The Anatomy of Medical Research US and International Comparisons

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1 Clinical Review & Education Special Communication SCIENTIFIC DISCOVERY AND THE FUTURE OF MEDICINE The Anatomy of Medical Research US and International Comparisons Hamilton Moses III, MD; David H. M. Matheson, JD, MBA; Sarah Cairns-Smith, PhD; Benjamin P. George, MD, MPH; Chase Palisch, MPhil; E. Ray Dorsey, MD, MBA IMPORTANCE Medical research is a prerequisite of clinical advances, while health service research supports improved delivery, access, and cost. Few previous analyses have compared the United States with other developed countries. Editorials pages 143 and 145 Supplemental content at jama.com OBJECTIVES To quantify total public and private investment and personnel (economic inputs) and to evaluate resulting patents, publications, drug and device approvals, and value created (economic outputs). EVIDENCE REVIEW Publicly available data from 1994 to 212 were compiled showing trends in US and international research funding, productivity, and disease burden by source and industry type. Patents and publications ( ) were evaluated using citation rates and impact factors. FINDINGS (1) Reduced science investment: Total US funding increased 6% per year ( ), but rate of growth declined to.8% per year (24-212), reaching $117 billion (4.5%) of total health care expenditures. Private sources increased from 46% (1994) to 58% (212). Industry reduced early-stage research, favoring medical devices, bioengineered drugs, and late-stage clinical trials, particularly for cancer and rare diseases. National Insitutes of Health allocations correlate imperfectly with disease burden, with cancer and HIV/AIDS receiving disproportionate support. (2) Underfunding of service innovation: Health services research receives $5. billion (.3% of total health care expenditures) or only 1/2th of science funding. Private insurers ranked last (.4% of revenue) and health systems 19th (.1% of revenue) among 22 industries in their investment in innovation. An increment of $8 billion to $15 billion yearly would occur if service firms were to reach median research and development funding. (3) Globalization: US government research funding declined from 57% (24) to 5% (212) of the global total, as did that of US companies (5% to 41%), with the total US (public plus private) share of global research funding declining from 57% to 44%. Asia, particularly, tripled investment from $2.6 billion (24) to $9.7 billion (212) preferentially for education and personnel. The US share of life science patents declined from 57% (1981) to 51% (211), as did those considered most valuable, from 73% (1981) to 59% (211). CONCLUSIONS AND RELEVANCE New investment is required if the clinical value of past scientific discoveries and opportunities to improve care are to be fully realized. Sources could include repatriation of foreign capital, new innovation bonds, administrative savings, patent pools, and public-private risk sharing collaborations. Given international trends, the United States will relinquish its historical international lead in the next decade unless such measures are undertaken. JAMA. 215;313(2): doi:1.11/jama Author Affiliations: The Alerion Institute and Alerion Advisors LLC, North Garden, Virginia (Moses); Johns Hopkins School of Medicine, Baltimore, Maryland (Moses); Boston Consulting Group, Boston, Massachusetts (Matheson, Cairns- Smith, Palisch); University of Rochester School of Medicine, Rochester, New York (George, Dorsey); Stanford University School of Medicine, Stanford, California (Palisch). Corresponding Author: Hamilton Moses III, MD, Alerion, PO Box 15, North Garden, VA (hm@alerion.us). 174 (Reprinted) jama.com Copyright 214 American Medical Association. All rights reserved. Downloaded From: on 1/15/215

2 The Anatomy of Medical Research Special Communication Clinical Review & Education Thepromiseofnewdrugs, vaccines, medicalprocedures, and devices captures the imaginations of the public, scientists, and physicians alike. For the last century, medical research, includingpublichealthadvances, hasbeentheprimarysource of and an essential contributor to improvement in the health and longevity of individuals and populations in developed countries. The United States has historically been where research has found the greatest support and has generated more than half the world s funding for many decades. Although US-based companies, foundations, and public agencies have sponsored most research, that research is conducted by an array of autonomous university laboratories, study groups, and coalitions of researchers. This organization contrasts with that found in most other countries, where government laboratories are predominant and where health systems and insurers conduct and finance service innovations directly. Expectations for medical research vary sharply, depending on the observer s perspective. For a patient affected by disease, it is a source of hope. For a parent of a child with a serious condition, it evokes both expectation and frustration over the pace of progress. Where a physician may seek a route to better care, an economist sees an engine of growth and a politician sees high-skill jobs and improved national competitiveness. Hospital executives expect research to spawn new services, whereas pharmaceutical CEOs must have new products. An insurance executive doubts instinctively that the value of research will outweigh its incremental cost. A regulator aims for the appropriate amount of risk while still getting innovations that matter to the market. For philanthropists and public health campaigners, research represents the best hope for alleviating the world s most immediate health-related problems. To a scientist, research deepens critical knowledge and the way intelligence and organized effort can improve health. All of these constituents play a role in how research is funded and brought from bench to bedside. Meeting their collective needs produces a complex set of hurdles. This Special Communication examines developments over the past 2 decades in the pattern of who conducts and who supports medical research, as well as resulting patents, publications, and new drug and device approvals. We place the United States in an international context to understand the key forces of change and suggest remedies for the various stakeholders to explore as they seek greater benefit for their investment. Key Questions We address 3 major trends: 1. Diminished funding in the United States from both public and private sponsors at a time when scientific opportunity has never been greater but when support for sustained, long-term investments is limited and short-term performance is rewarded disproportionately 2. Establishingstrongincentivesforinvestmentinhealthserviceand delivery innovations and better ways to deliver care 3. The implications of globalization Better understanding of these factors is required if the full promise of the cumulative investment in biomedical science and opportunity for improved services are to be realized. Information in 8 areas has been assembled to inform the discussion (Figure 1). Two areas involve the current and historical landscape in the United States of investment and employment in medical research, placing the United States in an international context. Two areas examine funding on biomedical and health services research separately. Four areas quantify the value of that investment as judged by resulting patents, publications, drug and device approvals, and public market performance of life science and health service companies. Methods To describe and document the current anatomy and historical trends of medical research, we assembled an array of information from various data sources. We relied on publicly available data, recalculated those data for display when necessary, reconciled inconsistent sources, and included years for which data are complete (in general, from 1994 to 212). The Box contains a list of the included and supplementary figures and tables. Methods were similar to those we have used previously. 1-3 Additionally, in this study, the 4 largest developed nations were ex- Figure 1. The Anatomy of Medical Research: US and International Comparisons Medical Research Funding Sources of funding Government, industry, foundations, charities, and universities Historical trends International comparisons Medical Research Activities Biomedical research Historical funding trends Funding by phase of research Funding by therapeutic area Medical Research Output Patents International comparison of patenting activity Publications International comparison of publication activity Science and Technology Workforce Workforce size Historical trends International comparisons Health services research Historical funding trends Industrial sector comparisons New drugs and devices New drug and device approvals by FDA and EMA Market performance Health care sector performance compared with market average EMA indicates European Medicines Agency; FDA, US Food and Drug Administration. jama.com (Reprinted) JAMA January 13, 215 Volume 313, Number Copyright 214 American Medical Association. 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3 Clinical Review & Education Special Communication The Anatomy of Medical Research Box. List of Included and Supplementary Figures and Tables Included figures Figure 1. The Anatomy of Medical Research: US and International Comparisons Figure 2. US Funding for Medical Research by Source, Figure 3. Growth in US Funding for Medical Research by Source, Figure 4. Pharmaceutical Industry Medical Research Funding by Phase of Research, Figure 5. Medicines in Development for Top 1 Therapeutic Areas, 213 Figure 6. US Funding for Health Services Research by Source, Figure 7. Research and Development Investment Ranking of Industrial Sectors Among US-Based Companies, 211 Figure 8. Global Medical Research Funding in Select Countries/ Regions, 211 Figure 9. Top 1 Countries by Size of Science and Technology Workforce, Figure 1. Global Life Science Patent Applications by Country of Origin, Figure 11. US Life Science Patent Applications by Country of Origin, Figure 12. Highly Valuable US Life Science Patents by Country of Origin, Figure 13. Medical Research Articles and Citations by Selected Countries/Regions, 2-21 Figure 14. Market Performance of Publicly Traded Life Sciences and Health Care Companies, Supplementary figures and tables efigure 1. Historical Growth Trajectory of US Medical Research Funding, efigure 2. Historical Trajectory of NIH Medical Research Funding, efigure 3. Venture Capital Investment in Biotechnology Companies, efigure 4. Relationship Between NIH Disease-Specific Research Funding and Burden of Disease for Selected Conditions efigure5. GrowthinGlobalMedicalResearchFundinginSelectCountries/Regions, efigure 6. Medical Research and Development Funding and Science and Technology Workforces in Select Countries/Regions, 211 efigure 7. European Life Science Patent Applications by Country of Origin, efigure 8. Highly Valuable European Life Science Patents by Country of Origin, efigure 9. Comparison of New Approvals by US Food and Drug Administration and European Medicines Agency, etable 1. US Funding for Medical Research by Source, etable 2. NIH Medical Research Funding by Type of Research, etable 3. NIH Disease Research Funding and Burden of Disease for Selected Conditions etable 4. Medical Research Funding From (A) Public Charities and (B) Private Foundations, 211 etable 5. US Funding for Health Services Research by Source, etable 6. Methods and Data Sources for Medical Research Funding by Select Countries/Regions amined using comparable, standard measures of investment, employment, economic value, patents, and publications. Although reliable international comparisons of biomedical science funding are possible, comparable data for health services research are not available because other countries do not distinguish them from costs of insurance and expenditures on provision of care. A complete description of methods is included in the footnotes accompanying each table and figure. Information, Trends, and Analysis Medical Research Funding In 212, total US funding of biomedical and health services research was $116.5 billion (Figure 2 and etable 1 in the Supplement), or.7% of gross domestic product (GDP). The largest increase in funding occurred between 1994 and 24, when funding grew at 6% per year. However, from 24 to 212, the rate of investment growth declined to.8% annually and (in real terms) decreased in 3 of the last 5 years (efigure 1 in the Supplement). The exceptions were 29 and 21, accountable to stimulus from the American Recovery and Reinvestment Act (ARRA). As a percentage of national health expenditures, medical research investment remained stable, ranging between 4.2% and 4.7% from 24 to 212 (efigure 1). In 1994, the National Institutes of Health (NIH) budget totaled $17.6 billion and in 24 reached a peak of $35.6 billion (Figure 3). Following a decade of remarkable public sponsorship of medical research with growth exceeding 7% per year in the199s, funding from the NIH declined nearly 2% per year in real terms (Figure 3) after the mid-2s. This decrease represents a 13% decrease in NIH purchasing power (after inflation adjustment) since 24 (efigure 2 in the Supplement), which may be more severe when considering NIH appropriations through Other sources of US investment were not immune to slowed growth. Funding from major sources of investment either slowed or declined over the past 1 years, with the exception of other federal support, which includes organizations such as the Agency for Healthcare Research and Quality (AHRQ). From 1994 to 24, the medical device, biotechnology, and pharmaceutical industries had annual growth rates greater than 6% per year (Figure 3), with biotechnology demonstrating the largest increases. The share of US medical research funding from industry accounted for 46% in 1994 and grew to 58% in 212. Although much of the growth in medical research funding over the past 2 years can be attributed to industry, investment still 176 JAMA January 13, 215 Volume 313, Number 2 (Reprinted) jama.com Copyright 214 American Medical Association. All rights reserved. Downloaded From: on 1/15/215

4 The Anatomy of Medical Research Special Communication Clinical Review & Education slowed (medical device, 6.6% to 6.2% in vs ; biotechnology, 14.1% to 4.6% in vs ), or declined (pharmaceutical firms, 6.8% to.6% in vs ). Research Funding Biomedical Research The distribution of investments across the types of medical research changed from 24 to 211. Pharmaceutical companies shifted funding to late-phase clinical trials and away from discovery activity such as target identification and validation. The share of pharmaceutical industry funding (including that by US companies outside of the United States) spent on phase 3 trials increased by 36% (5%/year growth rate) from 24 to 211 (Figure 4), and the share of investment in prehuman/preclinical activities decreased by 4% (2%/year average decline). This shift toward clinical research and development reflects the increasing costs, complexity, and length of clinical trials but may also reflect a deemphasis of early discovery efforts by the US pharmaceutical industry. While industry has shifted funding to clinical trials, the share of NIH contributions dedicated to basic science and clinical research was unchanged (etable 2 in the Supplement), with the majority of funds still focused on basic research. These data may not accurately reflect the true division of NIH investment for basic science vs diseasefocused research, as a growing proportion of NIH expenditures is for projects having potential clinical application in many diseases or organ systems. 7 In real terms, venture capital investment in biotechnology companies steadily increased from $1.5 billion in 1995 to a peak of $7. billion in 27 (efigure 3 in the Supplement). During that period, investment in biotechnology companies as a share of total venture capital investment increased from 1% to 18%, and the number of investments increased from 176 to 538. Investment levels and the number of transactions of biotechnology decreased following the financial crisis in 28-29, declining to a low of $4.3 billion in 29. Venture capital investment still has not recovered to its pre- 28 levels, with only $4.5 billion invested in 213. Size of investment per transaction (median, $11 million, inflation adjusted) has remained unchanged for 2 decades. Public funding of medical research by condition was only marginally associated with disease burden in the United States in 21 (efigure 4 in the Supplement). A set of 27 diseases that account for 84% of US mortality, 52% of years of life lived with disability, 84% of years of life lost, and 7% of disability-adjusted life-years receive 48% of NIH funding (R 2 =.26) (etable 3 in the Supplement). Several factors other than disease burden may influence funding, including the quality of research, scientific opportunity, portfolio diversification, or building of infrastructure, and the combination of these factors complicates the relationship of funding to particular conditions. 8,9 Cancer and HIV/AIDS were funded well above the predicted levels based on US disability alone (efigure 4 in the Supplement), with cancer accounting for 16% ($5.6 billion) of total NIH funding and 25% of all medicines currently in clinical trials (Figure 5). Rare diseases have emerged for industry as a preferential area of therapeutic development, with nearly as many compounds in trials as analgesics and antidiabetic drugs (Figure 5). Industry favors rare diseases because they are commercially attractive due Figure 2. US Funding for Medical Research by Source, Medical Research Funding, $, in Billions a Funding source Foundations, charities, and other private funds State and local government Other federal b National Institutes of Health b Compound annual growth rate, 6.3% d to provisions of the Orphan Drug Act and relative ease of clinical trials. Investment can be expected to increase as diseases are defined by biomarkers that allow the development of targeted therapies. 12 Support from private foundations, public charities, and other entities comes from only a few organizations. In 211, 42% of total not-for-profit funding was by the top 1 public medical charities and top 1 private foundations (etable 4 in the Supplement). The Howard Hughes Medical Institute (which supports domestic research primarily) and the Bill and Melinda Gates Foundation (which supports international research primarily) account for 87% of biomedical research funding by private foundations (etable 4, panel B). United States based medical charities direct most monies in the United States, though the amount spent on research (as opposed to education, disease screening, and other activities) cannot be quantified using public data. Health Services Research Funding Health services research, which examines access to care, the quality and cost of care, and the health and well-being of individuals, communities, and populations, accounted for between.2% and Medical device firms Biotechnology firms c Pharmaceutical firms Compound annual growth rate,.8% d Includes ARRA Funding b Data were calculated according to methods outlined in etable 1 in the Supplement. ARRA indicates American Recovery and Reinvestment Act. a Data were adjusted to 212 dollars using the Biomedical Research and Development Price Index. 4 b The National Institutes of Health and other federal sources include stimulus provided by ARRA in 29 and 21. c Data from and were estimated based on linear regression analysis of industry market share. d Compound annual growth rate (CAGR) supposing that year A is x and year B is y,cagr=(y/x) {1/(B A)} 1. The CAGR was calculated separately for 2 different periods with a single overlapping year: and The cut point was chosen at 24 given the changes seen in funding from the National Institutes of Health in that year. jama.com (Reprinted) JAMA January 13, 215 Volume 313, Number Copyright 214 American Medical Association. All rights reserved. Downloaded From: on 1/15/215

5 Clinical Review & Education Special Communication The Anatomy of Medical Research Figure 3. Growth in US Funding for Medical Research by Source, Medical Research Funding, $, in Billions a Funding Source Foundations, charities, other private State and local government Other federal National Institutes of Health Medical device firms Biotechnology firms Pharmaceutical firms Overall (4) 3.9 (7) 8. (13) 17.6 (29) 3.8 (6) 3.7 (6) 2. (34) 59.5 Medical Research Funding, $ (%), in Billions a (4) 5.9 (5) 4.8 (4) 35.6 (33) 7.1 (6) 13.7 (12) 38.6 (35) (4) 6.3 (5) 7.1 (6) 3.9 (27) 11.5 (1) 19.6 (17) 36.8 (32) Compound Annual Growth Rate, % b Data were calculated according to methods outlined in etable 1 in the Supplement. a Adjusted to 212 dollars using the Biomedical Research and Development Price Index. 4 b Compound annual growth rate (CAGR) supposing that year A is x and year B is y,cagr=(y/x) {1/(B A)} 1. Figure 4. Pharmaceutical Industry Medical Research Funding by Phase of Research, Industry Medical Research Funding, $, in Billions a Phase of Research Uncategorized c Phase 4 Approval Phase 3 Phase 2 Phase 1 Prehuman/preclinical Overall Industry Medical Research Funding, $, (%), in Billions a (9) 1.7 (3) 6.4 (13) 4.8 (1) 4.5 (9) 4.1 (8) 12.6 (26) 17.6 (36) 4.9 (1) 6.2 (13) 3.2 (7) 12.5 (26) (9) 1.6 (22) 49.3 Compound Annual Growth Rate, % b Pharmaceutical industry funding by phase was obtained from Pharmaceutical Research and Manufacturers of America (PhRMA) annual reports, Data were 2 years old at time of publication and include both domestic and international research funding from PhRMA members. a Data were adjusted to 212 dollars using the Biomedical Research and Development Price Index. 4 b Compound annual growth rate (CAGR) supposing that year A is x and year B is y,cagr=(y/x) {1/(B A)} 1. c Uncategorized funding could not be allotted to a single phase of research..3% of national health expenditures between 23 and 211, an approximately 2-fold difference in comparison with total medical research funding (efigure 1 in the Supplement). Health services research funding increased 4.6% per year from $3.7 billion in 24 to $5. billion in 211 (Figure 6 and etable 5 in the Supplement). Investment from foundations decreased in real terms at 1% per year over the period, following declines after the recession of 28. Increases in health services research funding were largely driven by AHRQ (15.8%/year growth) and the health care services industry (11.%/year growth), which includes hospitals, ambulatory health care services, and nursing care facilities. Although health care industry funding is likely underestimated because research funds may not account for hidden costs of quality improvement, research investment was especially low when compared with other industrial sectors (Figure 7). Insurers and health systems rank among the lowest in research and development (funding $1.3 billion, or.1% of revenue), which was well below the median for industrial sectors ($5.5-$7.3 billion for total funding, or 1.7%-2.5% of revenue). Health insurers may provide additional health services research funding that cannot be distinguished from the insurance industry as a whole, although these funds are small and unlikely to change the results for industry funding (Figure 7). International Medical Research Funding Global medical research expenditures by public and industry sources in the United States, Europe, Asia, Canada, and Australia combined increasedfrom$28.8billionin24to$265.billionin211, growing at 3.5% annually (Figure 8 and etable 6 in the Supplement). Although there may be medical research funding from other areas of the world (eg, South America), these data represent the most reliable and current sources of global medical research investment. Among the regions included in the analysis, the United States demonstrated the slowest annual growth in investment (1.5%/year), followed by Europe (4.1%/year) and Canada (4.5%/year). Asian countries increased from $28. billion in 24 to $52.4 billion in 211, 178 JAMA January 13, 215 Volume 313, Number 2 (Reprinted) jama.com Copyright 214 American Medical Association. All rights reserved. Downloaded From: on 1/15/215

6 The Anatomy of Medical Research Special Communication Clinical Review & Education or 9.4% per year, with especially large increases in, India, South Korea, and Singapore. These trends resulted in the restructuring of the share of total global investment (efigure 5 in the Supplement). As a percentage of global funding, the United States declined by approximately 13% from 24 to 212, and Asian economies increased by approximately the same share (13% in 24 to 2% in 211). Although absolute growth of Asian investment from 24 to 211 reached $24 billion, the United States remained the leading sponsor of global medical research in 211 (44% share), and Europe the next largest sponsor (33% share). Overall growth was slightly greater for industry outside the United States compared with public sources (4.3% vs 2.2%), and industry accounted for two-thirds of funds in 211. However, US contributions increased slowly from both public (.1%/year) and industry sources (1.7%/year). Public funding in the United States decreased to a 49% share of the world s public research investment by 211, down from 57% in 24 (Figure 8). United States industry, which accounted for nearly half of global industry medical research expenditures in 24, declined to 41% of global industry funding in 211 (Figure 8). demonstrated the greatest increase in the world s share of industry funding (+3.9%), and European countries gained the most in public investment (+3.5%). Despite decreases in the US share of investment, the United States remained the world s leading sponsor for both public and industry medical research funding in 211. Science and Technology Workforce From 1996 to 211, the US science and technology workforce increased by 2.7% annually to reach 1.25 million workers (Figure 9). Over the same period, s workforce increased 6% annually to reach 1.31 million workers, making it the largest national science and technology workforce in the world. Reliable information about the proportion of medical researchers could not, however, be obtained. Although led the world in the overall size of their science and technology workforce, it had only 1.9 science and technology workers per 1 full-time equivalents, the lowest among the countries included in the analysis (Figure 9). The United States employed 8.1 science and technology workers per 1 full-time equivalents in its total workforce, or the median for the 1 largest workforces in the world. The investment in capital terms and in labor terms differ widely across countries and regions. The United States contributes 44.2% of global medical research funding but comprises only 21.2% of the Figure 5. Compounds in Development for Top 1 Therapeutic Areas, 213 Therapeutic area a Anticancer, other b Anticancer, immunological Prophylactic vaccine, anti-infective Antidiabetic Analgesic Rare disease c Anti-inflammatory Recombinant vaccine Cognition enhancer No. of Compounds in Clinical Trials a Data for the number of compounds in development were from the Citeline Pharma R&D Annual Review Data for rare diseases were from the Pharmaceutical Research and Manufacturers of America. 11 a Number of compounds in clinical trials or under review by the US Food and Drug Administration. This includes a total of compounds in 213. b Includes all nonimmunological anticancer compounds. c Rare diseases were defined as those affecting 2 or fewer people in the United States. Figure 6. US Funding for Health Services Research by Source, Health Services Research Funding, $, in Billions a Funding source Health services industry c AHRQ NIH Other federal d Foundations e Overall Health Services Research Funding, $, in Millions (%) a (18) 1352 (27) 365 (1) 118 (2) 1158 (32) 1189 (24) 442 (12) 494 (1) 134 (28) 967 (19) Compound Annual Growth Rate, % b AHRQ indicates Agency for Healthcare Research and Quality; NIH, National Institutes of Health. Data were calculated according to methods outlined in etable 5 in the Supplement. a Adjusted to 212 dollars using the Biomedical Research and Development Price Index. 4 b Compound annual growth rate (CAGR) supposing that year A is x and year B is y,cagr=(y/x) {1/(B A)} 1. c Health services industry includes funding from hospitals, ambulatory health care services, nursing and residential facilities. Health insurance companies were not included. Data may not fully capture the entirety of funding for health services research and quality improvement initiatives for the US health care services industry. d Other federal funding includes the Centers for Disease Control and Prevention, Centers for Medicare & Medicaid Services, Veterans Health Administration, Health Resources and Services Administration, and Patient Centered Outcomes Research Institute (in 211 only). e Foundation funding includes total giving from the Robert Wood Johnson Foundation, California Endowment, Pew Charitable Trusts, W. K. Kellogg Foundation, and Commonwealth Fund. jama.com (Reprinted) JAMA January 13, 215 Volume 313, Number Copyright 214 American Medical Association. All rights reserved. Downloaded From: on 1/15/215

7 Clinical Review & Education Special Communication The Anatomy of Medical Research Figure 7. Research and Development Investment Ranking of Industrial Sectors Among US-Based Companies, 211 Total research and development funding a Share of revenue spent on research and development a Pharmaceuticals and biotechnology Computer and electronics manufacturing Software and paper publishing Automobiles and parts Medical devices Machinery Computer software and systems design Chemicals Aerospace and defense Plastics, minerals, and metal products Internet service provider and web search Food and beverage Mining, extraction, and support activities Data processing and hosting Banking, credit, and securities Telecommunications Physical, engineering, and life sciences Architectual engineering Health care services c Utilities Insurance carriers Transportation services.2 Median Domestic Foreign Research and Development Spending, $, in Billions b Pharmaceuticals and biotechnology Internet service provider and web search Software and paper publishing Physical, engineering, and life sciences Computer and electronics manufacturing Medical devices Aerospace and defense Computer software and systems design Data processing and hosting Machinery Automobiles and parts Chemicals Plastics, minerals, and metal products Mining, extraction, and support activities Architectual engineering Food and beverage Telecommunications Utilities Banking, credit, and securities Health care services c Transportation services Insurance carriers Research and Development Spending as % of Revenue Median Research and development expenditures for US-based companies performing research by the industrial sector were obtained from the National Science Foundation. 13 Data include research funds spent both domestically and abroad. Industry revenues were obtained from the National Science Foundation 13 or US Census Bureau 14 based on the availability of data. Revenues and research and development expenditures were matched by industry using North American Industry Classification System codes. a The pharmaceuticals and biotechnology, medical devices, and health care services industries are highlighted in red. b Adjusted to 212 dollars using the Biomedical Research and Development Price Index. 4 c Health care services industry includes US-based hospitals, ambulatory health care services, and nursing and residential facilities. global science and technology workforce (efigure 6 in the Supplement). Conversely, contributes only 1.8% of global funding for medicalresearchbutcomprises22.3% oftheglobalscienceandtechnology workforce. This difference in investment represents a natural experiment in productivity management and has broad implications for patents and intellectual property ownership, which will evolve over the next few years. Outputs of Medical Research Life Science Patent Filings filed 3% of global life science patent applications in 211, increasing from 1% of global applications in 1991 (Figure 1). This includes applications from a number of patenting offices throughout the world, including offices in, the United States, and the European Union. The United States followed with 24% of patent filings globally, increasing from an 11% share in United States inventors led in the number of life science patent filings in both the United States and EU, where accounted for less than 2% of filings in both regions (Figure 11 and efigure 7 in the Supplement). The proportion of US inventors filing patents in the United States decreased from 57% to 51% from 1981 to 211. During the same period, the share of highly valuable patents filed by US inventors decreased between from 73% to 59% (Figure 12), while all other countries in the analysis increased their share of highly valuable patents. Similar trends were observed for highly valuable patents filed through the European Patent Office (efigure 8 in the Supplement). Highly valuable patents are defined by the frequency they are cited by other inventors in subsequent patent applications (Figure 12, footnote b) Publications The United States led the world with 33% of published biomedical research articles in 29 (Figure 13A). In the United States, the number of biomedical research articles increased at.6% per year from 2 to 29. During the same period, the number of articles published in increased by 18.7% annually. The United States also leads the world in its share of the most highly cited biomedical research articles, with 63% of the top cited 18 JAMA January 13, 215 Volume 313, Number 2 (Reprinted) jama.com Copyright 214 American Medical Association. All rights reserved. Downloaded From: on 1/15/215

8 The Anatomy of Medical Research Special Communication Clinical Review & Education Figure 8. Global Medical Research Funding in Select Countries/Regions, 211 Medical Research Funding, in Billions a Medical research funding, $, in billions (%) a Overall Public b Industry c Compound annual growth rate, % (24-211) d Global e United States 265. (1) (44) 12.8 (1) 5.5 (49) (1) 66.6 (41) Europe 88.6 (33) 26.9 (26) 61.6 (38) (14) 17. (17) 2.8 (13) (1.2) 1.3 (2) 3.6 (.8) 16.9 Other Asia f 9.7 (4) 2.4 (2) 7.3 (4) 2.8 Public b Industry c Canada 3.1 (1.2) 1.8 (2) 1.3 (.8) 4.5 Australia 3.8 (1.4) 2.8 (3) 1. (.6) 9.3 The regions/countries/economies in the analysis include the major countries of North America (United States, Canada), Europe (including the 1 largest European countries in the Organisation for Economic Co-operation and Development), and Asia-Oceania (Australia,, India,, Singapore, and South Korea). Data for African and South American countries and Russia were not available. Data were calculated according to methods outlined in etable 6 in the Supplement. a Data were converted to US currency using an average annual exchange rate for the respective year 15 and adjusted to 212 dollars using the Biomedical Research and Development Price Index. 4 b Public research and development funding included that from government agencies, higher educational institutes, and not-for-profit organizations. c Industry research and development funding included pharmaceutical, biotechnology, and medical device firms. d Compound annual growth rate (CAGR) supposing that year A is x and year B is y,cagr=(y/x) {1/(B A)} 1. e Global total for medical research funding includes research and development expenditures from 36 major world countries across 4 continents. f Other Asia includes India, Singapore, and South Korea. articles in 2 and 56% in 21; however, the growth of highly citedliteraturepublishedbytheunitedstatestrailsothermajorcountries, regions, and economies (Figure 13B). After controlling for the share of the world s biomedical research articles using a citation index, the United States declined from 2 to 21 at.2% per year as the rest of the world increased by approximately 1% per year. New Drugs and Devices Since 23, drug approvals by the US Food and Drug Administration (FDA) have remained unchanged with an average of 26 approvals per year. Although drug approvals increased slightly in 211 and 212, theyreturnedclosertoaveragein213with27approvals(efigure 9 in the Supplement). United States device approvals have also remained relatively constant over the last decade. While the number of approvals steadily increased from 15 approvals in 29 to 39 approvals in 212, only 22 new devices were approved in 213. During the same period, the European Medicines Agency (EMA) averaged a higher number of both applications (55/year) and approvals (42/year) than the FDA (efigure 9). In 213, the EMA received 22 more applications and approved 16 more drugs than the FDA. Life Sciences Market Performance Equity (stock) markets reflect broad public perception of one industry s value in comparison with others. Since 23, market return for the entire health care industry (including medical device, pharmaceutical, and biotechnology companies as well as hospitals, nursing homes, and other health service suppliers) as measured by the Dow Jones US Health Care Index increased 8.2% annually, closely trailing the Standard & Poor s 5 (8.3%) (Figure 14). Market returns for biotechnology and health insurance companies outperformed the market, growing at 18.5% and 13.8% per year, respectively. Medical device companies, pharmaceutical companies, and hospital chains underperformed compared with the Standard & Poor s 5, increasing annually at 7.3%, 6.8%, and 5.8%, respectively. The financial crisis of 28 led to a decrease in market performance for all life sciences industries. Generally, all sectors recovered in the years following, and biotechnology companies, hospital chains, andhealthinsurancecompaniesperformedexceptionallywell since their decline in Discussion and Implications Medical research in the United States remains the primary source of new discoveries, drugs, devices, and clinical procedures for the world, although the US lead in these categories is declining. For example, whereas the United States funded 57% of medical research in 24, in 211 that had declined to 44%. Basic research and product development are central to the health of countries economies. However, changes in the pattern of investment, particularly level funding by US government and foundation sponsors, with a de- jama.com (Reprinted) JAMA January 13, 215 Volume 313, Number Copyright 214 American Medical Association. All rights reserved. Downloaded From: on 1/15/215

9 Clinical Review & Education Special Communication The Anatomy of Medical Research Figure 9. Top 1 Countries by Size of Science and Technology Workforce, A Work force size a Full-time Equivalents, in Thousands c United States Russian Federation Germany United Kingdom Korea France Canada Spain Compound annual growth rate, % ( ) b B Work force size per 1 total employment 12 No. per 1 Total Employment Korea France Canada United States Germany United Kingdom Russian Federation Spain c Compound annual growth rate, % ( ) b The sizes of national science and technology workforces were obtained from the Organisation for Economic Co-operation and Development. 16 a Workforce size was measured in number of full-time equivalents and includes all science and technology sectors (eg, engineering, physical sciences) in addition to the medical and health sciences. b Compound annual growth rate (CAGR) supposing that year A is x and year B is y,cagr=(y/x) {1/(B A)} 1. c Annual growth in s science and technology workforce may be underestimated because of a change in reporting methods for in 29. cline in real terms, combined with companies focus on late-stage products (with diminished discovery-level investment) indicate that difficulties may soon appear in the ability of clinicians to fully realize the value of past investments in basic biology. In addition, the limited support of ambitious but scientifically rigorous methods to improve delivery of health services represents a major missed opportunity to improve many aspects of health, especially as the burden of chronic illness, aging populations, and the need for more effective ways to deliver care are appreciated. 1 Over the past 2 decades, the period of this analysis, medical researchhasbecomeglobal. Ithasbeentransformedby multiple, complex and subtle transitions, from small laboratories to large, industrial-scale institutes, from hypothesis-driven inquiries to datadriven compilations, from experiments by single individuals to those requiring large teams, and from finding causes of specific diseases to learning how entire systems become disordered. 21 The information assembled demonstrates that 3 factors, wavering financial support for science, underinvestment in service innovation, and globalization, pose the chief challenges of the current era. Biomedical Research New knowledge about disease has a 15- to 25-year gestation from basic discovery to clinical application, an interval that may be lengthening. 22,23 Hence, the cumulative investment in biomedical research of the past 3 decades will soon mature. Therefore, ensuring sufficient support for its clinical development is a pressing need. Equally important are stable academic institutions and companies along with skilled researchers that have the capability to organize the research process and to sustain the innovation cycle, 24 particularly since the size of research teams and scale of activities have grown. to year variability in funding is a threat to that stability. 182 JAMA January 13, 215 Volume 313, Number 2 (Reprinted) jama.com Copyright 214 American Medical Association. All rights reserved. Downloaded From: on 1/15/215

10 The Anatomy of Medical Research Special Communication Clinical Review & Education Figure 1. Global Life Science Patent Applications by Country of Origin, No No. of patent family applications Percentage distribution by country in life science a Other Germany b Russia Taiwan India Australia Canada Korea United States Percentage Other Germany b Russia Taiwan India Australia Canada Korea United States The number of patent family applications by country filed was calculated based on data obtained from Thomson Innovation. 17 Only the most recent patent application in a patent family was counted for this analysis. Data are included for all countries available in the Thomson data set. a Life science was defined to include the following categories: analysis of biological materials, medical technology, organic fine chemistry, biotechnology, pharmaceuticals, macromolecular chemistry and polymers, and microstructural and nanotechnology. b Only patent grants, not all patent applications, are counted for, which tends toward patent applications with narrower definitions and therefore much greater numbers relative to the number of patents ultimately granted. Figure 11. US Life Science Patent Applications by Country of Origin, No. No. of patent application families in life science by country of inventor a Other Netherlands Taiwan Switzerland Korea Great Britain France Germany United States Percentage Percentage distribution by country of inventor Other Netherlands Taiwan Switzerland Korea Great Britain France Germany United States The number of patent application families by country was calculated counting the most recent application in family of patents based on data obtained from Thomson Innovation. 17 Data are included for all countries available in the Thomson data set. a Life science was defined to include the following categories: analysis of biological materials, medical technology, organic fine chemistry, biotechnology, pharmaceuticals, macromolecular chemistry and polymers, and microstructural and nanotechnology. Although the biomedical research enterprise is basically healthy, to fully capture the clinical value of past investment in science and its promise for the future, 2 areas require particular attention: (1) increased financial support for critical early studies that validate basic biological discoveries and demonstrate their relevance to disease (establishing proof of concept) and (2) greater productivity, especially acceleration of the application of new findings to disease. Financing That Can Sustain Long-term Investment In the United States and Europe, private companies will not likely have the latitude from their investors, or governments the political will, to continue to make long-term investments at historical levels. Today s political and commercial environment leads to this conclusion. Many new basic discoveries that have probable clinical value are stymied by financial constraints at the critical proof-of-concept stage, where utility in humans is demonstrated. That number can be expected to increase once platform technologies (such as highresolution mapping of the central nervous system, analysis of complex biological systems and networks, or insights into development of cell maturation and differentiation) show potential clinical value. This is an unfortunate paradox because many of the diseases associated with substantial morbidity and mortality may benefit the most from these new discoveries. Various new sources for long-term investments have been proposed. Most often, public funds have been sought, by expansion of the NIH budget, appropriations by state legislatures, or earmarked federal appropriations for threatened epidemics or defenserelated biological risks. Most advocates look to government for support of high-risk, early-stage research, given private companies focus on development of new technologies at their later stage. Private foundations and public charities, though small, play an essential role in filling that gap, especially for the most speculative undertakings or where commercial incentives are insufficient. However, it is unlikely that these conventional sources of research investment will be sufficient to meet the challenges of an aging population, the aggregate burden of disease, or the promise of emerging science. The reduced funding of large pharmaceutical and biotechnology companies on early, basic, discovery-stage research (with concomitant growth of late-stage clinical trials) is apparent from our jama.com (Reprinted) JAMA January 13, 215 Volume 313, Number Copyright 214 American Medical Association. All rights reserved. Downloaded From: on 1/15/215

11 Clinical Review & Education Special Communication The Anatomy of Medical Research Figure 12. Highly Valuable US Life Science Patents by Country of Origin, No. No. of life science patent applications Percentage distribution of top 1% in top 1% of patents by inventor country a,b of patents by country of inventor b 8 1 Other Netherlands Korea Canada Switzerland France Great Britain Germany United States Percentage Other Netherlands Korea Canada Switzerland France Great Britain Germany United States The number of patent application families by country was calculated counting the most recent application in family of patents based on data obtained from Thomson Innovation. 17 Data are included for all countries available in the Thomson data set. a Life science was defined to include the following categories: analysis of biological materials, medical technology, organic fine chemistry, biotechnology, pharmaceuticals, macromolecular chemistry and polymers, and microstructural and nanotechnology. b Top 1% of patents ranked by year using BCG Quality Index. The BCG Quality Index is made up of 3 components; specifically, forward citations of a patent in newer patents adjusted for the patent s age, the number of patent claims, and the strength of a patent s backward citations. The components and corresponding weights used by the quality index are a product of proprietary Boston Consultng Group research. Figure 13. Medical Research Articles and Citations by Selected Countries/Regions, 2-21 A No. of medical research articles No. B No. of highly cited medical research articles No. Other b Other Asia c European Union d United States Overall Other b Other Asia c European Union d United States Overall No. of Medical Research Articles No. of Highly Cited Medical Research Articles Citation Index of Highly Cited Articles NA NA Annual Growth Rate, % a Compound Annual Growth Rate (Citation Index), % a NA NA indicates not available. Medical research was defined as the life sciences and psychology, excluding agricultural science. Article counts reported by the National Science Foundation were from the Thomas Reuters Science Citation Index and Social Science Citation Index, 18 classified by year of publication and assigned to countries on the basis of institutional addresses listed on each article. Articles were counted on a fractional basis; ie, for articles with collaborating institutions from multiple countries, each country received fractional credit on the basis of proportion of its participating institutions. Citations were based on a 3-year period with 2-year lag; eg, citations for 2 are references made in articles in 2 to articles published in The citation index of highly cited articles was defined as the share of the world s top 1% cited biomedical research articles divided by the share of the world s biomedical research articles in the cited year window. a Compound annual growth rate (CAGR) supposing that year A is x and year B is y,cagr=(y/x) {1/(B A)} 1. b Other includes the remaining 159 nations of the world within the original database. c Other Asia includes India, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan, and Thailand. d The European Union includes 27 European nations. 184 JAMA January 13, 215 Volume 313, Number 2 (Reprinted) jama.com Copyright 214 American Medical Association. All rights reserved. Downloaded From: on 1/15/215

12 The Anatomy of Medical Research Special Communication Clinical Review & Education Figure 14. Market Performance of Publicly Traded Life Sciences and Health Care Companies, Value of $1 Invested January 23, $ NYSE Arca Biotechnology Index Health insurance Standard & Poor 5 index Dow Jones US health care index Dow Jones US medical equipment index NYSE Arca Pharmaceutical Index Hospital chains NYSE indicates New York Stock Exchange. Data on market performance was accessed from Bloomberg market data. Market performance was calculated as the return on investment of US $1 on January 3, 23, at various future time points. More detail regarding the indexes can be found at Standard & Poor s Dow Jones and New York Stock Exchange sector classifications. 19,2 analysis. This trend will likely continue. A combination of the limited recent record of industry research and development and the unpredictability of outcomes and length of time required to observe results produces uncertain returns on investment, which are not tolerated in an economy that values short-term performance disproportionally. Therefore, altogether new funding sources are required. As we and others have proposed previously, 25,26 a variety of new financing vehicles are feasible and attractive. These might include Foreigncapitalrepatriation, withnewtaxprovisionsthatallowcompanies to return funds held outside the United States if used for research. 27 Because of the size of these holdings, a yearly increment of 25% to 5% of total research funding is feasible over the next decade. Biomedical research bonds, analogous to those used to finance sports stadiums and airports, could be issued by federal, state, or local governments, with amortization from patent royalties or converted to equity in new companies created. Historically, bonds have funded infrastructure investments but are now being adapted for environmental and green projects, which have economics that resemble medical research. 28 Research innovation trusts could be formed to allow private and public entities to join forces for innovation in high-priority diseases or those of high public health importance, in return for tax credits (not deductions), as have been used previously to preserve land, create parks, and build factories. These new trusts can be structured to permit investments by public and company pension funds or individual retirement programs, which are currently precluded from most early-stage, speculative investments. Australia, Canada, and the United Kingdom have used such research and development trusts effectively. Tax checkoffs, whereby individuals can specify a portion of their tax payment to be diverted to research, as is currently the practice for public funding of elections. A few states (eg, California, Maryland, New York, and Oregon) have made science a priority using tax checkoffs. Each of these financial innovations could be invoked without direct federal or state funding. They potentially can mobilize new private sources of funds without requiring tax increases or direct public appropriations. Productivity New science and technology have been slow to address the morbidity and cost of chronic diseases and the growing number of elderly persons. Consequently, some have suggested that changing patient behavior and education (for adherence and lifestyle modification), not technology, should become the priority. 29 Others focus on changing the NIH mission to emphasize prevention and clinical evaluation rather than basic scientific discovery, or altering incentives of industry to encourage their investment in highprevalence, high-cost conditions rather than lucrative niches such as cancer and orphan diseases. 8,9,12 Some observers have even suggested that expectations for science and technology be reduced, given the long cycle time from discovery to clinical application. 3 Declining productivity is at the root of many of these dissatisfactions. Therefore, greater attention is required to introduce methods that enhance the pace of research with few additional costs. Improve the scientific process. As our analysis confirms, research is costly, capital intensive, and, above all, collaborative. Moreover, researchers depend on one another for a source of new ideas, aswellasaccesstomaterial, reagents, clinicalinformation, samples, andultimatelypatientswhoarewillingtoparticipateinclinicaltrials. Therefore, recent efforts have been aimed at facilitating those critical interactions. An example is the Accelerating Medicines Partnership 31 (between companies and the NIH), which identified common diseases for which few effective therapies exist but science is especially promising. Four conditions meeting those criteria were selected: Alzheimer disease, type 2 diabetes, rheumatoid arthritis, and systemic lupus erythematosus. In each, specific biologicalquestionswereidentifiedthatcanbestbeansweredusing resources from industry, the NIH, and academic investigators combined, who would otherwise be limited if working on their own. Enhance benefits of large-scale, industrialized biology and smallscale investigators laboratories. The past 2 decades investment in large projects, such as sequencing the human genome and its successors for proteins, the microbiome, or the nervous system connectome, is unlikely to realize its full value without interpretation and application by skilled individual scientists. Many astute observers suggest that the desirable balance has not yet been struck betweenindustrial-scaleandindividual-inspiredlaboratories. 21 Specifically, further experimentation with new organizational models jama.com (Reprinted) JAMA January 13, 215 Volume 313, Number Copyright 214 American Medical Association. All rights reserved. Downloaded From: on 1/15/215

13 Clinical Review & Education Special Communication The Anatomy of Medical Research should be aimed at obviating current limitations of the existing balkanized corporate, venture capital, NIH, and university practices. ExamplesofnewmodelsaretheBroadInstituteinCambridge, Massachusetts (genomics), BioDesign Institute at Arizona State University, Tempe (biomedical engineering), and Allen Institute for Brain Sciences, Seattle, Washington (neurological and psychiatric disease). Each of these seeks to optimize individual and institutional contributions while ensuring funding. Each orchestrates external relationships. Underinvestment in Improving Delivery of Health Services Investment in new ways to deliver better, more effective, and less expensive medical care has neither economic impetus nor professional recognition compared with technological innovation or basic discovery. Funding for health services research has increased 37% from $3.7 billion to $5. billion over the last decade (Figure 6). However, thisgrowthhasoccurredonaverysmallbase. Totalfundingforhealth services research is.3% of total health care funding (efigure 1 in the Supplement) compared with 4% toward new drugs and devices. That is, the United States spends $116 billion on research aimed at 13% of total health care costs but only $5. billion aimed at the remaining 87% of costs. 1 Why the disparity in investment? One major difference is that new drugs and devices command favorable prices, and their value accrues directly to the firm that invests in them. In contrast, service innovations can reduce morbidity and mortality while also reducing cost, but financial returns to innovators may be negligible or even negative. For example, as shown by Arriaga et al 32 and Pronovost and Wachter, 33 procedure checklists and other simple precautions are effective but may result in lower payments to hospitals. 34 This mismatch between who invests (the hospital) and who is rewarded (the insurer) is a fundamental barrier, even though clinical benefitisenormousandtotalsavingsmayexceedthereturnonmany categories of blockbuster drugs. 35 Three other factors pose barriers: Behaviorchange. Disruptionofthecurrentpatternsofcareisthreatening to physicians and hospitals, even when shown to produce comparable or better clinical outcomes, higher patient satisfaction, and lower cost than traditional care. 36 Examples include telemedicine, daily monitoring, and intensive in-home services. Data quality. Claims databases, electronic medical records, and other sources of clinical information are not yet sufficiently reliable to inform research. Recent initiatives are aimed at linking separate sources of data and introducing standards to support research and are a specific goal of international measurement collaborations for chronic illnesses (eg, the International Consortium for Health Outcomes Measurement), 38 and alliances among insurers, hospitals, and clinicians for the most severely ill patients (eg, Wellpoint/Emory Health). 39 Communications. Clinical service innovation is more difficult than the introduction of a new drug or procedure because it requires manyindividualstoadjustthewaytheyinteract, communicate, and use information. Moreover, to have any effect, culture change must occur throughout large, hierarchical organizations. Cultural barriers are potent reasons why small-scale demonstration projects are rarely generalized, even when they are initially effective. 4 Therefore, research should focus on devising reliable, effective interventions that sustain better practices, with lessons adopted from other complex organizations (eg, military or transportation). Neither the organizations nor finances exist to innovate on the scale required. Small, incremental federal or foundation grants are an ineffective spur of sustained change in clinical practice because behavioral and cultural issues remain unaddressed. It is unlikely that recent federal and state risk sharing (accountable care organizations) or other incentives will prove to be adequate for the same reason. Therefore, more fundamental changes are needed. In particular, 3 changes should be considered. Additional investment by insurers and health systems in delivery innovation to bring them to the median of other service industries. This increment could produce an annual influx of $8 billion to $15 billion, potentially quadrupling the level of effort overall, and can be funded from administrative simplification and savings. Sharply increasing federal support of service sector innovation, which can be channeled through the Centers for Disease Control and Prevention, Public Health Service, AHRQ, Centers for Medicare & Medicaid (CMS), Patient-Centered Outcomes Research Institute, and NIH. Funds might be generated by allocating 5% all savings generated over the next decade by CMS demonstration projects and by creating new regional private hospital physician insurer innovation consortia to undertake wholesale change in delivery. Encouragement of new entrants who are prepared to make basic, highly disruptive changes in service delivery (via tax credits and other incentives that are comparable with those now available for investment in plant and equipment). Examples now on the horizon include provision by pharmacies of chronic disease care (for hypertension and depression) and use of simple self-monitoring technologies linked by a ubiquitous internet-of-things to automated artificial intelligence agents for asthma and diabetes control. Such examples are threatening to many physicians and hospitals but have the potential to lower costs and improve quality. 41 The Challenge of Globalization Biomedical science and improved health are tied closely to growth of a country s general economy. 42 The primacy of the United States as the source of biomedical technology (and until recently, longevity) has corresponded with a 4-decade-long improvement in real personal incomes. In turn, investment in science and technology has been a potent force producing higher personal incomes and total GDP, withthelongerlifeexpectancythatwasachievedbetween197 and199estimatedtohaveaddedabout35%tousgdpby2. 43 Some have suggested that a domestic, US-centric perspective is antiquated and parochial in an era of globalization because people, ideas, capital, and information are highly mobile. 44 The United States has been the world s leader for 6 decades in investment in science and technology research and development. In 212, the United States spent $366 billion on all research and development, or 2.8% of GDP. 45 However, the United States declined from sixth in 2 to 1th in 212 in its proportion of research and development investment compared with the 34-country Organisation for Economic Co-operation and Development. In Asia, South Korea and now each spend about 2% of GDP, with expected to surpass the United States in absolute funding within a decade. 45 This trend, along with aggressive patent practices by some countries (notably) ordisregardofintellectualpropertyrights(inafrica, Cen- 186 JAMA January 13, 215 Volume 313, Number 2 (Reprinted) jama.com Copyright 214 American Medical Association. All rights reserved. Downloaded From: on 1/15/215

14 The Anatomy of Medical Research Special Communication Clinical Review & Education tral Europe, and India), raise barriers to the diffusion of clinical innovations between countries. Two areas are of particular concern: erosion of the public s support for science in the United States and hesitancy to reform the patent system. Public Opinion Recent polls show erosion of public support for biomedical research compared with other priorities. Support has declined steadily since 2 and is now well behind concerns about the economy, domestic security, immigration, crime, and the US role in international affairs. 46,47 The trend is not confined to the United States but is also evident in Europe. Despite the demonstrable successes of earlier decades, the primacy of science as the source of improved health is today questioned because of the convergence of several forces. First, despite bold promises, advances visible to the public have been less frequent because solutions to many conditions like autism, Alzheimer disease, and most cancers remain elusive, with neither effective prevention nor treatment, despite intensive research. Second, drug discovery has proven more difficult and less predictable than many had expected, with a decline over the past 2 decades in altogether new classes of drugs, new registrations, and drugs in clinical trials. Third, the economics of medical advances are being scrutinized as a source of added insurance cost, with growing pressure to justify clinical value using objective criteria, formal tools of technology assessment, and consideration of quality-oflife measures separately from those that affect mortality. Some technology skeptics have even urged that the United States take a technology holiday for a decade, suggesting that the money saved be spent on ensuring that everyone receives existing preventive and therapeutic means, even if this slows scientific discovery. 48 Such tensions are perhaps inevitable, given the high cost and poor performance of US health care as judged by international mortality comparisons. Skepticism of medical research is evident in recent US budget discussions, which have favored the physical sciences as faster, reliable, and more predictable routes to US competitiveness than the uncertainties of medicine. Also, medical devices and new manufacturing practices for large-molecule biopharmaceuticals are heavily driven by engineering advances, which in turn depend more on the physical sciences and less on the biological sciences. These trends imply that pressure will mount to divert resources away from challenging but high-potential avenues in biology. Patents and Intellectual Property As this analysis demonstrates, at the same time support for biomedical research in the United States has wavered, global interest in biomedical research is increasing. 49 Asia and Europe are now on par with the United States in the relative number of researchers, and Asia, especially, is making rapid gains in life science patents and highly cited publications. Although the United States is far from losing its preeminent role in biomedical research, similar historical changes have occurred in other industries (eg, electronics, automobiles, industrial manufacturing) that over time reshaped the country s competitiveness. Many in the United States applaud the new interest in other countries as a reflection of the truly international reach of science, since discoveries made anywhere can be applied here. This optimistic view neglects the strong barriers created by intellectual property practices, which reward patenting any discovery or technique, no matter how incremental or trivial. Apatent sprimarypurposeistofosterinnovationbymakingnew knowledge generally available in order that successors may improveontheoriginalinvention. Inreturn, theinventorreceivesatemporary monopoly. Recently, however, patents have been used to capturefinancialvalueofadiscoveryorproductattheexpenseoffurther invention, a practice known as rent-seeking. Current intellectual property practices inhibit rather than enhance biological discovery and clinical innovation. 5 Several factors bear on the global pattern we observed in this analysis: patents on basic discoveries before utility is demonstrated (such as of cancer-related genes), tying surgical procedures (such as deep brain stimulation) to specific patented devices, abuse of the litigation process by patent aggregators (known formallyas nonperformingentities orpejorativelyas patenttrolls ), and the high cost of patent filing and defense in multiple countries. Universities and investigators alike see that patenting early-stage discoveries rarely results in financial returns because costs exceed royalty revenue, except for occasional, high-value findings, which are serendipitous and economically unpredictable. Three changes can align intellectual property protections with incentives for substantive, clinically important advances and would be accomplished by changes to current federal law. 51,52 Defer patents to later in the discovery chain, awarding to the entity demonstrating clinical utility as well as the inventor. Because costs are greatest and risks highest to those who finance and conduct later-stage clinical development, those risks should be reflected in intellectual property protections. Ensure that patents are granted only for truly novel, not just incremental, technologies, with clinical procedures remaining in the public domain. Establish patent pools, which allow innovators to share value and cost to encourage free exchange of information and set technology standards. Patent pools have operated successfully since the 19th century and are today common in semiconductors, aerospace, and entertainment. 51,53 Taken together, these changes could foster fundamental, not incremental, innovation and could facilitate more effective collaborations. They are also prerequisites for generating new sources of investment. Conclusions The information assembled in this article does not do justice to the breadth and depth of medical research in the United States and other countries. For any current or future patient, research provides hope. For the researcher, unanswered biological and clinical questions are endlessly fascinating. For a company or its investors, new products and services promise financial return, often at levels greater than other industries. For the policy maker, biomedical research is a route to national competitiveness as well as to enhanced public health and economic vitality. Our perspective for this examination has been primarily economic, although the value of research surely is not solely economic. Therefore, in our view, biomedical science and technology must be seen in a broader context, with its myriad roles recog- jama.com (Reprinted) JAMA January 13, 215 Volume 313, Number Copyright 214 American Medical Association. All rights reserved. Downloaded From: on 1/15/215

15 Clinical Review & Education Special Communication The Anatomy of Medical Research nized: as a source of competitiveness on the international stage; as a vehicle to satisfy curiosity; as a means to provide realistic hope to patients and families who must confront grave conditions. None of those roles will necessarily be reflected in reduced health care costs. Therefore, a new calculus is required to weigh them as decisions of cost and value are made. Clearly, the pace of scientific discovery and need for service improvement have outstripped the capacity of current financial and organizational models to support the opportunities afforded. The analysis underscores the need for the United States to find new sources to support medical research, if the clinical value of its past science investment and opportunities to improve care are to be fully realized. Substantial new private resources are feasible, though public funding can play a greater role. Both will require nontraditional approaches if they are to be politically and economically realistic. Given global trends, the United States will relinquish its historical innovation lead in the next decade unless such measures are undertaken. ARTICLE INFORMATION Author Contributions: Dr Moses had full access to all of the data in the study and takes responsibility for the integrity of the data and the accuracy of the data analysis. Dr George and Mr Palisch contributed equally. Study concept and design: Moses, Matheson, Cairns-Smith, Dorsey. Acquisition, analysis, or interpretation of data: All authors. Drafting of the manuscript: Moses, Matheson, Cairns-Smith, George, Palisch. Critical revision of the manuscript for important intellectual content: All authors. Statistical analysis: Moses, George, Palisch. Administrative, technical, or material support: Moses, Matheson, Cairns-Smith, Dorsey. Study supervision: Moses, Matheson, Cairns-Smith, Dorsey. Conflict of Interest Disclosures: All authors have completed and submitted the ICMJE Form for Disclosure of Potential Conflicts of Interest. Dr Moses reports membership in a variety of foundation and company boards in health care and financial services. Dr Moses, Messrs Matheson and Palisch, and Dr Cairns-Smith report providing management consulting services to hospital systems, insurers, foundations, and pharmaceutical, device, and IT companies. Dr Dorsey reports consultancy for Amgen, Avid Radiopharmaceuticals, Clintrex, Lundbeck, Medtronic, the National Institute of Neurological Disorders and Stroke, and Transparency Life Sciences; a filed patent related to telemedicine and neurology; and stock/stock options in Grand Rounds (a second opinion service). No other disclosures were reported. REFERENCES 1. Moses H III, Matheson DHM, Dorsey ER, George BP, Sadoff D, Yoshimura S. The anatomy of health care in the United States.JAMA. 213;31(18): Moses H III, Dorsey ER, Matheson DH, Thier SO. 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