Life Science Compliance Update

June 29, 2015

The Importance of Private Investment into Research and Development


Recently, we covered Thomas Stossel, M.D.’s new book, Pharmaphobia: How the Conflict of Interest Myth Undermines American Medical Innovation. The distinguished Harvard hematologist and research fights back against the “conflict of interest movement” as one that chills medical progress and hurts the people who benefit most from industry research collaboration: patients. “Physician-industry interactions have been critical to the development of a large percentage of the medical products that allow physicians to prevent heart attacks, cure cancers, and restore mobility to the elderly,” he writes. Despite their importance to modern research and development programs, critics remain undeterred, but a recent report suggests private research—which often relies upon physician-industry relationships—is critically important to the United States’ economy.

R&D Growth and Hope for the Economy

Bloomberg Business reports that amidst concerns of a permanently slowing United States economy, private investment into research and development remains “hope on the horizon,” growing at the fastest pace in 50 years. Specifically, from November 2014 through March 2015, American companies funded R&D to a tune of $316 billion, around 1.8 percent of gross domestic product. This represents the largest share ever for the private sector.

One economist quoted believes additional R&D spending will in turn spark the creation of new technologies, encouraging businesses to invest in new equipment. This domino effect by boosting worker productivity may then create higher growth rates. If funding breakthrough technologies does not bring the United States out of its economic rut, the article asserts there simply may be no other way out.

But it takes decades for research spending and subsequent development to translate into new products, if it ever happens at all. This is compounded by the fact that private partnerships with government are diminishing, despite their historic success after World War II when industry turned the most promising advances from government labs into critical products today like GPS and the Internet. As Bloomberg notes, pharmaceutical companies are one example of an industry where a substantial share of revenue is invested back into R&D. Most companies have no choice but to keep spending or risk getting left behind from important breakthroughs.

The article recommends making the R&D tax credit permanent. Since its introduction in 1981, the credit has been modeled internationally. Now, over three decades later, the United States ranks 27th in terms of the generosity of its R&D tax credit. It is one reason domestic companies have boosted overseas R&D 2.7 times faster than what companies have spent inside the United States. This corresponds with the biopharmaceutical industry which saw its largest 12 companies achieve a 4.8 percent return on R&D investments, compared to 10.5 only five years prior in 2010.

Many Other Challenges Facing R&D

The importance of private-sector R&D cannot be understated. It is critical as both public funding declines and critics continue to villainize industry-researcher collaborations, making R&D even more difficult. As we previously noted, a recent study found that it costs drugmakers $2.6 billion dollars to develop a new prescription medicine that gains marketing approval. This is up from $802 million in 2003, equal to approximately $1 billion in 2013 dollars. While the average time it takes to bring a drug through clinical trials has decreased, the rate of success has gone down by almost half, to just 12 percent.

Furthermore, the estimated cost of post-approval research and development of $312 million “boosts the full product lifecycle cost per approved drug” to close to $3 billion. R&D costs include studies to test new indications, new formulations, new dosage strength and regimens, and to monitor safety and long-term side effects in patients as required by the FDA as a condition of approval.


The importance of private investment into R&D is a key part of scientific discovery and spurs growth domestically and abroad. But the burdens upon researchers are vast, and only further complicated by additional costs related to the Open Payments program. Every dollar spent on a compliance manager is a dollar not spent on R&D or complementary departments. All of this makes it even more remarkable that despite these hurdles, industry R&D, especially in the pharmaceutical industry, remains a crucial component to jumpstart the stagnated American economy.

April 14, 2015

Doctor's Article Counters The "Myths That Undermine Medical Research"


Thomas Stossel, American Cancer Society Professor of Medicine at Harvard Medical School and a visiting scholar at the American Enterprise Institute, recently wrote an article entitled “Myths that undermine medical research.” Stossel raises important points to counter three prevailing myths about the drug and device industry.  View the article, as published in the

If you or a loved one suffers from a serious and debilitating disease and hope for improved treatment or—even better—a cure, the recent history of medical progress should be encouraging. Over the years I have practiced medicine, U.S. longevity has increased by a decade, deaths from the commonest killer, cardiovascular disease, have dropped by 60 percent, and cancer deaths, the second most prevalent cause, are at an all-time low. HIV-infected individuals, once doomed, live normal albeit medicated lives. Arthritis sufferers previously condemned to pain, crutches and wheelchairs enjoy relative comfort and mobility. Unfortunately, three pernicious myths conspire to undermine such optimism.

Myth 1: Non-profit foundation—or government-subsidized university research is the main reason for this medical progress.

Myth 2: Private industry easily exploits this research to develop medical products—for which it overcharges. If industry spent less on marketing and more on research it could charge less.

Myth 3: Billions of dollars in settlement fees paid to the Justice Department by companies accused of marketing drugs for uses not approved by the Food and Drug Administration (FDA) prove that industry marketing is corrupt.

The truth regarding the first myth is that four-fifths of new drugs and most medical devices approved by the FDA originated from inventions solely created by companies. Among many examples, an industry researcher discovered the first cholesterol-lowering statin drug. Statins, in large measure, account for the reduction in heart attacks and strokes.

Publicly supported academic research certainly advances medical knowledge. But converting that knowledge to clinical benefits isn’t straightforward. Helping patients justifies public research funding, but obtaining such funding depends far more on impressing grant review committees with the novelty and virtuosity of research than with its practical medical applications. I know, because following these precepts has certainly contributed to my success. I have had continuous government research funding for over 45 years, have published research papers in prestigious scientific journals, won prizes, and been elected to elite scientific societies. Yet no one has lived one second longer or better as a direct result of my research accomplishments.

My efforts to remedy this deficiency illustrate why the second myth—that developing treatments and cures is cheap and easy—is wrong. Clinically relevant discoveries usually emerge unexpectedly, as did one of mine that may lead to a life-saving therapy. But because academics deciding what research to support don't value the trial and error experimentation that advances such projects, it took decades of persistent effort before investors were willing to take the risk of developing it in startup companies, the route most academic research must take to benefit patients.

That risk is huge. Over my lifetime, the inflation-adjusted cost of introducing new drugs has increased 100-fold, now averaging over $2.5 billion per FDA approval. The principal reason for the rising cost is more stringent FDA testing requirements engrafted on biology’s variability. Unlike complex machines we engineer to behave predictably, our bodies evolved to respond idiosyncratically. This inconsistency enables our species to survive assaults by microorganisms that can adapt quickly to kill or disable susceptible individuals. But it also means that nine out of ten drug candidates informed by our best research efforts fail in clinical trials. There’s no easy solution other than for companies to have as many shots on the elusive product introduction goal as possible. To offset these tough odds, the industry has to be sufficiently profitable to finance as many development attempts as possible. And although vilified, marketing not only sustains profits but also provides caregivers with essential information. This information, supervised by the FDA, is far, more rigorous than what academics publish in medical journals.

Recent research discussed in Health Affairs questions whether current profits are sufficient to sustain medical innovation. Large companies may survive by ceasing medical product development and defaulting to selling pet food. Startup companies, however, like the one developing my potential treatment can only turn their lights out.

The myth that the billions of dollars confiscated from companies by the ubiquitous class action lawsuit settlements address real crimes also is false. The settlements often result from prosecutors perverting “false claims” litigation designed to punish contractors who bill the government for unperformed services. Physicians frequently—and appropriately—prescribe FDA approved drugs for unapproved uses. Since physicians, not companies, are the ones “billing” by writing prescriptions, the prosecutors have to prove at trial that corporate marketing practices forced physicians to prescribe for an unapproved indication. The notion that highly educated and trained physicians, concerned about their reputations, are so gullible is patently absurd. So, why do companies always settle these dishonest lawsuits? It’s because false claims convictions carry a draconian penalty called debarment, something media accounts never mention. A debarred company cannot do any business involving the federal government. No medical products manufacturer extensively involved in sales to federal programs, such as Medicare for example can afford to risk such an outcome.

These myths compromise medical progress. They encourage product excise taxes, price controls, weakening of essential patent protection, and other political rent-seeking schemes that erode essential corporate profitability. A prime example is the legislation recently drafted by my state’s senator, Elizabeth Warren (D-Mass.), in which she proposes to force companies settling prosecutions to subsidize government research. I’d love more funding for research—but not at the expense of diverting funds from the development of treatments and cures for my sick patients and punishing the medical industry for non-existent crimes.

**Myths that undermine medical research, by Thomas Stossel, available: 

Stossel’s book, Pharmaphobia: How the Conflict of Interest Myth Undermines American Medical Innovation is being published by Rowman & Littlefield in April.


February 27, 2015

New Poll Shows Majority of Americans Are Concerned About Pace of Medical Progress


According to America Speaks, a compilation of public opinion polls commissioned by Research!America, the majority of Americans agree with the central tenets of the 21st Century Cures Bill

"Majorities across the political spectrum say it is important that the new 114th Congress takes action on assuring the discovery, development and delivery of treatments and cures for diseases in the first 100 days of the legislative session (75% Democrats, 64% Republicans and 60% Independents)," states Research!America. "As Congress considers numerous proposals in support of research, including the 21st Century Cures draft legislation aimed at speeding the delivery of lifesaving treatments to patients, it is notable to see public support in favor of accelerating medical progress."

Speed Drug Approval Pic

The report found that an increasing percentage of Americans say the U.S. Food and Drug Administration (FDA) should move more quickly in order to get new treatments to patients, even if it means there may be risks. In 2015, 38% favor faster regulatory review, compared to 30% in 2013 (see the graphic to the left). Meanwhile, 25% say the FDA should act more slowly in order to reduce risk, even if it means patients may wait longer for treatments.  Another 19% are undecided on this question and 18% do not agree with either position.  

When it comes to rising health care costs, 46% say research to improve health is part of the solution, while 28% are not sure and 26% say research is part of the problem. Meanwhile, 41% say that the roughly 1.5% of government spending allocated for biomedical and health research is not enough. Nearly one-third (29%) say it is about right, 21% are not sure and 9% say it is too much.

Furthermore, 44% say they are willing to pay $1 per week more in taxes if they were certain that all of the money would be spent on additional medical research, while 32% say no and 24% are not sure.

Currently, only 27% of Americans believe the U.S. has the best health care system in the world, but more than half say it is important that the U.S. is a leader in medical and health research. Furthermore, confidence in the current system in the U.S. for evaluating the safety of vaccines and recommendation for when they should be given dropped to nearly half, compared to 85% in 2008.


Among the polling results:

  • 70% of Americans agree basic scientific research that advances the frontiers of knowledge, even if it brings no immediate benefits, is necessary and should be supported by the federal government.
  • 80% of Americans say it’s important that elected officials at all levels listen to advice from scientists.
  • 78% of Americans say it’s important that our nation supports research that focuses on improving how our health care system is functioning.
  • A plurality (44%) say they’re willing to pay more in taxes if they were certain that all of the money would be spent on additional medical research, and
  • More than half (53%) say it’s important to make the R&D tax credit permanent
  • 56% of Americans favor expanding federal funding for research using embryonic stem cells.
  • More than half (55%) of Americans are willing to share their personal health information to advance medical research. An even higher percentage (60%) say they will share personal health information so that health care providers can improve patient care, and 46% percent are willing to share information so public health officials can better track disease and disability and their causes.
  • 73% of Americans say the federal government should assign a higher priority to improving education focused on science, technology, engineering and mathematics (STEM) and careers in those fields.
  • Studies show that certain health problems such as diabetes, heart disease and infant mortality happen more often among minorities or citizens with lower incomes. More than two-thirds of Americans (69%) say it is important to conduct medical or health research to understand and eliminate these differences.

 View the full report:  Download AmericaSpeaks Volume 15

Research!America notes that their online polls are conducted with a sample size of approximately 1,000 U.S. adults, age 18+, with a maximum theoretical sampling error of +/- 3.2%. Data are demographically representative of adult U.S. residents. Polling in this publication was conducted by Zogby Analytics.



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