The Anatomy Of Medical Research

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Copyright 2014 American Medical Association. All rig hts reserved.

The Anatomy ofMedical Research

US and International Comparisons

Hamilton Moses III, MD; DavidH. M. Matheson, JD,MBA; SarahCairns-Smith, PhD;BenjaminP. George, MD,MPH;

ChasePalisch,MPhil; E. RayDorsey, MD, MBA

IMPORTANCE Medical research is a prerequisiteof clinical advances, while healthservice

research supports improved delivery, access, and cost. Few previous analyses have compared

the United States with other developed countries.

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 2012 were compiled showing trends

in US and international research funding, productivity, and disease burden by source and

industry type. Patents and publications (1981-2011) were evaluated using citationrates and

impact factors.

FINDINGS (1)Reduced science investment: Total US funding increased6% per year

(1994-2004),but rate of growthdeclined to 0.8% per year (2004-2012), reaching $117 billion

(4.5%) of totalhealth care expenditures. Private sources increasedfrom 46% (1994)to 58%

(2012). 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 $5.0 billion (0.3%of total healthcare expenditures) or only 1/20thof

science funding. Private insurers ranked last(0.04% of revenue) and health systems 19th

(0.1% of revenue) among 22 industries in their investment in innovation. An incrementof

$8 billion to $15billion yearly would occur if service firms were to reach medianresearch

and development funding. (3) Globalization: US government research funding declined from57%(2004) to 50%(2012) of theglobal total,as did that of US companies (50% to 41%),

with thetotal US (public plus private)share of globalresearchfunding decliningfrom 57%to

44%. Asia, particularly China, tripled investment from $2.6 billion (2004) to $9.7 billion

(2012)preferentiallyfor educationand personnel. The US share of life science patents

declined from 57%(1981) to 51%(2011),as didthoseconsidered most valuable, from 73%

(1981)to 59%(2011).

CONCLUSIONS AND RELEVANCE New investment is required if the clinical valueof past

scientific discoveriesand 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 internationaltrends, the United

Stateswill relinquish itshistoricalinternational lead in thenext decade unlesssuch measures

are undertaken.

JAMA. 2015;313(2):174-189. doi:10.1001/jama.2014.15939

Editorials pages 143and 145

Supplementalcontent at

jama.com

Author Affiliations: TheAlerion

Instituteand Alerion Advisors LLC,

North Garden, Virginia (Moses);

Johns Hopkins School of Medicine,

Baltimore,Maryland(Moses);BostonConsultingGroup, Boston,

Massachusetts (Matheson, Cairns-

Smith, Palisch); Universityof

Rochester School of Medicine,

Rochester,New York (George,

Dorsey); StanfordUniversity School

of Medicine,Stanford, California

(Palisch).

Corresponding Author: Hamilton

Moses III, MD, Alerion,PO Box 150,

North Garden, VA22959

([email protected]).

Clinical Review& Education

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Thepromiseofnewdrugs,vaccines,medicalprocedures,and

devices captures the imaginations of the public, scien-

tists, and physicians alike. Forthe lastcentury, medical re-

search,includingpublichealthadvances,hasbeentheprimarysource

ofandanessentialcontributortoimprovementinthehealthandlon-

gevity of individuals and populations in developed countries. The

United States has historically been where research has found the

greatest supportand hasgenerated more than half theworldsfund-ing for many decades. Although US-based companies, founda-

tions, and public agencies have sponsored most research, that re-

search is conducted by an array of autonomous university

laboratories,studygroups,and coalitionsof researchers. Thisorga-

nization contrasts with that found in most other countries, where

government laboratories are predominant and where health sys-

tems and insurers conduct and finance service innovations di-

rectly.

Expectations for medical research vary sharply, depending on

theobserversperspective.For a patient affected by disease, it is a

source of hope. For a parent of a child with a serious condition, it

evokes bothexpectationand frustration overthe paceof progress.

Wherea physicianmayseeka routeto bettercare, aneconomistsees

an engine of growth and a politician sees high-skill jobs and im-

proved national competitiveness. Hospital executives expect re-

search tospawn new services, whereas pharmaceutical CEOsmust

havenewproducts.Aninsuranceexecutivedoubtsinstinctivelythat

the value of research will outweigh its incremental cost. A regula-

toraims for the appropriate amountof risk while still getting inno-

vations that matter to the market. For philanthropists and public

health campaigners,researchrepresents thebest hopefor alleviat-

ing the worlds most immediate health-related problems. To a sci-

entist, research deepens critical knowledge and the way intelli-

gence and organized effort can improve health. All of these

constituentsplay a rolein howresearchis funded andbroughtfrom

bench to bedside. Meeting their collective needs produces a com-

plex setof hurdles.ThisSpecialCommunication examinesdevelopmentsover the

past 2 decades in the pattern of who conducts and who supports

medicalresearch,as wellas resulting patents, publications, andnew

drug and device approvals. We place the United States in an inter-

national context to understand the key forces of change and sug-

gest remedies for the various stakeholders to explore as they seek

greater benefit for their investment.

Key Questions

We address 3 major trends:

1. Diminishedfunding inthe UnitedStates from both publicand pri-vate sponsors at a time when scientific opportunity has never

been greater but whensupport for sustained, long-terminvest-

ments is limited and short-term performance is rewarded dis-

proportionately

2. Establishingstrongincentivesfor investment inhealthservice and

delivery innovations andbetter ways to deliver care

3. The implications of globalization

Betterunderstandingofthesefactorsisrequiredifthefullprom-

iseof the cumulative investment in biomedical science andoppor-

tunityfor improvedservices are to be realized.

Information in 8 areas has been assembled to inform the dis-

cussion(Figure 1). Twoareas involve thecurrentand historicalland-

scapein the United States of investment andemployment in medi-

cal research, placing the United States in an international context.

Two areas examine funding on biomedical and health services re-

search separately. Four areasquantify the value of thatinvestment

as judged by resulting patents, publications, drug and device ap-

provals, and public market performance of life science and health

service companies.

Methods

To describeand document thecurrent anatomyand historicaltrends

ofmedical research, weassembledan arrayof informationfromvari-

ous datasources.We relied on publicly available data, recalculated

those data for display when necessary, reconciled inconsistentsources, and included years for which data are complete (in gen-

eral,from1994to2012).TheBox containsa list ofthe includedand

supplementary figures and tables.

Methods were similar to those we have used previously.1-3Ad-

ditionally, in this study, the 40 largest developed nations were ex-

Figure 1. TheAnatomyof Medical Research:US and International Comparisons

Medical Research ActivitiesMedical Research Funding

Sources of funding

Government, industry,

foundations, charities,

and universities Historical trends

International comparisons

Biomedical research

Historical funding trends

Funding by phase of

research

Funding by therapeutic area

Workforce size

Historical trends

International comparisons

Science and TechnologyWorkforce

Health services research

Historical funding trends

Industrial sector comparisons Market performance

Health care sector

performance compared

with market average

New drugs and devices

New drug and device

approvals by FDA and EMA

Patents

International comparison

of patenting activity

Publications

International comparison

of publication activity

Medical Research Output

EMA indicates European Medicines

Agency; FDA, USFoodand Drug

Administration.

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amined using comparable, standard measures of investment, em-

ployment, economic value, patents, and publications.

Althoughreliable internationalcomparisons of biomedicalsci-

ence funding are possible, comparable data for healthservices re-

search are notavailable because other countries do notdistinguish

themfromcostsof insurance andexpenditures onprovisionof care.

A complete description of methods is included in the foot-

notes accompanying each table and figure.

Information, Trends, and Analysis

Medical Research FundingIn 2012, total US funding of biomedical and health services

research was $116.5 billion (Figure 2and eTable 1 in the Supple-

ment), or 0.7% of gross domestic product (GDP). The largest

increase in funding occurred between 1994 and 2004, when

funding grew at 6% per year. However, from 2004 to 2012, the

rate of investment growth declined to 0.8% annually and (in real

terms) decreased in 3 of the last 5 years (eFigure 1 in the Supple-

ment). The exceptions were 2009 and 2010, 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 2004 to 2012 (eFigure 1).

In 1994, the National Institutes of Health (NIH) budget

totaled $17.6 billion and in 2004 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

the1990s, funding from the NIH declined nearly 2% per year in

real terms (Figure 3) after the mid-2000s. This decrease repre-

sents a 13% decrease in NIH purchasing power (after inflation

adjustment) since 2004 (eFigure 2 in the Supplement), which

may be more severe when considering NIH appropriations

through 2013.5 Other sources of US investment were not immune

to slowed growth. Funding from major sources of investmenteither slowed or declined over the past 10 years, with the excep-

tion of other federal support, which includes organizations such

as the Agency for Healthcare Research and Quality (AHRQ).

From 1994 to 2004, 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 2012.

Although much of the growth in medical research funding over

the past 20 years can be attributed to industry, investment still

Box. Listof Included and SupplementaryFiguresand Tables

Included figures

Figure 1.The Anatomy of Medical Research: US and International

Comparisons

Figure 2.US Funding for Medical Research by Source, 1994-

2012

Figure 3.Growth in US Funding for Medical Research by Source,1994-2012

Figure 4.Pharmaceutical Industry Medical Research Funding by

Phase of Research, 2004-2011

Figure 5. Medicines in Development for Top 10 Therapeutic Areas,

2013

Figure6. USFunding forHealth ServicesResearchby Source,2004-

2011

Figure 7.Researchand Development Investment Ranking of Indus-

trialSectorsAmong US-BasedCompanies, 2011

Figure 8.Global Medical Research Funding in Select Countries/

Regions, 2011

Figure9. Top 10 Countriesby Sizeof Scienceand TechnologyWork-

force, 1996-2011

Figure 10.Global Life Science Patent Applications by Country of

Origin, 1981-2011

Figure 11. US LifeSciencePatent Applications by Country of Origin,

1981-2011

Figure 12.Highly Valuable US Life Science Patents by Country of

Origin, 1981-2011

Figure 13.Medical Research Articles and Citations by Selected

Countries/Regions, 2000-2010

Figure 14.Market Performance of Publicly Traded Life Sciences

and Health CareCompanies, 2003-2013

Supplementary figures and tables

eFigure1. Historical GrowthTrajectory ofUS MedicalResearchFund-

ing, 1994-2012

eFigure 2.Historical Trajectory of NIH Medical Research Funding,

1994-2012

eFigure 3.Venture Capital Investment in Biotechnology Compa-nies, 1995-2013

eFigure 4.Relationship Between NIH Disease-Specific Research

Funding and Burden of Disease forSelectedConditions

eFigure 5.GrowthinGlobalMedicalResearchFundinginSelectCoun-

tries/Regions, 2004-2011

eFigure 6.Medical Research and Development Funding and Sci-

enceand TechnologyWorkforces in Select Countries/Regions,2011

eFigure 7.EuropeanLife SciencePatent Applications by Country of

Origin, 1981-2011

eFigure 8. Highly ValuableEuropean LifeSciencePatentsby Coun-

try of Origin, 1981-2011

eFigure 9. Comparisonof NewApprovalsby USFood andDrugAd-

ministration and EuropeanMedicinesAgency, 2003-2013

eTable1. US Fundingfor Medical Researchby Source, 1994-2012

eTable2. NIHMedical Research Funding by Type ofResearch, 2004-

2012

eTable3. NIH Disease ResearchFunding and Burden of Disease for

Selected Conditions

eTable 4.Medical Research Funding From (A) Public Charities and

(B) Private Foundations, 2011

eTable 5. USFundingforHealthServicesResearchby Source,2004-

2012

eTable6. Methods andData Sourcesfor Medical ResearchFunding

by Select Countries/Regions

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slowed (medical device, 6.6% to 6.2% in 1994-2004 vs 2004-

2012; biotechnology, 14.1% to 4.6% in 1994-2004 vs 2004-

2012), or declined (pharmaceutical firms, 6.8% to 0.6% in 1994-

2004 vs 2004-2012).

Research Funding

Biomedical Research

The distribution of investments across the types of medical re-search changed from 2004 to 2011. Pharmaceutical companies

shifted funding to late-phase clinical trials and away from discov-

ery activity such as target identification and validation. The share

of pharmaceutical industry funding (including that by US compa-

nies outside ofthe UnitedStates)spenton phase 3 trialsincreased

by 36% (5%/year growth rate) from 2004 to 2011 (Figure 4), and

the share of investment in prehuman/preclinical activities de-

creased by 4% (2%/yearaveragedecline). Thisshift toward clinical

research and development reflects the increasing costs, complex-

ity, andlength of clinical trialsbut may also reflecta deemphasis of

earlydiscovery efforts by theUS pharmaceuticalindustry. Whilein-

dustry hasshifted funding to clinical trials, the share of NIHcontri-

butions dedicated to basic science and clinical research was un-

changed (eTable 2 in the Supplement), with the majority of funds

still focused on basic research. These data may not accurately re-

flectthetruedivisionofNIHinvestmentforbasicsciencevsdisease-

focused research, as a growing proportion of NIH expenditures is

forprojectshavingpotentialclinicalapplication in manydiseases or

organ systems.7

Inreal terms,venture capitalinvestmentin biotechnology com-

panies steadilyincreased from $1.5 billion in 1995 to a peak of $7.0

billion in 2007 (eFigure 3 in the Supplement). During that period,

investmentin biotechnologycompanies as a shareof total venture

capital investment increasedfrom 10%to 18%, and thenumber of

investments increased from 176to 538. Investment levelsand the

number of transactions of biotechnology decreased following the

financial crisis in 2008-2009, declining to a low of $4.3 billion in2009. Venture capital investment still has notrecoveredto its pre-

2008 levels, with only $4.5 billion invested in 2013. Size of invest-

mentper transaction(median,$11 million, inflation adjusted) hasre-

mainedunchanged for 2 decades.

Public funding of medical research by condition was only mar-

ginally associated withdisease burden in the United States in 2010

(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 70% of disability-adjusted life-years

receive 48% of NIH funding (R2 = 0.26) (eTable 3 in the Supple-

ment). Several factors other than disease burden may influence

funding, including the quality of research, scientific opportunity,

portfolio diversification, or building of infrastructure, and the com-bination of these factorscomplicatesthe relationshipof 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

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 feworganizations.In 2011,42% of total

not-for-profitfundingwas by thetop 10 public medicalcharitiesand

top10 private foundations (eTable4 in theSupplement). TheHow-

ardHughesMedicalInstitute(which supports domestic researchpri-

marily) and the Billand Melinda GatesFoundation(which supports

international research primarily)accountfor 87%of biomedical re-search funding by private foundations (eTable 4, panel B). United

Statesbased medical charities direct most monies in the United

States, thoughthe amountspenton research (asopposed to edu-

cation, disease screening, and other activities) cannot be quanti-

fied using publicdata.

HealthServices Research Funding

Health services research, which examines access to care, the qual-

ity and cost of care, and the health and well-being of individuals,

communities, and populations, accounted for between 0.2% and

Figure 2. US Fundingfor Medical Researchby Source, 1994-2012

120

140

100

80

60

40

20

0

1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

MedicalResearchFunding,$,inBillionsa

Year IncludesARRA Fundingb

Compound annual growthrate, 6.3%d

Compound annual growthrate, 0.8%d

Foundations, charities, and other private funds

State and local government

Other federalb

Medical device firms

Biotechnology firmsc

Pharmaceutical firms

National Institutes of Healthb

Funding source

Data were calculated accordingto methods outlinedin eTable 1 inthe

Supplement. ARRA indicates American Recoveryand ReinvestmentAct.

a Data were adjusted to2012dollars usingthe Biomedical Researchand

Development PriceIndex.4

b TheNationalInstitutes of Health and other federal sources includestimulus

provided byARRA in 2009 and2010.

c Datafrom 1994-2002 and 2011-2012were estimatedbased on linear

regression analysis of industry market share.

d Compoundannualgrowthrate(CAGR) supposingthatyearA isxand yearB is

y, CAGR = (y/x){1/(BA)}1.The CAGRwas calculated separatelyfor 2 different

periods witha singleoverlapping year: 1994-2004 and 2004-2012. Thecut

pointwas chosenat 2004 giventhe changes seen in funding from theNational Institutesof Health in thatyear.






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0.3% of national health expenditures between 2003 and 2011, an

approximately 20-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

2004 to $5.0 billion in 2011 (Figure 6and eTable 5 in the Supple-

ment). Investment fromfoundations decreased in real terms at 1%

per year over the period, following declines after the recession of

2008. Increases in health services research funding were largely

driven by AHRQ (15.8%/year growth) and the health care services

industry (11.0%/year growth), which includes hospitals, ambula-

tory 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 com-

pared with other industrial sectors (Figure 7). Insurers and health

systems rank among the lowest in research and development

(funding $1.3 billion, or 0.1% of revenue), which was well below

the median for industrial sectors ($5.5-$7.3 billion for total fund-

ing, or 1.7%-2.5% of revenue). Health insurers may provide addi-

tional health services research funding that cannot be distin-

guished 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 expendituresby publicand industry sources

in theUnited States, Europe, Asia, Canada, andAustralia combined

increasedfrom$208.8billionin2004to$265.0billionin2011,grow-

ingat 3.5%annually(Figure 8 and eTable 6 inthe Supplement).Al-

thoughthere may be medical research funding from otherareasof

theworld (eg, South America),these data represent the most reli-

able and current sources of global medical research investment.

Among theregionsincludedin theanalysis, theUnited States dem-

onstrated the slowestannual growthin investment (1.5%/year), fol-

lowed by Europe (4.1%/year)and Canada (4.5%/year). Asiancoun-

tries increased from $28.0 billion in 2004 to $52.4 billion in 2011,

Figure 3. Growth in US Fundingfor Medical Researchby Source, 1994-2012

120

100

80

60

40

20

0

MedicalResearchFunding,

$,inBillio

nsa

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

Overall

Biotechnology firms

1994

2.6 (4)

3.9 (7)

8.0 (13)

17.6 (29)

3.8 (6)

59.5

3.7 (6)

20.0 (34)

2004

3.9 (4)

5.9 (5)

4.8 (4)

35.6 (33)

7.1 (6)

109.7

13.7 (12)

38.6 (35)

2012

4.2 (4)

6.3 (5)

7.1 (6)

30.9 (27)

11.5 (10)

116.5

19.6 (17)

36.8 (32)

Compound Annual

Growth Rate, %b

1994-2004

4.2

4.1

4.9

7.3

6.6

6.3

14.1

6.8

2004-2012

0.8

1.0

0.9

5.0

1.8

6.2

4.6

0.6Pharmaceutical firms

Year

1994 2004 2012

Data were calculated accordingto methods outlined ineTable 1 inthe

Supplement.

a Adjusted to 2012dollars usingthe BiomedicalResearchand Development

PriceIndex.4

bCompoundannualgrowthrate(CAGR) supposingthatyearA isxand yearB is

y, CAGR = (y/x){1/(BA)}1.

Figure 4. PharmaceuticalIndustryMedicalResearchFunding by Phase of Research,2004-2011

50

40

30

20

10

0IndustryMedicalResearch

Funding,$,inBillionsa

2004 2011

Phase of Research

Uncategorizedc

Phase 4

Approval

Phase 3

Phase 2

Overall

Phase 1

Industry Medical Research

Funding,$, (%), in Billions a

2004

4.2 (9)

6.4 (13)

4.5 (9)

12.6 (26)

4.9 (10)

48.3

3.2 (7)

12.5 (26)

2011

1.7 (3)

4.8 (10)

4.1 (8)

17.6 (36)

6.2 (13)

49.3

4.3 (9)

10.6 (22)

Compound Annual

Growth Rate, %b

2004-2011

0.3

11.9

3.9

1.2

4.9

3.3

4.1

2.3Prehuman/preclinical

Pharmaceutical industry funding by phasewas obtained fromPharmaceuticalResearchand Manufacturers of America (PhRMA) annual reports,2004-2011.6

Data were 2 yearsold at time of publication andincludeboth domestic and

international research funding fromPhRMA members.

a

Data were adjustedto 2012 dollars using theBiomedicalResearch andDevelopment PriceIndex.4


y, CAGR = (y/x){1/(BA)}1.

c Uncategorized funding could notbe allotted toa singlephaseof research.






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or 9.4%per year, withespeciallylargeincreases in China, India, South

Korea, and Singapore.

These trendsresultedin therestructuring of theshareof total

global investment (eFigure 5 in the Supplement). As a percentage

of global funding,the United States declinedby approximately13%

from 2004 to 2012, and Asian economies increased by approxi-

matelythe same share (13% in2004to 20%in 2011). Althoughab-

solutegrowthof Asianinvestmentfrom2004to 2011 reached $24billion, the United States remained the leading sponsor of global

medical research in 2011 (44% share), and Europethe next largest

sponsor (33% share).

Overall growth was slightly greater for industry outside the

United States compared withpublicsources (4.3%vs 2.2%),and in-

dustry accountedfor two-thirdsof fundsin 2011. However, US con-

tributions increasedslowlyfrom bothpublic(0.1%/year)and indus-

try sources (1.7%/year).

Public funding in the United States decreased to a 49% share

of theworldspublic research investment by 2011,downfrom57%

in 2004 (Figure 8). United States industry, which accounted for

nearlyhalf ofglobal industry medical researchexpendituresin 2004,

declined to41% ofglobal industry funding in2011(Figure 8).Japan

demonstrated the greatest increase in the worlds share of indus-

tryfunding(+3.9%),andEuropeancountriesgainedthemostinpub-

licinvestment(+3.5%).Despite decreasesin theUS share of invest-

ment, the United States remained the worlds leading sponsor for

both publicand industry medical research funding in 2011.

Science and Technology Workforce

From 1996 to 2011, the US science and technology workforce in-

creased by 2.7% annually to reach 1.25 million workers (Figure 9).

Over the sameperiod, Chinas workforce increased6% annually to

reach1.31millionworkers,makingit thelargestnationalscience and

technology workforce in the world. Reliable information about the

proportion of medical researchers could not, however, be ob-

tained.

AlthoughChina ledthe world inthe overall size oftheirscience

and technology workforce, it had only 1.9 science and technology

workers per 100 000 full-time equivalents, the lowest among the

countriesincludedin theanalysis(Figure9). TheUnited States em-

ployed 8.1 science and technology workers per 100 000 full-time

equivalents in its total workforce, or the median for the 10 largest

workforcesin theworld.

Theinvestmentin capital terms andin labor terms differ widelyacross countriesand regions.The United States contributes 44.2%

of global medical research funding butcomprisesonly 21.2% of the

Figure5. Compoundsin Developmentfor Top 10Therapeutic Areas,2013

200 400 600 800 1200 1400 1600 18001000

Rare diseasec

Anti-inflammatory

Recombinant vaccine

Cognition enhancer

Anticancer,immunological

Anticancer, otherb

Therapeutic areaa

Prophylactic vaccine,anti-infective

Antidiabetic

Analgesic

0

No. of Compounds in Clinical Trialsa

Data forthenumber of compoundsin developmentwerefromthe Citeline

PharmaR&D AnnualReview 2014.10 Data forrarediseases were from the

Pharmaceutical Researchand Manufacturers of America.11

a Numberof compoundsin clinicaltrials orunderreviewby theUS Foodand

DrugAdministration. Thisincludes a totalof 10 479compoundsin 2013.

b Includes all nonimmunologicalanticancer compounds.

c Rare diseases were defined as those affecting200 000or fewerpeople in the

United States.

Figure 6. US Fundingfor Health ServicesResearch by Source, 2004-2011

6

4

2

0HealthServicesResearch

Funding,$,inBillionsa

2004 2011

Funding source

Health services industryc

AHRQ

NIH

Other federald

Foundationse

Overall

Health Services Research

Funding,$, in Millions (%)a

2004

653 (18)

365 (10)

1158 (32)

442 (12)

1034 (28)

3652

2011

1352 (27)

1018 (20)

1189 (24)

494 (10)

967 (19)

5019

Compound Annual

Growth Rate, %b

2004-2011

4.6

11.0

15.8

0.4

1.6

1.0

AHRQindicatesAgency for HealthcareResearch and Quality; NIH,National

Institutesof Health. Datawere calculated accordingto methods outlined in

eTable 5 in theSupplement.

a Adjusted to 2012dollars usingthe Biomedical Researchand Development

PriceIndex.4

b Compound annualgrowth rate (CAGR)supposing that year A isxand yearB is

y, CAGR = (y/x){1/(BA)}1.

c Health services industry includes funding fromhospitals,ambulatory health

careservices,nursing and residentialfacilities.Health insurancecompanies

were not included.Datamay notfullycapturethe entiretyof funding for

health services researchand quality improvement initiativesfor theUS health

careservices industry.

d Other federal funding includes theCenters forDisease Control and Prevention,

Centers for Medicare & Medicaid Services, Veterans HealthAdministration,

Health Resourcesand Services Administration,and Patient Centered

OutcomesResearchInstitute(in 2011only).

e Foundationfundingincludes totalgiving fromthe Robert Wood Johnson

Foundation, CaliforniaEndowment, PewCharitableTrusts, W.K. Kellogg

Foundation, and CommonwealthFund.






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globalscience andtechnology workforce (eFigure 6 in theSupple-

ment).Conversely, Chinacontributesonly 1.8%of globalfunding for

medicalresearchbutcomprises22.3%oftheglobalscienceandtech-

nology workforce.This differencein investment representsa natu-

ralexperiment in productivity management and hasbroad implica-

tions for patents and intellectual property ownership, which will

evolveover the next fewyears.

Outputs of Medical ResearchLife Science Patent Filings

China filed30% of global lifesciencepatentapplications in 2011, in-

creasing from 1% of globalapplications in 1991 (Figure 10). This in-

cludesapplications froma number of patentingofficesthroughout

the world, including offices in China, the United States, and the

EuropeanUnion.The United States followedwith24% of patentfil-

ings globally, increasing from an 11%sharein 1991.

United States inventors led in the number of life science pat-

ent filings in both the United States and EU, where China ac-

counted for less than 2% of filings in both regions ( Figure 11and

eFigure 7 in the Supplement). The proportionof US inventors filing

patents inthe UnitedStates decreasedfrom57% to51% from 1981

to 2011. During the same period, the share of highly valuable pat-

ents filed by US inventors decreased between from 73% to 59%

(Figure 12), while allothercountries in theanalysisincreased 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 valuablepatentsare defined

by the frequency they are cited by other inventors in subsequentpatent applications (Figure 12, footnote b)

Publications

The UnitedStates ledthe world with 33% of publishedbiomedical

researcharticlesin2009(Figure13A).IntheUnitedStates,thenum-

ber of biomedicalresearcharticles increasedat 0.6%per yearfrom

2000to 2009.Duringthesame period, thenumberof articlespub-

lished in China increased by 18.7% annually.

The United States also leads the world inits share of the most

highly citedbiomedical research articles, with63% of thetop cited

Figure 7. Researchand DevelopmentInvestment Ranking of IndustrialSectorsAmong US-BasedCompanies, 2011

20 40 60 800

Research and DevelopmentSpending, $, in Billionsb

Domestic

Foreign

Transportation services

Insurance carriers

Utilities

Health care servicesc

Architectual engineering

Physical, engineering, and life sciences

Telecommunications

Banking, credit, and securities

Data processing and hosting

Mining, extraction, and support activities

Food and beverage

Internet service provider and web search

Plastics, minerals, and metal products

Aerospace and defense

Chemicals

Computer software and systems design

Machinery

Medical devicesAutomobiles and parts

Software and paper publishing

Computer and electronics manufacturing

Pharmaceuticals and biotechnology

Median

Total research and development fundinga

5 10 150

Research and DevelopmentSpending as % of Revenue

Pharmaceuticals and biotechnology

Median

Share of revenue spent on research and developmenta

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 beverageTelecommunications

Utilities

Banking, credit, and securities

Health care servicesc

Transportation services

Insurance carriers 0.040.2

0.04

Researchand development expenditures forUS-based companiesperforming

research by theindustrialsector wereobtainedfrom the National Science

Foundation.13 Datainclude researchfunds spentboth domesticallyand abroad.

Industry revenues wereobtainedfrom the National Science Foundation13

orUSCensusBureau14 based onthe availabilityof data. Revenuesand researchand

development expenditures werematchedby industry usingNorth American

Industry ClassificationSystemcodes.

a Thepharmaceuticals and biotechnology, medical devices, and health care

services industriesare highlightedin red.

bAdjusted to 2012dollars usingthe BiomedicalResearchand Development

PriceIndex.4

c Healthcare services industry includes US-based hospitals,ambulatoryhealth

careservices, and nursing and residentialfacilities.






8/16


articles in 2000 and 56% in 2010; however, the growth of highly

citedliteraturepublishedbytheUnitedStatestrailsothermajorcoun-

tries, regions, and economies(Figure13B). Aftercontrollingfor theshareof theworldsbiomedical research articles usinga citationin-

dex, the United States declined from 2000 to 2010 at 0.2% per

yearastherestoftheworldincreasedbyapproximately1%peryear.

NewDrugs andDevices

Since 2003, drug approvals by the US Food and Drug Administra-

tion(FDA) have remainedunchanged withan averageof 26approv-

als per year. Althoughdrug approvals increasedslightlyin 2011and

2012,theyreturnedclosertoaveragein2013with27approvals(eFig-

ure 9 in the Supplement). United States device approvalshave also

remained relatively constantover thelast decade. While thenum-

ber of approvalssteadily increasedfrom 15 approvals in 2009to 39

approvals in 2012,only 22 newdevices were approved in 2013.Duringthe sameperiod, theEuropean Medicines Agency(EMA)

averaged a higher number of both applications (55/year) and ap-

provals (42/year) than the FDA (eFigure 9). In 2013, the EMA re-

ceived22 more applications andapproved16 more drugs than the

FDA.

Life Sciences Market Performance

Equity (stock) markets reflect broad public perception of one in-

dustrys value in comparison with others. Since 2003, market re-

turn for the entire health care industry (including medical device,

pharmaceutical, and biotechnology companies as well as hospi-

tals, nursing homes, and other health service suppliers) as mea-

sured by the Dow Jones US Health Care Index increased 8.2% an-nually, closelytrailingthe Standard & Poors500 (8.3%)(Figure14).

Market returns for biotechnology and health insurance companies

outperformedthe market, growingat 18.5% and13.8%per year, re-

spectively. Medical device companies, pharmaceutical companies,

and hospital chains underperformed compared with the Standard

& Poors500, increasing annuallyat 7.3%,6.8%, and5.8%,respec-

tively. The financial crisis of 2008 led to a decrease in market per-

formancefor alllife sciencesindustries. Generally, allsectorsrecov-

eredin theyears following, andbiotechnology companies,hospital

chains,and healthinsurancecompaniesperformedexceptionallywell

since their decline in 2008-2009.

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 theUS lead in these categories is declining. For ex-

ample, whereas the United States funded 57% of medical research

in2004,in2011thathaddeclinedto44%.Basicresearchandprod-

uct 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-

Figure 8. Global Medical ResearchFunding in Select Countries/Regions, 2011

100

20

40

80

60

0

200

120140

180

160

220

240

280

260

MedicalResearchFu

nding,inBillionsa

Medical research funding,

$, in billions (%)a

Overall

Publicb

Industryc

Compound annual growth

rate, % (2004-2011)d

Globale

265.0 (100)

102.8 (100)

162.2 (100)

3.5

UnitedStates

117.2 (44)

50.5 (49)

66.6 (41)

1.0

Europe

88.6 (33)

26.9 (26)

61.6 (38)

4.1

Japan

37.8 (14)

17.0 (17)

20.8 (13)

6.8

China

4.9 (1.2)

1.3 (2)

3.6 (0.8)

16.9

OtherAsiaf

9.7 (4)

2.4 (2)

7.3 (4)

20.8

Canada

3.1 (1.2)

1.8 (2)

1.3 (0.8)

4.5

Australia

3.8 (1.4)

2.8 (3)

1.0 (0.6)

9.3

Publicb

Industryc

Theregions/countries/economies in the analysis include the majorcountries of

NorthAmerica(United States, Canada), Europe (including the10 largest

European countriesin the Organisation for EconomicCo-operationand

Development),and Asia-Oceania (Australia,China, India,Japan, Singapore,and

SouthKorea). Datafor African and SouthAmericancountries and Russiawere

notavailable.Data were calculatedaccordingto methods outlined ineTable 6 in

the Supplement.

a Datawere convertedto US currency usingan average annual exchangerate

forthe respectiveyear15 andadjustedto 2012 dollars using theBiomedical

Researchand Development PriceIndex.4

b Publicresearchand development funding included thatfrom government

agencies,higher educationalinstitutes, and not-for-profit organizations.

c Industry researchand development funding included pharmaceutical,

biotechnology, and medical devicefirms.

d Compoundannualgrowthrate(CAGR) supposingthatyearA isxand yearB is

y, CAGR = (y/x){1/(BA)}1.

e Global totalfor medical research funding includes researchand development

expenditures from36 majorworld countriesacross 4 continents.

f Other Asia includes India,Singapore, and SouthKorea.






9/16


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 real-

izethe value of past investments in basic biology.

In addition, the limited support of ambitious but scientifically

rigorous methods to improve delivery of health services repre-sentsamajormissedopportunitytoimprovemanyaspectsofhealth,

especially as the burden of chronic illness, aging populations, and

theneed formore effectiveways to deliver care areappreciated.1

Overthe past 2 decades,the periodof thisanalysis,medicalre-

searchhasbecomeglobal.Ithasbeentransformedbymultiple,com-

plex and subtle transitions, from small laboratories to large, in-

dustrial-scale institutes, from hypothesis-driven inquiries to data-

drivencompilations, fromexperimentsby singleindividualsto those

requiringlargeteams, and from finding causesof specific diseases

to learning how entire systems become disordered.21

The information assembled demonstrates that 3 factors, wa-

vering financialsupport for science, underinvestment in service in-

novation, and globalization, pose the chief challenges of the cur-

rent era.

Biomedical ResearchNew 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, ensur-

ingsufficientsupportforitsclinicaldevelopmentisapressingneed.

Equally important are stable academic institutions and companies

along with skilled researchers that have the capability to organize

theresearchprocessand to sustainthe innovation cycle,24particu-

larly since the size of research teams and scale of activities have

grown.Year toyear variabilityin funding is a threatto that stability.

Figure 9.Top 10 Countriesby Sizeof Science and Technology Workforce, 1996-2011

1400

1200

1000

800

600

400

200

0

Full-timeEquivalents,in

Thousands

Chinac

6.0

UnitedStates

2.7

Japan

0.4

RussianFederation

1.5

Germany

2.6

UnitedKingdom

3.7

Korea

7.4

France

3.2

Canada

3.8

Spain

6.4

Work force sizeaA

1996

2011

Compound annual growthrate, % (1996-2011)b

12

10

8

6

4

2

0

No.per1000TotalEmployment

Korea

6.2

Japan

0.5

France

2.5

Canada

2.2

UnitedStates

1.8

Germany

2.2

UnitedKingdom

2.9

RussianFederation

2.1

Spain

4.1

Chinac

5.2

Work force size per 1000 total employmentB

1996

2011

Compound annual growth

rate, % (1996-2011)b

Thesizes of national science and technology workforces wereobtainedfrom

the Organisation for EconomicCo-operationand Development.16

a Workforce sizewas measured in number of full-time equivalentsand includes

all science and technologysectors(eg, engineering, physical sciences) in

addition to themedical and health sciences.


y, CAGR = (y/x){1/(BA)}1.

c Annualgrowth in Chinas science and technology workforce may be

underestimatedbecause of a change in reportingmethodsfor Chinain 2009.






10/16


Althoughthe biomedicalresearch enterpriseis basicallyhealthy,

to fully capture theclinicalvalue of past investment in science and

itspromisefor thefuture,2 areas require particularattention: (1)in-

creased financial support for critical early studies that validate ba-

sic biological discoveries and demonstrate their relevance to dis-

ease (establishing proof of concept) and (2) greater productivity,

especially acceleration of the application of new findings to dis-

ease.

Financing ThatCan Sustain Long-termInvestmentIn the United States and Europe, private companies will not likely

havethe latitude fromtheir investors, or governments the political

will,to continueto make long-terminvestments at historical levels.

Todays politicaland commercial environment leadsto thisconclu-

sion. Many new basic discoveries that have probable clinical value

are stymied by financialconstraintsat the critical proof-of-concept

stage, where utility in humans is demonstrated. That number can

be expected to increase onceplatformtechnologies(such as high-

resolutionmapping of thecentralnervoussystem,analysis of com-

plex biological systems and networks, or insights into develop-

mentof cell maturation and differentiation) showpotential clinical

value. This is an unfortunate paradox because many of the dis-

easesassociated withsubstantial morbidity andmortalitymay ben-

efit themost from these newdiscoveries.

Variousnew sourcesfor long-terminvestmentshave beenpro-

posed. Most often, public fundshavebeen sought,by expansion of

the NIH budget, appropriationsby state legislatures, or earmarked

federal appropriations for threatened epidemics or defense-

relatedbiologicalrisks.Mostadvocateslookto governmentfor sup-

portof high-risk, early-stage research,given privatecompanies fo-cuson developmentof newtechnologies attheirlater stage.Private

foundations andpubliccharities, thoughsmall,playan essentialrole

in filling thatgap, especially for the mostspeculative undertakings

or where commercial incentives areinsufficient. However, it is un-

likely that these conventional sources of research investment will

be sufficient tomeet thechallengesof anaging population, theag-

gregate burdenof disease, or thepromise of emerging science.

The reduced funding of large pharmaceutical and biotechnol-

ogy companieson early, basic, discovery-stage research (with con-

comitant growth of late-stage clinical trials) is apparent from our

Figure 11.US LifeSciencePatentApplicationsby Country of Origin, 1981-2011

100

80

60

40

20

0

Percentage

80000

60000

40000

20000

0

No.

Year

1981 1991 2001 2011

Other

Netherlands

China

Taiwan

Switzerland

Korea

Great Britain

Germany

Japan

United States

France

No. of patent application familiesin life science by country of inventor a

Year

1981 1991 2001 2011

Other

Netherlands

China

Taiwan

Switzerland

Korea

Great Britain

Germany

Japan

United States

France

Percentage distributionby country of inventor

Thenumber of patent application

families by country was calculated

counting the mostrecentapplication

in familyof patents based ondata

obtained fromThomsonInnovation.17

Data areincludedfor allcountries

available inthe Thomsondata set.

a Life science wasdefinedto include

thefollowingcategories: analysis of

biological materials, medical

technology, organic fine chemistry,

biotechnology, pharmaceuticals,macromolecular chemistryand

polymers,and microstructural and

nanotechnology.

Figure 10.Global LifeSciencePatentApplicationsby Country of Origin, 1981-2011

400000

300000

200000

100000

0

No.

Year

1981 1991 2001 2011

Other

Germany

Japanb

Russia

TaiwanIndia

Australia

Korea

United States

China

Canada

No. of patent family applicationsin life sciencea

100

80

60

40

20

0

Percenta

ge

Year

1981 1991 2001 2011

Other

Germany

Japanb

Russia

TaiwanIndia

Australia

Korea

United States

China

Canada

Percentage distribution by country

Thenumberof patentfamilyapplicationsby country filed wascalculatedbased

on data obtained fromThomsonInnovation.17 Onlythe mostrecentpatent

application ina patentfamily wascountedforthis analysis.Dataare included for

allcountries available in theThomson data set.

a Lifescience was defined to include thefollowingcategories: analysis of

biologicalmaterials,medical technology, organic fine chemistry,

biotechnology, pharmaceuticals,macromolecularchemistry and polymers,

and microstructural and nanotechnology.

b Onlypatent grants, not all patent applications, are counted forJapan, which

tends toward patent applicationswith narrowerdefinitions and therefore

muchgreaternumbers relative to the number of patents ultimately granted.






11/16


Figure 12. Highly ValuableUS LifeSciencePatentsby Country of Origin, 1981-2011

8000

6000

4000

2000

0

No.

Year

1981 1991 2001 2011

Other

China

Netherlands

Korea

CanadaSwitzerland

France

Germany

Japan

United States

Great Britain

No. of life science patent applicationsin top 10% of patents by inventor countrya,b

100

80

60

40

20

0

Percenta

ge

Year

1981 1991 2001 2011

Other

China

Netherlands

Korea

CanadaSwitzerland

France

Germany

Japan

United States

Great Britain

Percentage distribution of top 10%of patents by country of inventor b

Thenumber of patent applicationfamilies by country was calculated counting

themostrecentapplicationin familyof patents based ondata obtainedfrom

Thomson Innovation.17 Data areincluded forall countriesavailablein the

Thomson dataset.

a Lifescience was defined to include the followingcategories: analysis of

biologicalmaterials,medical technology,organicfine chemistry,

biotechnology, pharmaceuticals,macromolecularchemistry and polymers,

and microstructural and nanotechnology.

bTop10% ofpatents rankedby year usingBCG Quality Index.TheBCG Quality

Indexis made up of3 components; specifically, forward citationsof a patentin

newerpatents adjustedfor thepatents age, thenumberof patentclaims, and

the strengthof a patentsbackwardcitations. Thecomponents and

correspondingweights usedby the quality indexare a product of proprietary

Boston ConsultngGroup research.

Figure 13.Medical ResearchArticlesand Citations by SelectedCountries/Regions, 2000-2010

400000

300000

200000

100000

0

No.

2000 2009

Otherb

Other Asiac

China

Japan

European Uniond

Overall

United States

No. of Medical

Research Articles

2000

49946

10029

3937

26755

114970

321795

116156

2009

63483

20790

18399

21477

120421

367229

122659

Annual

Growth Rate, %a

2000-2009

1.5

2.7

8.4

18.7

2.4

0.5

0.6

No. of medical research articlesA

Year

12000

10000

8000

6000

4000

2000

0

No.

2000 2009

Otherb

Other Asiac

China

Japan

European Uniond

Overall

United States

No. of Highly Cited

Medical Research

Articles

2000

763

20

16

345

2079

8626

5402

2010

1034

113

82

294

2936

10189

5729

Citation Index

of Highly

Cited Articles

2000

NA

0.57

0.1

0.22

0.5

0.68

1.67

2010

NA

0.59

0.22

0.22

0.45

0.86

1.63

Compound

Annual Growth

Rate (Citation

Index), %a

2000-2009

NA

0.4

8.6

0.3

1.0

2.5

0.2

No. of highly cited medical research articlesB

Year

NA indicates notavailable.Medical researchwas defined as thelifesciencesand

psychology, excludingagricultural science. Article counts reportedby the

National Science Foundationwere fromthe Thomas Reuters Science Citation

Indexand Social Science Citation Index,18 classifiedby year of publicationand

assigned tocountries onthe basis ofinstitutional addresseslisted oneach

article.Articleswerecounted ona fractional basis;ie, forarticles with

collaborating institutions frommultiple countries,each country received

fractionalcredit on the basisof proportionof its participating institutions.

Citationswerebasedon a 3-yearperiodwith 2-year lag; eg,citations for2000

arereferences made inarticles in 2000 toarticlespublishedin 1996-1998.The

citationindexof highlycitedarticles wasdefinedas theshare ofthe worlds top

1% citedbiomedical researcharticles divided bythe shareof theworlds

biomedicalresearcharticles in the citedyear window.

a Compoundannualgrowthrate(CAGR) supposingthatyearA isxand yearB is

y, CAGR = (y/x){1/(BA)}1.

bOtherincludesthe remaining159 nations ofthe world withinthe original

database.

c Other Asia includes India,Indonesia, Malaysia, Philippines,Singapore, South

Korea, Taiwan,and Thailand.

dTheEuropeanUnion includes 27 Europeannations.






12/16


13/16


shouldbe aimed atobviating currentlimitationsof theexistingbal-

kanized corporate, venture capital, NIH, and university practices.

Examplesof newmodels arethe BroadInstitutein Cambridge,Mas-

sachusetts (genomics), BioDesign Institute at Arizona State Uni-

versity, Tempe (biomedical engineering), and Allen Institute for

Brain Sciences, Seattle,Washington(neurological and psychiatric

disease). Each of these seeks to optimize individual and institu-

tionalcontributions while ensuringfunding. Eachorchestrates ex-ternal 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 profes-

sional recognition compared with technological innovation or ba-

sic discovery.

Funding for health services research has increased 37% from

$3.7 billion to $5.0 billion over the lastdecade (Figure 6). However,

thisgrowthhasoccurredonaverysmallbase.Totalfundingforhealth

services research is 0.3% of total health care funding (eFigure 1 in

the Supplement) compared with 4% toward new drugs and de-

vices.Thatis, theUnited States spends$116billion on research aimed

at 13% of total health care costs but only $5.0 billion aimed at the

remaining 87% of costs.1

Why the disparity in investment? One major difference is that

new drugs anddevices command favorable prices, and their value

accrues directly to the firm that invests in them. In contrast, ser-

vice innovations canreducemorbidity andmortality while also re-

ducing cost, butfinancial returns toinnovatorsmay be negligible or

even negative.Forexample, asshown byArriagaet al32and Prono-

vost and Wachter,33procedure checklists andother simple precau-

tions are effectivebut may result in lower paymentsto hospitals.34

This mismatch between who invests (the hospital) and who is re-

warded(the insurer) is a fundamental barrier, even thoughclinical

benefitisenormousandtotalsavingsmayexceedthereturnonmany

categories of blockbuster drugs.35

Three other factors pose barriers:

Behavior change.Disruptionofthecurrentpatternsofcareisthreat-

ening to physicians and hospitals, even when shown to produce

comparable or better clinical outcomes, higher patient satisfac-

tion, andlowercost than traditionalcare.36Examplesinclude tele-

medicine, daily monitoring, and intensive in-home services.

Data quality. Claims databases, electronic medical records, and

other sources of clinical information are not yet sufficiently reli-

ableto informresearch.Recentinitiatives areaimed at linking sepa-

rate sources of data and introducing standards to support

research34-37 and are a specific goal of international measure-

mentcollaborationsfor chronic illnesses (eg,the International Con-

sortium for Health Outcomes Measurement),

38

and alliancesamong insurers, hospitals, and clinicians for the most severely ill

patients (eg, Wellpoint/Emory Health).39

Communications. Clinicalservice innovation is moredifficultthan

the introduction of a new drug or procedure because it requires

manyindividualsto adjust theway theyinteract, communicate, and

useinformation.Moreover,tohaveanyeffect,culturechangemust

occur throughout large, hierarchical organizations. Cultural barri-

ersare potentreasons whysmall-scale demonstrationprojectsare

rarely generalized,even whenthey areinitially effective.40There-

fore, research should focus on devising reliable, effective inter-

ventionsthat sustainbetter practices,with lessons adopted from

other complex organizations (eg, military or transportation).

Neither the organizations norfinancesexist to innovate on the

scale required. Small, incremental federal or foundation grants are

an ineffective spur of sustainedchange in clinical practice because

behavioraland culturalissues remainunaddressed.It is unlikelythat

recent federal and state risk sharing (accountable care organiza-

tions)orotherincentiveswillprovetobeadequateforthesamerea-son.Therefore, morefundamental changes are needed. In particu-

lar, 3 changes should be considered.

Additional investment by insurers and health systems in delivery

innovation to bring them to the median of other service indus-

tries. This increment could produce an annual influx of $8 billion

to$15 billion,potentiallyquadruplingthe levelof effortoverall,and

can be funded from administrative simplification and savings.

Sharply increasing federal support of service sector innovation,

which canbe channeled through theCenters forDisease Control

and Prevention, Public Health Service, AHRQ, Centers for Medi-

care& Medicaid (CMS), Patient-Centered Outcomes ResearchIn-

stitute,and NIH. Fundsmightbe generatedby allocating 50%all

savings generated over the next decade by CMS demonstration

projects andby creatingnew regionalprivatehospitalphysician

insurer innovationconsortia toundertake wholesale changein de-

livery.

Encouragementofnewentrantswhoarepreparedtomakebasic,

highly disruptive changes in service delivery (via tax credits and

other incentives thatare comparable withthosenow available for

investment in plant and equipment). Examples now on the hori-

zon 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 auto-

mated artificialintelligence agents forasthmaand diabetescon-

trol. Such examples are threatening to many physicians andhos-

pitals but have the potential to lowercosts and improve quality.41

The Challenge of Globalization

Biomedical science and improved health are tied closely to growth

of a countrysgeneral economy.42Theprimacyof theUnited States

as the source of biomedicaltechnology (anduntil recently, longev-

ity)has correspondedwith a 4-decade-long improvement inreal per-

sonal incomes. In turn, investment in science and technology has

been a potent force producing higher personal incomes and total

GDP,withthelongerlifeexpectancythatwasachievedbetween1970

and1990estimatedtohaveaddedabout35%toUSGDPby2000.43

Some have suggested thata domestic, US-centric perspective

is antiquatedand parochial in an era of globalization becausepeople,

ideas,capital,andinformationarehighlymobile.44TheUnitedStates

hasbeen theworlds leader for6 decades in investment in scienceand technology research and development. In 2012, the United

States spent$366 billionon allresearchand development,or 2.8%

of GDP.45 However, the UnitedStates declined from sixth in 2000

to 10th in 2012 in its proportion of research and development in-

vestment compared with the 34-country Organisation for Eco-

nomic Co-operation and Development. In Asia, South Korea and

Chinanoweachspendabout2%ofGDP,withChinaexpectedtosur-

pass theUnited States in absolute funding withina decade.45 This

trend,along withaggressivepatent practices bysomecountries(no-

tablyChina)ordisregardofintellectualpropertyrights(inAfrica,Cen-






14/16


tral Europe, and India), raise barriers to the diffusion of clinical in-

novations between countries.

Two areas are ofparticular concern:erosionof thepublicssup-

portforscienceintheUnitedStatesandhesitancytoreformthepat-

ent system.

PublicOpinion

Recent polls show erosion of public support for biomedical re-searchcomparedwithother priorities. Supporthas declinedsteadily

since 2000 and is now well behind concerns about the economy,

domestic security, immigration, crime, and the US role in interna-

tionalaffairs.46,47The trendis not confinedto the UnitedStatesbut

is alsoevidentin Europe. Despitethe demonstrablesuccessesof ear-

lierdecades,theprimacyofscienceasthesourceofimprovedhealth

is todayquestioned because of theconvergence of several forces.

First,despitebold promises, advances visibleto thepublichave

been less frequent because solutions to many conditions like au-

tism, Alzheimerdisease, andmost cancersremain elusive,with nei-

ther effective prevention nor treatment, despite intensive re-

search. Second, drug discovery has proven more difficult and less

predictable than many hadexpected,witha decline overthe past 2

decades in altogether newclasses of drugs,new registrations, and

drugsin clinicaltrials.Third,the economicsof medical advancesare

being scrutinized as a source of added insurance cost, with grow-

ing pressure to justify clinical value using objective criteria, formal

tools of technology assessment, and consideration of quality-of-

lifemeasures separatelyfrom thosethat affectmortality.Some tech-

nology skeptics have evenurgedthatthe United Statestakea tech-

nologyholiday 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

poorperformanceof US health careas judged by international mor-

tality comparisons. Skepticismof medical research is evident in re-

cent US budget discussions, which have favored the physical sci-ences 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 bio-

pharmaceuticals areheavilydrivenby engineeringadvances, which

in turn depend more on the physical sciences and less on the bio-

logical sciences.Thesetrends imply that pressure will mount to di-

vertresources away fromchallenging buthigh-potentialavenuesin

biology.

Patents and Intellectual Property

As this analysis demonstrates, at the same time support for bio-

medical research in theUnited States haswavered, globalinterest

in biomedicalresearch is increasing.

49

Asia andEurope arenow onparwiththe UnitedStatesin therelativenumber ofresearchers, and

Asia, especially China, is making rapid gains in life science patents

andhighlycited publications. Althoughthe United States is farfrom

losing its preeminent role in biomedical research, similar historical

changeshave occurredin other industries (eg,electronics, automo-

biles, industrial manufacturing) thatover time reshaped the coun-

trys competitiveness. Many in the United States applaud the new

interest in other countries as a reflection of the truly international

reach of science, since discoveriesmade anywherecan be ap-

plied here. This optimistic view neglects the strong barriers cre-

atedby intellectualpropertypractices,which reward patenting any

discovery or technique, no matter how incremental or trivial.

Apatentsprimarypurposeistofosterinnovationbymakingnew

knowledge generally available in order that successors may im-

proveontheoriginalinvention.Inreturn,theinventorreceivesatem-

porarymonopoly. Recently, however, patentshave beenused tocap-

turefinancialvalueofadiscoveryorproductattheexpenseoffurther

invention, a practice known as rent-seeking. Current intellectualproperty practices inhibit rather thanenhance biological discovery

and clinical innovation.50

Several factors bear on the global pattern we observed in this

analysis: patents on basic discoveries before utility is demon-

strated (such as of cancer-related genes), tying surgical proce-

dures (such as deep brain stimulation) to specific patented de-

vices, abuseof thelitigationprocess by patent aggregators(known

formallyas nonperforming entities orpejorativelyas patenttrolls),

andthehighcostof patentfiling anddefensein multiple countries.

Universitiesandinvestigatorsalike seethat patentingearly-stagedis-

coveriesrarelyresultsin financial returns becausecostsexceedroy-

alty revenue, except for occasional, high-value findings, which are

serendipitous and economically unpredictable.

Threechangescan alignintellectualproperty protections with

incentives forsubstantive, clinically important advancesand would

be accomplishedby changes to current federal law.51,52

Defer patents to later in thediscovery chain, awardingto the en-

tity demonstrating clinical utility as well as the inventor. Because

costs aregreatestand riskshighest to those whofinanceand con-

duct later-stage clinical development, those risks should be re-

flected in intellectual property protections.

Ensure that patents are granted only for truly novel, not just in-

cremental, technologies, withclinicalprocedures remainingin the

public domain.

Establish patent pools, which allow innovators to share value and

cost to encourage free exchange of information and set technol-

ogy standards. Patent pools haveoperatedsuccessfully sincethe19th century and are today common in semiconductors, aero-

space, and entertainment.51,53

Taken together, these changes could foster fundamental, not

incremental,innovation andcould facilitate moreeffective collabo-

rations. They are also prerequisites for generating new sources of

investment.

Conclusions

The informationassembled inthis article does notdo justice tothe

breadthanddepthofmedical researchin theUnitedStates andother

countries. For anycurrent orfuturepatient,research provides hope.Forthe researcher, unanswered biologicaland clinicalquestionsare

endlessly fascinating.For a company or its investors, new products

and services promise financial return, often at levels greater than

other industries.For thepolicymaker, biomedicalresearch isa route

tonationalcompetitivenessas well asto enhancedpublic healthand

economic vitality.

Our perspective for this examination has been primarily eco-

nomic, although the value of research surely is not solely eco-

nomic. Therefore, in our view, biomedical science and technology

must be seen in a broader context, with its myriad roles recog-






15/16


nized: as a source of competitiveness on theinternational stage; as

a vehicle tosatisfy curiosity; asa meansto provide realistichopeto

patientsand familieswho mustconfront grave conditions. Noneof

thoseroleswillnecessarilybereflectedinreducedhealthcarecosts.

Therefore, a newcalculus isrequired toweighthemas decisions of

cost andvalueare made.

Clearly,thepaceofscientificdiscoveryandneedforserviceim-

provement have outstripped the capacity of current financial andorganizational models to support the opportunities afforded.

Theanalysis underscores theneed forthe United States to find

newsources to support medical research,if theclinicalvalue of its

past science investment and opportunities to improve care are to

be fully realized. Substantial new private resources are feasible,

thoughpublic funding canplay a greater role.Bothwill require non-

traditionalapproaches if theyare to be politically and economically

realistic.Givenglobaltrends, theUnitedStateswillrelinquishits his-

toricalinnovationlead in thenext decade unless suchmeasuresareundertaken.

ARTICLE INFORMATION

Author Contributions: DrMoseshad full accessto

allof thedatain thestudy andtakes responsibility

fortheintegrity ofthe data andthe accuracy ofthe

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 manuscriptfor 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

completedand submitted theICMJE Form for

Disclosureof PotentialConflicts of Interest.Dr

Moses reports membership in a variety of

foundation andcompanyboards in healthcareand

financial services. Dr Moses, Messrs Matheson and

Palisch, and Dr Cairns-Smith report providing

management consultingservices to hospital

systems, insurers,foundations, and

pharmaceutical, device, and IT companies.DrDorsey reports consultancyfor Amgen, Avid

Radiopharmaceuticals, Clintrex, Lundbeck,

Medtronic,the National Instituteof Neurological

Disordersand Stroke,and TransparencyLife

Sciences;a filed patent related to telemedicine and

neurology;and stock/stock options in Grand

Rounds (a second opinion service). No other

disclosureswere reported.

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The Anatomy Of Medical Research