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.

May 08, 2015

Pharmaphobia: How the Conflict of Interest Myth Undermines American Medical Innovation


Long a champion of physician and industry collaboration, Thomas Stossel, M.D., has published a new book entitled Pharmaphobia: How the Conflict of Interest Myth Undermines American Medical Innovation. In it, Stossel, a distinguished Harvard hematologist and researcher, decries the conflict of interest movement as detrimental to medical progress and ultimately the patients who would benefit from new, innovative therapies.

Writing about conflicts of interest has been an increasingly surefire way to get published—the Journal of the American Medical Association even has its own conflict of interest category. What’s often missing from both sides of the mostly academic “COI” debate, however, is a relation back of nebulous concepts to what is important: tangible medical innovations and patient well-being.

One of the reasons Dr. Stossel’s writing is so engaging is that he bucks this trend by illustrating in plain language what is at stake. “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.

Over the course of my career, medicine and industry have together made spectacular progress against diseases. Cardiovascular deaths are down 60 percent, HIV has been converted from a death sentence to a chronic disease, and cancer mortality is at a historic low. Despite such progress and the role of physician-industry interactions in fomenting it, physicians are reducing or severing their relationships with biopharmaceutical and medical device companies out of fear that their patients will mistakenly view such interactions as a sign of corruption, rather than expertise.

In addition to the large amount of ink being spilled in academic journals on COI, Stossel characterizes a number of recent legislative measures as being similarly “pharmophobic.” He points specifically to the medical device excise tax and the Physician Payments Sunshine Act, which requires pharmaceutical and device companies to report any payments to physicians and teaching hospitals of more than $10. These payments are reported on a publicly accessible website, “with minimal explanations,” he notes, which “stigmatiz[es] relationships that are critical to the development and dissemination of new medical products.”

“[O]ne of the highest-paid physicians in the Sunshine database is a world-famous vascular surgeon who received royalties for his invention of multiple aneurism repair devices,” Stossel illustrates. Similarly, "Paul Offit, who invented the rotavirus vaccine that is believed to have reduced the incidence of hospitalizations for rotavirus-induced diarrhea by more than 85 percent among U.S. toddlers since its addition to the childhood-vaccine schedule in 2006, is often maligned for his industry ties." Stossel concludes: “Such cases, along with research grants for clinical trials, dominate the largest payments documented under the Sunshine Act. They are unequivocally beneficial and should not be stigmatized in this manner.”

Dr. Stossel’s book also aims to illustrate just how important private industry has been to these amazing breakthroughs. Again, he is the perfect spokesman for this. “I’ve done medical research for most of my career, and people say that I’ve been successful at it," he notes. “I hope that this research will save lives someday, but only drug and device companies can make that happen.”

He writes:

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.

But regulations, largely stemming from the conflict of interest movement has only served to impede medical innovation. “Regulations always slow things down, and compliance and enforcement divert precious funds from research and development,” states Dr. Stossel. “It takes on average 16 years and costs over $2 billion to get a new drug approval by the FDA.” This delay matters:

For patients desperate for new treatments and cures, such delays can be lethal. Marketing restrictions mean doctors don’t learn about drug and device advances. Delays or prevention of potentially innovation-promoting relationships between researchers and industry have been documented. The myth that device and drug development isn’t difficult and expensive encourages enactment of taxes on companies and calls for price controls. Both inhibit innovation.


Dr. Stossel stands as a rare counter to the COI movement, and provides years of experience and patient-centered arguments to back it up.  Pharmaphobia: How the Conflict of Interest Myth Undermines American Medical Innovation is out now and available here. Also, read  a Q&A with Stossel about his book.

In full disclosure, Thomas Sullivan, Editor of Policy and Medicine is listed in the preface to Pharmaphobia, he receives no remuneration from the sales of this book or his work with Dr. Stossel.  


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