shortage, in turn, is directly attributable to the National Organ Transplant Act of 1984, which proscribes payment to potential organ donors, even if that would increase supply. This atavistic policy and the shortage and deaths it has spawned provides a stirring example of the tendency for public policy to lag behind technological advancement, particularly in the medical field. But the tide of medical opinion may be turning on this issue, and some form of donor payments may soon emerge.

The first successful human organ transplant in the U.S. was performed on December 23, 1954. 1 On that date, a kidney was successfully transplanted, with the organ donated by a living identical twin of the recipient. Since then, organ transplantation has moved from the experimental stage to assume an important role in the treatment of organ failure stemming from a wide variety of underlying causes. Today, kidneys, hearts, livers, lungs, and other organs are routinely transplanted to patients whose lives would otherwise soon be ended. Moreover, unlike some life-extending measures that substantially lower the quality of life, where organ transplants succeed, recipients’ health can be restored dramatically.

The extension of transplantation technology to non-renal organs during the 1970s and 1980s greatly increased the potential to save lives through the use of this treatment modality. That extension required the utilization of cadaveric-as opposed to living-donors. And the use of cadaveric organs, in turn, was made feasible by a series of technological advances, primarily in the form of new immunosuppressive drugs. Beginning with the discovery of cyclosporine in the late 1970s, and its subsequent approval in the U.S. in 1983, newer, more effective drugs have been introduced periodically to prevent the principal cause of transplant failure – rejection of the transplanted organ by the recipient’s own immune system.2 As these new drugs have appeared and physicians’ experience with their administration has accumulated, organ rejection rates have fallen almost continuously.

As is becoming increasingly commonplace in this age of rapid technological change, however, the amazing potential of organ transplantation to save lives is being severely constrained by the failure of public policy to keep pace with technological advances. Specifically, U.S. (and other countries’) cadaveric organ procurement policies have failed to respond effectively to the rapid growth in the demand for transplantable organs that has resulted from the significant strides achieved in immunosuppressive therapy. The result has been a chronic and growing shortage of human organs made available for transplantation.

That shortage, in turn, denies this life-saving treatment to thousands of desperately ill patients, who now occupy ever- increasing organ waiting lists. Today, over 87,000 patients are on these lists awaiting transplantation. And, tragically, at current collection rates, approximately half will die before the needed organs become available. Indeed, in each of the last four years, more than six thousand would-be transplant recipients (more than twice the number lost in the 9/11 attacks) have died while waiting in vain for the needed organs.3 And this number continues to increase each year that the shortage remains unresolved. In the meantime, thousands of organs that could have provided life-saving transplants go uncollected and are buried along with the potential donors.

Now, as we mark the 50th anniversary of the birth of this important medical technology, it seems appropriate to document both the successes and failures we have experienced to date. It is also a good time to take stock of what we have learned regarding the potential of alternative public policies that have been proposed in recent years to resolve, or at least ameliorate, the organ shortage. Only through an accurate and dispassionate assessment of these alternative policies can we hope to narrow the ever-widening technology/policy gap that is now costing so many lives.

The Successes

The successes achieved in organ transplantation over the past fifty years are nothing short of remarkable. As the ability to suppress the body’s immune system has advanced with the discovery of new drugs, rejection rates have fallen dramatically. For example, prior to the introduction of cyclosporine, one-year graft survival rates were approximately 70 percent for kidneys, 58 percent for hearts, and 25 percent for livers. By 2001, these rates had risen to 90, 84, and 80 percent, respectively.4 Moreover, these increased success rates may understate somewhat the improvements that have been achieved, because organ transplants are now being performed on some patients whose health would have prohibited use of this treatment modality two decades ago.

Along with this decline in rejection rates, the expected life of a transplanted organ has lengthened commensurately. For example, in the early 1990s, the expected life of a cadaveric kidney transplant was on the order of 4-5 years. Today, however, Alan Leichtman, of the University of Michigan, reports that:

In general, two-haplotyped matched living related donor kidney transplants have a 50% chance of achieving 24 years of function, one- haplotyped matched living related donor kidney transplants have a 50% chance of achieving 12 years of function, and cadaver donor kidney transplants have a 50% chance of achieving 9 years of function.5

This lengthening of graft survival times means that patients’ lives are being greatly extended and the necessity of second (and third) transplants has been reduced accordingly.

These technological advances have caused considerable growth in the demand for organ transplants. In addition, public policy has also played a significant role in increasing transplant demands. It has done so in two fundamental ways. First, the not-so-subtly-named End Stage Renal Disease (ESRD) program was created by the U.S. Congress in 1972. 6 This program provides federal funding for all renal transplants performed on U.S. citizens in this country, regardless of the patient’s age or income. Moreover, such funding has also been extended to some non-renal transplants in recent years. As a result, expenditures under this program have grown from $229 million in 1974 to over $15 billion in 2002. 7 Also, private health insurance companies have extended coverage to heart, liver, and other organ transplants as these procedures have moved from the experimental phase to accepted treatment modalities. Such third party payments extend the transplantation option to many patients who would otherwise be unable to afford it. And second, the federal government’s ESRD program funds dialysis treatments for all U.S. citizens suffering renal failure. Such treatments, in turn, keep these patients alive much longer than they would otherwise survive and, thereby, further increase the effective demand for kidney transplants.

As a consequence, then, of both technological advances and expanded funding, the demand for organ transplants has grown tremendously.8 Moreover, while the supply of transplantable organs has failed to keep pace with this increasing demand, it has, nonetheless, grown considerably as well. The result has been significant growth in the number of organ transplants performed. Table 1 documents this growth for the four organs most frequently transplanted over the period for which consistent data are available, 1988-2003.9

Several points are worth noting from these figures. First, while the number of transplants has grown over this fifteen year period for each of these organs, the observed rates of growth have varied considerably by organ. For example, while the number of kidney transplants has increased from its 1988 value by 70.4 percent, the number of heart transplants grew by only 22.7 percent. At the same time, the number of liver transplants has grown by 231 percent, and the number of lung transplants has risen over 3,000 percent.10 Second, while the growth in the number of transplants has been fairly continuous for kidneys, livers, and lungs, the number of heart transplants peaked in 1995 and has actually fallen slightly since then. The reason for this decline is not immediately apparent. Finally, the total number of transplants performed across all four organs has grown 95 percent over this decade and a half. Adjusting for the approximate one-year rejection rates for these organs, these numbers indicate that somewhere around 200,000 patients have received successful, life-extending organ transplants over this period. Finally, while some modern medical treatments tend to extend the patient’s life only at great cost in terms of the quality of life, a successful organ transplant, while not a complete cure, can often restore the patient’s health substantially.11 Indeed, many successful transplant recipients have used the term “rebirth” to describe their experience. Thus, this medical technology, first introduced in the mid-1950s, is responsible for relieving suffering and extending the lives of many critically ill patients. As we shall see, it could have delivered far greater benefits if cadaveric organ procurement policy had been able to keep pace with the growing demand.

The Failures

While the successes achieved through technological advancement in organ transplantation are, indeed, remarkable, the failure of cadaveric organ procurement policy to adapt over time in order to accommodate the rapidly increasing demand for transplantable organs is equally remarkable. As I have pointed out elsewhere, the current cadaveric organ procurement system, which relies entirely upon altruism to motivate individuals to supply the organs of their recently deceased relatives, appears to have been inherited from the earliest days of transplantation in which living related donors provided the only technologically feasible source of supply of organs.12 At that time – the late 1950s and early 1960s – the state of knowledge concerning immunosuppressive therapy effectively precluded the use of cadaveric donor organs. As a result of this technological limitation, kidney transplant candidates brought the necessary donor with them when they checked into the hospital for the transplant operation. If there was no acceptable living donor, no transplant operation was possible. Consequently, at that time, there were no waiting lists and no apparent shortage.

Moreover, under the living related donor system, no obvious need existed for any sort of third-party financial incentive to encourage the donor’s cooperation. The affection associated with the kinship between the donor and recipient was generally thought to be sufficient to motivate the requisite organ supply. And, where it was not sufficient, any necessary payment (or coercion) between family members could easily be arranged without resorting to the sort of middlemen generally required for market exchange. Such intrafamily cajoling by emotional pressure or outright payment (or both) also remained out of sight of the transplant centers and attending physicians. Therefore, a system of purely “altruistic” supply seemed to make sense in this setting, and reliance on that system did not seriously impede the use of that emerging medical technology.

The situation gradually changed over time, however, as new drugs, improved tissue matching techniques, and advanced surgical procedures began to allow transplantation of cadaveric organs and greatly increased transplant success rates. Significantly, the new- found ability to make use of cadaveric organs expanded the application of transplants to vital organs other than kidneys – especially hearts and livers. As a result, sometime during the 1970s, organ waiting lists began to appear as transplant candidates formed queues for needed cadaveric organs. Those queues were generally managed and the available organs allocated to waiting recipients by the transplant physicians located at the centers where the operations were to be performed.

Initially, this system appeared to work reasonably well. While the transplant industry was still in its infancy, the demand for cadaveric organs was sufficiently small that the supply of such organs supported by altruistic donations was able to keep up with the emerging demand. As demand grew, however, shortages soon began to develop. And as these shortages have persisted year after year, the backlog of patients on transplant waiting lists started to soar.

Despite these shortages, however, the basic public policy that had been inherited from the former days of living related donor transplants has never been seriously questioned or systematically evaluated. Indeed, in 1984, at the behest of the transplant industry, Congress codified that de facto policy into law through passage of the National Organ Transplant Act. That Act explicitly proscribes any payment to organ donors – both living and cadaveric – to encourage increased supply.13 Thus, the “altruistic” system was firmly locked into place without any serious inquiry regarding its relative effectiveness in the new technological environment, which relies primarily on cadaveric donors. An organ procurement policy that was born as a more or less natural component of a transplant system that relied exclusively on living related donors was institutionalized for a system that now relies heavily on cadaveric organs from unrelated, and generally unknown, donors. That zeroprice policy is, without question, the principal cause of the ongoing organ shortage, discussed more fully below.

The 1984 Act, however, did not stop there. It went on to institutionalize a complex system of non-profit organizations that are solely responsible for collecting and allocating all transplantable organs in the U.S. On the collection side, approximately sixty firms called Organ Procurement Organizations (or OPOs) were each assigned exclusive geographic territories within which their organ acquisition activities are conducted. Thus, both price and profits are constrained to equal zero, and competition between OPOs is prohibited by exclusive territories. This legislation, then, specified a system in which a set of non-profit monopsonists acquire organs under a zero-price constraint. As a result, these firms are subject to neither the carrot of profits nor the stick of competition. Frankly, it is difficult to imagine a system that would better guarantee a shortage of organs for transplantation.

This fundamental failure of public policy to come to grips with the changing technological environment by implementing an organ procurement system that could accommodate the rapidly growing demand has had a number of dire consequences for patients in need of organ transplants. The following sub-sections describe some of the more serious effects.

Increasing Waiting Lists

With the legal price of organs set at zero and organ procurement activities in the hands of non-profit monopsonists, organ shortages have been a constant feature in this industry for over two decades. Such shortages, in turn, have led to ever-increasing waiting lists of patients in need of transplants. Table 2 documents the growth of those lists over time.

Several points are worth noting here. First, it is important to distinguish the concept of a shortage from the observed size of a waiting list. Economists define a shortage as an excess of the quantity demanded of a good over the quantity supplied of that good at a given price.14 Because the concepts of both demand and supply, in turn, are defined as flows – the number of units purchased and sold at various prices over some specified interval of time – shortages, too, must be defined as flows. Thus, the shortage of a particular organ in a given year is given approximately by the number of patients added to the waiting list in that year.15 That is, the observed waiting list constitutes the backlog (a stock) of patients that have accumulated from the series of annual shortages (flows) for that organ over prior years.

At the same time, it must be recognized that the expected waiting times, suffering, and deaths that are caused by the organ shortage are more directly related to the size of the waiting lists than to the annual shortages themselves. These lists show the actual number of patients who are in need of that organ at that time. As such, they correlate directly with expected waiting times and deaths. Thus, as a shortage persists, its negative effects tend to accumulate and grow worse over time.

Second, both the size and growth of the waiting list for kidneys exceed those for the other three organs. At least part of the reason for this is the availability – both technological and financial – of an alternative treatment modality, dialysis. As noted above, by keeping more patients alive longer, dialysis treatments tend to increase the shortage of transplantable kidneys.

Finally, given the correct definition of a shortage, it is apparent from Table 2 that, at least since 1988, there has never been a single year in which the supply of any of these four organs has been sufficient to meet the demand. That is, the waiting lists have increased every year. Thus, the organ shortages have been both pervasive (across organs) and persistent (across time). The atavistic altruistic organ procurement policy has consistently failed to meet patients’ needs.

Increasing Number of Deaths

As organ shortages persist year after year and waiting times grow, an increasing number of patients die. Longer waiting times also lead to a deterioration in patients’ health. The result is that an increasing number of patients are not able to survive the extended times required to locate an acceptable organ for transplantation. Table 3 documents the number of patients who have died while on official organ waiting lists for the four organs considered here.

It is not clear whether these figures overstate or understate the actual number of deaths causally attributable to the shortage (and, therefore, attributable to this public policy failure). On the one hand, the figures simply show the number of people who have died while on the waiting lists each year. Because an organ transplant would not have saved every one of these patients, the figures tend to overstate somewhat the deaths caused by the shortage. On the other hand, it is likely that the shortage conditions keep some marginal patients from being approved to be placed on the waiting lists.16 Also, when a patient’s health deteriorates to the point that they can no longer withstand the transplant operation, they are frequently removed from the list. These considerations, then, suggest that the figures in Table 3 may understate the death toll attributable to the shortage. Regardless of the precision of these numbers, however, it is indisputable that tens of thousands of patients have now died unnecessarily as a direct consequence of the organ shortage and the failed policy that has caused it. The annual death toll has now reached over 6,000 patients, which is over twice the number of lives lost in the tragic 9/1 1 attacks. And cumulatively, we have now lost something on the order of the number of U.S. soldiers lost in the Vietnam War. Most of these lives could have been saved if a more sensible cadaveric organ procurement policy that allows payments to donors had been put in place.

Increasing Expenditures and Prolonged Suffering

In most areas of medical policy, there exists a clear tradeoff between costs and the number of lives saved. That is, in most cases, additional lives can be saved only at (often substantially) increased expenditures.17 Importantly, that traditional trade-off is not present in this case.

A successful organ transplant not only improves the patient’s health dramatically, but it is also a considerably less costly treatment modality than dialysis and most other methods used to keep patients alive while awaiting transplantation. As a result, a change in organ procurement policy that allows additional transplants to be performed simultaneously reduces deaths and expenditures on the affected programs. Moreover, such a cost reduction is likely to occur even if that policy change carries some costs of its own.

A simple example may help to explain. Although the numbers I use here are not precise, they are in the ballpark and can be used to illustrate this important point. Suppose it costs $40,000 per year to keep a patient suffering renal failure alive on dialysis. Also, suppose it costs $100,000 to perform a kidney transplant and an additional $5,000 per year for the necessary post-transplant immunosuppressive drugs. Then, with no discounting, the transplant saves society $75,000 over a fiveyear period for each patient removed from dialysis. If half of the existing population of approximately 400,000 dialysis patients (in 2002) could be transplanted, then overall savings could reach $3 billion per year for this organ alone.

Moreover, these savings are unlikely to be offset to any significant degree by the potential costs involved in paying organ donors. Preliminary evidence, which I review below, suggests market- clearing prices on the order of $ 1 ,000 to $ 1 ,500 per cadaveric organ donor. Since each such donor typically yields several transplantable organs, the costs per organ will not add a significant amount to the overall costs of organ transplants. In fact, those costs may also fall as expenditures associated with current inefficient procurement practices are reduced. That is, it may be less costly to simply purchase the organs than it is to convince surviving family members to give them away for free.

To the above direct cost savings, one must add the unquestionably large social benefits associated with the health improvements realized by the additional transplant recipients. Dialysis is a very debilitating treatment modality. Due to the time requirements, complications, and common side effects of these treatments, very few dialysis patients are able to remain employed. A successful kidney transplant, however, frequently restores the patient’s health sufficiently to allow a return to work.18 Thus, increasing the number of transplants not only lowers overall treatment program costs, but it also raises the affected patients’ economic productivity. As a result, a continuation of the current policy has the dual effect of increasing expenditures and prolonging patient suffering.

Increasing Reliance on Living Donors

An ancient Greek saying holds that: “Desperate times call for desperate measures.” If you are a patient (or a close relative of a patient) suffering organ failure today, these are desperate times, indeed. As the number of patients on organ waiting lists has grown (see Table 1, above), expected waiting times have increased commensurately In several regions of the country, depending upon the patient’s blood type and the organ needed, the expected length of time before a suitable cadaveric organ will become available for a given patient now exceeds five years.

The prospect of such extraordinary waits have contributed to an increasing reliance on living organ donors. Indeed, for the first time in 2001, the number of living kidney donors exceeded the number of cadaveric kidney donors.19 Table 4 documents this rapid growth in the use of living donors over the past decade and a half.

The use of living donor organs carries both costs and benefits relative to the use of cadaveric donors. With regard to benefits, living donor transplant recipients tend to exhibit lower rates of rejection, particularly long term (beyond, say, five years).20 It is not entirely clear medically why this improved performance arises. Nonetheless, it is the case currently that living donor kidneys provide somewhat superior outcomes. On the cost side, however, there have been a number of cases in which living organ donors have died during (or shortly after) the operation to remove the organ.21 And in other cases, these donors have subsequently experienced renal failure or other complications and have become transplant candidates themselves. As a result, the physician’s oath to “do no harm” cannot confidently be upheld when performing living donor transplants.22

A serious quantitative reckoning of the above costs and benefits has not, to my knowledge, been performed. Obviously, the outcome of that calculation would depend crucially upon whether the alternative to the living donor transplant is a cadaveric donor transplant or, as is the case today, no transplant at all. At this time, it is doubtful that the necessary data for such an analysis are available. In particular, solid data on the subsequent health status of living organ donors do not appear to exist. As the cadaveric organ shortage continues, however, and we are increasingly forced to rely upon living donors, such a calculation assumes increasing importance.

Regardless of that calculation, however, it seems clear that, in the absence of a severe shortage of cadaveric organs, the number of living donor transplants would decline dramatically. In addition, it is worth emphasizing that the shortage of non-renal organs, such as hearts, livers, and lungs, cannot be resolved (or even substantially reduced) through the use of living donors.23 Thus, our increased reliance on living donor transplants must be viewed as a symptom of, not a cure for, the shortage of cadaveric organs.

Increasing Use of Marginal Donor Organs

Another adverse consequence of the ongoing shortage of cadaveric organs is the increasing reliance on increasingly marginal donor organs.24 As the gap between cadaveric organ supply and demand has persisted year after year and organ waiting lists have continued to grow, transplant centers have turned to what they euphemistically refer to as “extended criteria” organs. These are organs from older, sicker donors or organs that have some sort of defect which, in previous years, would have resulted in their disposal rather than transplantation.

For example, some heart transplants have recently been performed after bypass surgery was done on the deceased’s organ. Also, livers with hepatitis have been transplanted to recipients who already had the disease. Engstrom (2001) writes that “… surgeons … are implanting donor organs that only a decade ago were deemed too old or damaged or otherwise unusable.”23

To a limited degree, this increased reliance on marginal organs has been made possible by technological advancements in the immunosuppressive drugs that prevent the recipient’s body from rejecting the transplant. There is no question, however, that this trend toward increasingly inferior donor organs is being driven primarily by the desperation caused by the organ shortage.26 Moreover, this trend has obvious consequences for the recipients of these substandard organs. Increased complications and transplant organ failure will obviously become more frequent. Worse yet, several incidences have occurred recently in which transplanted organs were cancerous. That condition, in conjunction with the immune system suppression used to prevent rejection has resulted in the deaths of several transplant recipients. The so-called “gift of life” turned out to be a death warrant for these patients.

Ironically, some opponents of the use of financial incentives to resolve the organ shortage have argued that, while such a policy might result in a larger number of cadaveric organs being made available for transplantation, it could also lead to a decline in the quality of organs collected relative to a purely altruistic system.27 There are a number of logical responses to that argument, but the most obvious seems to be to simply look at what is happening now under the altruistic system.28 Frankly, it seems absurd to claim that organ quality would get worse with more organs made available. Rather, as with the other problems that are currently being inflicted by the organ shortage, the average quality of the cadaveric organs transplanted would likely improve as the shortage is resolved.

Increasing Black Market Activity

In any market – from alcoholic beverages to sex to illegal drugs – government restrictions on exchange (either price or quantity) inevitably lead to black market activities. This ubiquitous phenomenon, which is described in most microeconomic principles textbooks, is a natural outcome of attempts to artificially restrain the laws of supply and demand. And the market for transplant organs is no exception. The mechanics of the process are straightforward.29 Legal restraints on market activities reduce the amount of the product supplied. That reduction, in turn, artificially raises the price that some parties who are rationed out of the market are willing to pay. The upshot, then, is to greatly increase the profits associated with illegal trade. And those profits attract criminals who are willing to break the law to capture these returns.

A predictable outcome of the organ shortage, then, has been the growth of black-market activities of various sorts. Perhaps the most prominent has been increasing international brokerage activities in living donor kidneys.30 The practice generally involves a transplant recipient from a relatively affluent country such as the U.S., Saudi Arabia, or Israel purchasing a kidney from a poor person living in a less developed country such as Brazil. The two participants – donor and recipient – are bought together by a broker who also arranges for the transplant operation, often in a third country. Kidney donors are reported to have been paid between $3,000 and $10,000 for their organ which, in turn, may sell for $100,000 or more.31 With mark-ups in that range, it is not surprising that such brokerage activities persist.

In a truly ironic twist of logic, some opponents of the use of financial incentives for cadaveric organ donors have cited various human rights abuses and extraordinarily high prices associated with such black market activities as harbingers of the sorts of outcomes likely to accompany legalized organ markets.32 This line of “reasoning” is equivalent to arguing that legalization of liquor sales would lead to the sorts of mafia-related activities that arose during prohibition. This argument stands accepted economic theory on its head.

The truth is that the types of behavior and price levels that frequently accompany black market sales tend to disappear when trade is legalized. Legalized trade allows the market price to fall as legitimate businesses enter the market and increase supply. Moreover, costs decrease as the risks of both prosecution and violent actions by rival producers are eliminated. The outcome is lower prices, an increase in the volume of trade, and a cessation of criminal activities.

Thus, the types of conduct associated with illegal suppliers involved in black market trade and the prices at which such trade takes place do not accurately reflect the behavior and prices likely to result from legalized sales. In fact, it has long been recognized that the most effective remedy for undesirable black market activity is to eliminate restrictions on trade. Stated succinctly, the cure for black market abuses is legalized trade.

That conclusion holds a fortiori, in the case at hand. Eliminating the shortage of cadaveric organs through legalization of financial incentives would greatly reduce, if not eliminate, the demand for living donor kidneys obtained through black markets. Therefore, if one is opposed to current black market activities, then one should favor financial incentives for cadaveric organ donors.


Like any other market activity, the organ procurement and transplantation business is a system. Both a demand and supply for transplants and a corresponding demand and supply for transplantable organs exist. These all interact simultaneously with public policy to yield the outcomes we observe. A ubiquitous characteristic of all systems, whether they are biological, ecological, mechanical, electrical, or economic, is that a malfunction in one component of the system will typically have repercussions in other components of the system. The organ transplant system is no exception. The various adverse consequences identified above are all symptoms of the failure of our cadaveric organ procurement policy to allow organ supply and demand to equilibrate through an increase in the price paid to organ donors. That is, they are all attributable to the shortage of transplantable cadaveric organs. If those problems are to be resolved, we must first resolve the underlying cause, which is the zero price policy.

Potential Solutions-What Have We Learned?

Given the obvious failure of our existing cadaveric organ procurement policy to deliver the organs needed by the growing number of potential transplant recipients, a number of alternative policy options have been proposed over the past two decades to resolve, or at least reduce, the organ shortage.33 Some of these policies have been implemented with limited success in both the U.S. and other countries.34 But, apparently, none has succeeded in fully resolving the shortage. Moreover, all such policy proposals (e.g., required request, presumed consent, and so on) can be demonstrated to provide socially inferior outcomes relative to a system of financial incentives.35

At the same time, the policy option most frequently recommended by economists writing on this subject-allowing positive prices to be paid to organ donors (including surviving family members who consent to donate their relative’s organs) – has not been openly adopted anywhere. The reluctance to implement this most promising policy option appears to have its roots in the medical community’s longstanding preference for unpaid, altruistic donations. And, while that preference appears to be waning in recent years, new policy options are being proffered as alternatives to donor payments.36 The upshot of these newer proposals has been to further delay the implementation of financial incentives and, thereby, prolong the organ shortage.37 Recent evidence has been presented that sheds some light on the likely ability of these various approaches to resolve the organ shortage. In the subsections that follow, I briefly review that evidence.

Increased Educational Spending

The most common proposal advocated by opponents of donor payments is to increase spending on donor-related educational campaigns.38 Traditionally, such spending has focused upon two separate groups. First, public advertisements of various sorts have attempted to increase awareness of the urgent need for organs among the general population (public education). And second, training programs for physicians and hospital staff are designed to improve both the timely identification of potential donors and improve the way donation requests are presented to surviving family members (professional education). Despite the fact that these educational programs have been in place for over two decades now, opponents of financial incentives continue to argue, nonetheless, that the supply of organs made available at the zero price can be expanded considerably by substantially increasing spending on one or the other or both of these programs.39

That argument has recently been tested empirically.40 Specifically, through a Freedom of Information Act request, two colleagues and I were able to obtain data on both the size of organ procurement organizations’ (OPOs’) expenditures on public and professional educational programs and the rate of cadaveric organ donations obtained (measured by the number of cadaveric donors per 1,000 hospital deaths within the OPO’s collection region). A regression model was then specified with donor collection rates as the dependent variable and the two types of educational expenditures as independent variables (along with several demographic variables that characterize the collection region’s population).

The results fail to support (indeed, strongly reject) the increased educational efforts argument. While the coefficients associated with both types of educational expenditures are positive, neither is statistically significant at standard levels of acceptance. Thus, from a statistical point of view, the evidence suggests no significant relationship between educational spending and cadaveric organ collection rates. Moreover, at sample mean values, the point estimates indicate that an increase in educational expenditures of approximately $21,300 for professional education and $55,500 for public education would be required to generate one additional cadaveric organ donor. These expenditure levels are well above current estimates of likely market-clearing prices for cadaveric organ donors.41 Thus, the empirical results strongly suggest that increased educational spending is unlikely to have a significant effect on the organ shortage. To argue that it can represents little more than wishful thinking.

“Best Practice” Procurement Strategies

Another approach that has recently been proposed to resolve the organ shortage is to attempt to implement so-called “best practice” procurement techniques across the OPOs. Specifically, there is a wide variation in observed cadaveric donor collection rates across the existing procurement organizations.42 Noting that variation, opponents of the use of financial incentives have argued that the organ shortage can be eliminated or substantially reduced by bringing all OPOs’ performance up to the observed level of those with the highest collection rates. And they allege that that outcome can be achieved by transferring the procurement practices employed by the relatively successful organizations to those with lower collection rates.

This proposal raises at least two empirical questions. First, will such transference succeed in raising significantly the collection rates of the comparatively poor performers? And second, if it does, will the resulting elimination of inefficiencies in the existing system provide a sufficient number of organs to fully resolve the shortage without resorting to financial incentives?

The answer to the first question is highly doubtful. Observed collection rates are likely to be influenced strongly by factors other than the OPO’s operational practices. In particular, the demographic and cultural characteristics of the collection region’s population have been found to exert a strong influence on observed collection rates.43 In addition, the answer to the second question is also uncertain. As long as all OPOs remain subject to the zero price constraint, even fully efficient performance by all (if that is possible) may not yield an adequate supply of cadaveric donors to meet demand. To answer these questions, two colleagues and I have made use of the same OPO procurement data described above to calculate the amount of inefficiency (or shortfall in collections) exhibited by each organization.44 Using a frontier estimation methodology, we are able to measure each OPO’s actual and potential donor collection rates while controlling for the demographic characteristics (e.g., population, racial composition, and income) of the collection region’s population.45 The results of that estimation, then, allow us to calculate the number of donors that could be expected to be forthcoming if all of the relative inefficiencies in the system were (somehow) eliminated.

Our findings indicate that, even with complete eradication of inefficiencies within the current altruistic cadaveric organ procurement system, the number of organs obtained would still fall short of demand. From this evidence, we conclude that the organ shortage cannot be resolved under the zero price policy. A new approach that allows the use of financial incentives (i.e., the payment of positive prices to donors) is needed if we are to satisfy the demand for transplantable organs. The sooner we implement that approach, the more lives will be saved.

Presumed Consent

The functioning of any economic activity depends crucially upon the assignment of property rights in the affected good by the state; and the cadaveric organ procurement system is no exception. Unfortunately, public policy has failed to specify and enforce any strong property rights in this area.46 As a result, the question of who has the legal right to decide whether the organs of the deceased can be removed for transplantation purposes remains largely open at this time. At least three alternative parties appear to be potential claimants to that right: (1) the deceased individual, through pre- mortem directives; (2) the surviving family members; and (3) the state acting as an agent for potential transplant recipients. Various proposals have advocated assignment of property rights to each of these.

As organ transplantation technology has advanced, it has also diffused rapidly around the world. Transplants are now performed in virtually all developed nations and even some less developed countries as well. As a result, cadaveric organ procurement systems have become institutionalized in many countries. And, interestingly, these systems have (either explicitly or implicitly) adopted different definitions of potential organ donors’ post-mortem property rights.

Two such systems appear to dominate. First, the cadaveric organ procurement system employed in the U.S., Britain, and Canada operates under a so-called “opt-in” policy.47 Under this policy, potential organ donors become actual organ donors only if they or their surviving family members make an affirmative decision to donate the organs of the deceased. In the absence of such a decision, the organs are not removed. In contrast, several European (and other) countries have adopted a policy referred to as presumed consent, in which individuals are required to “opt-out” in order to prevent their organs from being harvested at death.48 Under this system, deceased individuals are presumed to be willing to have their organs removed unless they have expressly stated otherwise.49

Interestingly, while the law in these latter countries allows hospitals to remove the organs of all deceased individuals who have not opted out without consulting surviving family members, such consultation is, nonetheless, almost universally practiced.50 Moreover, the families’ wishes are generally followed, even where those wishes conflict with the hospitals’ legal right to harvest the organs. As a result, it is not immediately apparent that presumed consent, as practiced, will necessarily lead to an increase in cadaveric organ supply.

While both the opt-in (altruistic) and the opt-out (presumed consent) systems assign potential organ donors and/or their surviving family members limited property rights to the organs of the deceased, they differ in what action is required to exercise those rights. In effect, the difference lies in which party – the donor or the hospital – is required to bear the transaction costs of conducting the exchange. Specifically, under the opt-in policy, the hospital or OPO bears the burden of approaching the family; while, under a strict opt-out policy, the potential donor bears the cost of pre-registering his or her objection to organ removal prior to death. The important question is whether, empirically, that difference has a significant effect on observed cadaveric organ collection rates.

Several studies have addressed that question over the past decade or so.51 These studies vary in several important respects. Specifically, they have employed different sets of countries in the sample, examined different time periods, and employed different statistical methodologies. Nonetheless, a review of these papers yields a surprising level of agreement regarding two fundamental findings.

First, it appears that presumed consent produces a significantly larger supply of cadaveric donors than the altruistic system. Specifically, the most recent (and most rigorous) study finds that adoption of presumed consent increases the number of cadaveric organ donors by 25 to 30 percent on average.52 Thus, this relatively subtle alteration of property rights appears to be a fairly effective mechanism for reducing the cadaveric organ shortage.

Second, despite the increase in supply associated with adoption of presumed consent, it appears that this policy is, nonetheless, incapable of fully resolving the shortage. That is, the magnitude of the supply shift is not sufficient to meet demand at the zero price, at least in the U.S.53 As a result, even if this policy were adopted in this country, it would still be necessary to eliminate the price constraint in order to fully resolve the organ shortage. Financial incentives would still be required.

A final issue pertaining to this subject involves the transferability of the statistical findings from one country to another. There are complex social/political reasons that specific countries have adopted the policies they have in place; and these are not fully accounted for in any statistical model. Moreover, survey evidence reveals a relatively strong level of opposition to a presumed consent policy in the U.S.54 Apparently, U.S. citizens object to the comparatively intrusive character of that reassignment of property rights. Indeed, it appears that there has been some movement away from this policy in Europe as a result of such objections.55 Consequently, the political feasibility of this policy approach in the U.S. is uncertain.

Financial Incentives

Proposals to resolve the organ shortage through the use of financial incentives (or, similarly, through the formation of cadaveric organ procurement markets) have surfaced repeatedly over the years.56 Importantly, every economist that has written on this subject has reached the same conclusion – i.e., that the shortage is caused by the zero price policy and that the straightforward cure, therefore, is the elimination of that policy. Other, non-economist commentators have reached that same conclusion as well.

Opponents of the use of financial incentives have countered these appeals along two separate lines. First, they have alleged that such payments are unacceptable on various ethical grounds.57 And second, they have expressed doubts that, as an empirical matter, the implementation of financial incentives would have a significant and positive effect on the quantity of cadaveric organs supplied.58

Turning to the first set of objections, I am not an ethicist and this is not the place to present a full rebuttal of the various arguments that have been raised along these lines. Nonetheless, a review of the relevant literature reveals that, while there are some ethicists who feel that financial incentives are morally unacceptable, they represent a distinct minority among the members of that profession who have considered this issue.59 At a recent international ethics conference in Munich, a vote was taken on this subject. The outcome was 35 to 4 that financial incentives for organ donors do not violate any fundamental ethical principles. Thus, while ubiquity of opinion is not present, the vast majority (90 percent) of ethicists appear to approve of the use of financial incentives to resolve the organ shortage.

Moreover, the ethical arguments that have been presented to allegedly justify opposition to such incentives are unconvincing at best (and just plain nonsense at worst). In reviewing these ethical objections, Radcliffe-Richards writes that: “People do not resort to arguments as bad as these unless they think arguments are badly needed.”60 Thus, an objective and dispassionate reading of the literature in this area strongly suggests that the ethical objections to cadaveric organ donor payments are unfounded. Indeed, it is hard to imagine how a policy that results in the needless death of over 6,000 patients a year could possibly be viewed as morally superior.

Focusing next on the second objection involving the likely empirical impact of financial incentives on cadaveric organ supply, there exists some limited evidence that this concern is also without merit. That evidence comes from two sources. First, in the absence of any data on actual experience under an organ procurement system that contains financial incentives, two colleagues and I conducted a survey of students in various classes at Auburn University61 Our purpose was to gauge the likely responses of potential organ donors to various levels of compensation and, from those responses, to calculate the relevant supply curve and equilibrium, market- clearing price of cadaveric organ donors. Two important caveats of this study are: (1) the non-representative nature of the sample – college students; and (2) the unrealistic setting in which responses were elicited-specifically, respondents were not in a hospital environment having just lost a close relative. Accordingly, the results should be viewed as providing preliminary evidence only.

Nonetheless, despite our adoption of relatively conservative assumptions throughout the analysis, our findings suggest that: (1) financial incentives are likely to exert a significant influence on the quantity of cadaveric organs supplied; and (2) the market- clearing level of payment is surprisingly low-on the order of $500 to $1,500 per cadaveric donor, depending upon the specific set of assumptions used. With each donor yielding multiple transplantable organs, the implied cost per organ appears to be quite low.

A second (and, again, limited) source of empirical evidence pertaining to this issue is provided by a cross-country comparison of cadaveric donor collection rates. A recent study by Abadie and Gay (2004) presents data on the number of cadaveric organ donors per million population across a sample of 22 countries over a ten-year period.62 Their study focuses on the impact of presumed consent legislation on cadaveric organ supply, but the data they present is indirectly relevant to the issue of financial incentives. Specifically, those data indicate that, among the countries in their sample, Spain stands out as the one with the highest donor collection rate. Moreover, the observed gap between this country and the one with the second highest collection rate (Austria) is substantial. Figure 1, which is reproduced from their paper, shows the procurement rates of the sample countries.

Abadie and Gay (2004) offer no explanation for the higher donation rate in Spain. In an earlier, unrelated paper by Cohen (1998), however, a potential explanation of this phenomenon can be found.63 Specifically, Cohen writes that:

The Spanish representatives extolled the virtues of the Spanish system of organ retrieval which, as they demonstrated with charts and tables had moved Spain from near the bottom in Europe in the rate of consent to donation to near the top in a few years. They attributed this success to the use of physicians rather than American style OPOs to ask the families for donation and to shepherd the process. During the break in the proceedings 1 learned from informed sources that the Spanish government also paid a stipend for ‘funeral expenses’ to those who consented to donation. . . . Thus there is evidence . . . that rewarded gifting results in a significantly increased rate of donation.64

Thus, while additional research in the form of trials is clearly warranted, the Spanish experience offers an additional piece of evidence regarding the efficacy of financial incentives as a practical remedy to the organ shortage. While physician involvement in the procurement process may, in fact, be beneficial, it appears that even a very modest financial incentive may yield a substantial increase in supply.


Public policy frequently fails to keep pace with technological advancement, and this appears to be particularly true in the field of medicine. Legal and regulatory obstacles increasingly thwart future advancements and limit the application of prior discoveries. Moreover, while policy lags in other industries can cause significant economic distortions that reduce social welfare, in the medical area they can actually kill patients. Economists’ traditional welfare triangles become body counts.

This tendency for public policy to consistently lag behind technology is explained, at least in part, by the economic theory of regulation.66 Scientific discovery is motivated by both human curiosity and the lure of potentially large profits. But public policy is driven largely by interest group politics. That is, policies are typically put in place in order to serve the interests of politically influential parties – those with relatively large stakes, superior information, and low organizational costs.67 While necessity may be the mother of invention, interest group influence is both the mother and the father of policy formation.

Consequently, once a policy is put in place, it tends to exhibit considerable inertia. Unless and until a policy ceases to serve (or begins to conflict with) the interests of the group or groups that initially supported it or it becomes sufficiently destructive to some other politically influential group’s interests, it will remain in place, regardless of the overall social cost/benefit calculus associated with it.

Thus, the longevity of the current altruistic policy is at least partially attributable to the political impotence of the group that is the most adversely affected by it. Dead people do not lobby or vote. And the patients who now occupy organ waiting lists are typically unorganized, uninformed, and spread out geographically over all fifty states. Many are also extremely ill. Neither they nor their families wield any significant political power. That is, they exhibit all of the characteristics identified by the economic theory of regulation of groups that are unlikely to be able to mount effective political influence. Consequently, until a much more influential group’s interests are aligned with theirs, they may well continue to suffer and die under a policy that was initially devised for a completely different technological environment.

There are, however, some rays of hope beginning to appear. As the organ shortage persists and the resulting death toll continues to mount, physicians associated with the transplant industry have begun to abandon their long-standing opposition to donor payments. Consequently, in June 2002 the American Medical Association’s House of Delegates passed a resolution condoning trials with cadaveric donor payments.68

Federal legislation required to enable such trials was subsequently introduced in the U.S. Congress. That legislation, however, was killed in committee as a result of intense lobbying by a very vocal group within the transplant community that remains adamantly opposed to financial incentives for donors.69 Nonetheless, it appears that the tide may be turning on this issue, and some form of donor payments may soon emerge. Thousands of patients’ lives depend on it.


2 Id. at 30.

3 Most of the data cited in this paper is drawn from the Organ Procurement and Transplantation Network (OPTN) web site at http://

4 KASERMAN & BARNETT, supra, note 1, at 30.

5 “What Is the Life Expectancy of an LR Kidney Transplant?” at transweb/qa/asktw/answers/ answers9507/Whatisthelifeexp, accessed on 6-1-04.

6 KASERMAN & BARNETT, supra, note 1, at 8.


8 There are, of course, other likely causes for this growth – e.g., increases in population, and the general aging of the population.

9 See the OPTN web site, supra, note 3.

10 The extraordinary percentage growth in the number of lung transplants is at least partially attributable to the relatively small base from which that growth is measured.

11 See Robert A. Wolfe et al, Comparison of Mortality in All Patients on Dialysis, Patients on Dialysis Awaiting Transplantation, and Recipients of a First Cadaveric Transplant, 341NEW ENG. J. MED. 1725, 1725-30 (Dec. 2, 1999).

12 KASERMAN & BARNETT, supra, note 1, at 7.

13 See Pub. L. 98-507, Oct. 19, 1984, Stat. 2339 (Title 42, Sec. 273 et seq.). This law proscribes payments either to living donors or to families or estates of cadaveric donors, stating, in part, that it is illegal to “. . . knowingly acquire, receive, or otherwise transfer any human organ for valuable con- sideration for use in human transplantation. . . .” Penalties include fines of up to $50,000 and prison sentences up to five years, or both.


15 The annual change in the size of the waiting list is only an approximate measure of the shortage, because it fails to properly account for the deaths of patients on the lists. It also fails to account for patients who are turned down for listing due to the shortage. See David L. Kaserman, Markets for Organs: Myths and Misconceptions, 18 J. CONTEMP. HEALTH L. POL’Y 567, 567-81 (2002).

16 The decision of whether to approve a given patient for registration on a waiting list generally rests with the physicians who perform the initial evaluation at the transplant center.

17 See e.g., Federal Trade Commission and the Department of Justice, Improving Health Care: A Dose of Competition 6 (July 2004).

18 John R Merrill, Dialysis Versus Transplantation in the Treatment of End-Stage Renal Disease, 29 ANNUAL REV. MED. 343 (1978). Perhaps the best indication of the reduced quality of life of patients undergoing dialysis is the fact that the rate of suicide among these patients is over 100 times that of the general population. Lloyd R. Chen, Increasing the Supply of Transplant Organs: The Virtues of a Futures Market, 58 GEORGE WASH. L. REV. 38 (Nov. 1989).

19 Alan R. Hull, Can We Go Beyond Altruism . . . Without Destroying It? TRANSPLANT NEWS & ISSUES, Oct. 2002, at 58 (“The number of living kidney donors, both related and unrelated, has steadily increased over the last decade to where it now equals the number of cadaveric donors each year (not the number of kidneys because most cadaver donors donate two kidneys)” (emphasis in original)). 20 P. II. Terasaki et al., High Surviva! Rates of Kidney Transplants from Spousal and Living Unrelated Donors, 333 New Eng. J. Med. 333 (1995).

21 Gregory Pence, Time to Pay for Organs? Birmingham News, June 29, 2003, at Cl .

22 A pediatric kidney transplant surgeon once remarked to me that she considers it a good day when she does not have to perform any living donor transplants.

23 Partial liver and lung transplants are performed occasionally using living donors. These, however, are relatively rare. Moreover, living donor heart transplants are obviously not feasible.

24 See, e.g., Paul Engstrom, Damaged Goods, Wash. Post, June 26, 2001, at HE08.

25 Id.

26 /d. Engstrom quotes a director of transplant services as stating that: “One way to shorten the wait is to trade off donor quality.”

27 See, e.g., Francis L. Delmonico, Financial Incentives for Organ Donation, 5 MEDSCAPE TRANSPLANTATION (2004) available at http:/ /

28 A more complete rebuttal of the decline in organ quality argument may be found in KASERMAN and BARNETT, supra note 1, at 82- 84.

29 See Kaserman, supra, note 15.

30 Michael Finkel, This Little Kidney Went to Market, N.Y. TIMES MAG., May 27, 2001, at 26; and Larry Rohter, Tracking the Sale of a Kidney on a Path of Poverty and Hope, N.Y. TIMES, May 23, 2004, at A1.

31 Id.

32 See, e.g., Laura A. Siminoff & Mary Beth Mercer, Public Policy, Public Opinion, and Consent for Organ Donation, 10 CAMBRIDGE Q. HEALTHCARE ETHICS 377 (2001). These authors state that: “. . . payment for organs . . . may lead to a black market for organs.” Id. at 383.

33 For an evaluative survey of the major policy proposals, see A.H. Barnett & David L. Kaserman, The Shortage of Organs for Transplantation: Exploring the Alternatives, 9 Issues in Law & Med. 1 17 (Fall 1993). See also, Chapter 3 in KASERMAN & BARNETT, supra, note 1.

34 See, e.g., Alberto Abadie & Sebastian Gay, The Impact of Presumed Consent Legislation on Cadaveric Organ Donation: A Cross Country Study, 25 J. Health Economics 599 (2006); Frank P Stuart ef al, Brain Death Laws and Patterns of Consent to Remove Organs for Transplantaion from Cadavers in the United States and 28 Other Countries, 31 Transplantation 231, 238-44 (1981); L. Roels et al, Three Years of Experience With a ‘Presumed Consent’ Legislation in Belgium: Its Impact on Multi-Organ Donation in Comparison With Other European Countries, 23 Transplantation Proceedings 903 (Feb. 1991); and Monique C. Gorsline & Rachelle L.K. Johnson, The United States System of Organ Donation, the International Solution, and the Cadaveric Organ Donor Act: “And the Winner Is . . .”, 20 J. Corp. L. 5 (Fall 1994).

35 KASERMAN & BARNETT, supra, note 1, ch. 3.

36 In June, 2002, the American Medical Association’s House of Delegates approved a recommendation made by its Council on Ethical and Judicial Affairs that approves trials of financial incentives for cadaveric organ donation. That action was followed by a similar proposal by the United Network for Organ Sharing’s board of directors. Andis Robeznieks, Feds Have Final Say on Organ Donor Initiatives, AM. MED. NEWS, July 22, 2002.

37 See, e.g., Francis L. Delmonico et al.. Ethical Incentives- Not-Payment-For Organ Donation, 346 NEW ENG. J. MED. 2002 (June 20, 2002).

38 See, e.g., William Dejong et al.. Options for Increasing Organ Donation: The Potential Role of Financial Incentives, Standardized Hospital Procedures, and Public Education to Promote Family Discussion, 73 MILBANK Q. 463(1995).

39 For a cogent explanation of why additional spending on public education programs are unlikely to significantly expand cadaveric organ supply, see Margaret Verble & Judy Worth, The Case Against More Public Education to Promote Organ Donation, 6 J. TRANSPLANT COORDINATION 200 (Dec. 1996).

40 T. Randolph Beard, David L. Kaserman, & Richard P Saba, Limits to Altruism: Organ Supply and Educational Expenditures, 22 CONTEMP. ECON. POL’Y 433 (Oct. 2004).

41 A. Frank Adams, III, A.H. Barnett, & David L. Kaserman, Markets for Organs: The Question of Supply, 17 CONTEMP. ECON. POL’Y 147 (Apr. 1999).

42 Collection rates – as measured by the number of cadaveric donors per thousand hospital deaths – vary by at least five fold across OPOs. T. Randolph Beard, David L. Kaserman, & Richard P. Saba, Inefficiency in Cadaveric Organ Procurement, 73 S. Econ. J. 13 QuIy 2006).

43 See, e.g., Edgar A. Pessemier et al.. Willingness to Supply Human Body Parts: Some Empirical Results, 4 J. Consumer Res. 131 (Dec. 1977); Laura A. Siminoff et al, Factors Influencing Families’ Consent for Donation of Solid Organs for Transplantation, 286 JAMA 71 (2001); and Beard, Kaserman, and Saba, supra, note 40.

44 Beard, Kaserman, & Saba, supra, note 40.

45 For an explanation of the frontier estimation approach, see J. Jondrow et al. On the Estimation of Technical Inefficiency in the Stockhastic Frontier Model, 23 J. ECONOMETRICS 267 (1982).

46 Richard Schwindt & Aidan R. Vining, Proposal for a Future Delivery Market for Transplant Organs, 11 J. HEALTH, POL., POL’Y, & L. 483 (Fall 1986), emphasize that problems inevitably arise when property rights to a valuable asset are ill defined.

47 Other countries have adopted this policy as well. See Abadie & Gay, supra, note 34.

48 In practice, surviving family members tend to have the final say in these decisions.

49 Most countries that have adopted presumed consent maintain a national registry of individuals who have chosen to opt out.

50 There are several possible reasons for this pronounced tendency to defer to the preference of surviving family members. These are described in KASERMAN & BARNETT, supra, note 1, at 131- 32.

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