The Anatomy of Medical Research

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
Editorials pages 143 and 145
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.
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 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 citation rates and
impact factors.
FINDINGS (1) Reduced science investment: Total US funding increased 6% per year
(1994-2004), but rate of growth declined to 0.8% per year (2004-2012), reaching $117 billion
(4.5%) of total health care expenditures. Private sources increased from 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 health care expenditures) or only 1/20th of
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 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% (2004) to 50% (2012) of the global total, as did that of US companies (50% to 41%),
with the total US (public plus private) share of global research funding declining from 57% to
44%. Asia, particularly China, tripled investment from $2.6 billion (2004) to $9.7 billion
(2012) preferentially for education and personnel. The US share of life science patents
declined from 57% (1981) to 51% (2011), as did those considered most valuable, from 73%
(1981) to 59% (2011).
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. 2015;313(2):174-189. doi:10.1001/jama.2014.15939

174
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, CairnsSmith, 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 150,
North Garden, VA 22959
(hm@alerion.us).
(Reprinted) jama.com
Copyright 2014 American Medical Association. All rights reserved.
Downloaded From: http://jama.jamanetwork.com/ on 01/15/2015
Special Communication Clinical Review & Education
he promise of new drugs, vaccines, medical procedures, and

devices captures the imaginations of the public, scientists, and physicians alike. For the last century, medical research, including public health advances, has been the primary source
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 worlds 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 observers 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 worlds 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 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. 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. Establishing strong incentives for investment in health service and
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 2012). 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 40 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
Science and Technology

Workforce
Workforce size
Historical trends
International comparisons
Medical Research Activities
Biomedical research
Historical funding trends
Funding by phase of
research
Funding by therapeutic area
Health services research

Historical funding trends
Industrial sector comparisons
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Medical Research Output

Patents
International comparison
of patenting activity
Publications
International comparison
of publication activity
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.
(Reprinted) JAMA January 13, 2015 Volume 313, Number 2
175
slowed (medical device, 6.6% to 6.2% in 1994-2004 vs 20042012; biotechnology, 14.1% to 4.6% in 1994-2004 vs 20042012), or declined (pharmaceutical firms, 6.8% to 0.6% in 19942004 vs 2004-2012).
Figure 2. US Funding for Medical Research by Source, 1994-2012

Funding source
Foundations, charities, and other private funds
Medical device firms
State and local government
Biotechnology firmsc
Research Funding
Other federalb
Pharmaceutical firms
Biomedical Research
National Institutes of Healthb
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Compound annual growth

rate, 6.3% d

rate, 0.8% d
140
Medical Research Funding, $, in Billions a
The distribution of investments across the types of medical research changed from 2004 to 2011. 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 2004 to 2011 (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 $7.0
billion in 2007 (eFigure 3 in the Supplement). During that period,
investment in biotechnology companies as a share of total venture
capital investment increased from 10% 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 2008-2009, declining to a low of $4.3 billion in
2009. Venture capital investment still has not recovered to its pre2008 levels, with only $4.5 billion invested in 2013. 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 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 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
120
100
80
60
40
20
0
1994
1996
1998
2000
2002
2004
Year
2006
2008
2010
2012
Includes
ARRA Fundingb
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 2012 dollars using the Biomedical Research and
Development Price Index.4
The National Institutes of Health and other federal sources include stimulus
provided by ARRA in 2009 and 2010.
Data from 1994-2002 and 2011-2012 were estimated based on linear

regression analysis of industry market share.
Compound annual growth rate (CAGR) supposing that year A is x and year B is
y, CAGR = (y/x){1/(BA)}1. The CAGR was calculated separately for 2 different
periods with a single overlapping year: 1994-2004 and 2004-2012. The cut
point was chosen at 2004 given the changes seen in funding from the
National Institutes of Health in that year.
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 2011, 42% of total
not-for-profit funding was by the top 10 public medical charities and
top 10 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
Statesbased 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 0.2% and
177
slowed (medical device, 6.6% to 6.2% in 1994-2004 vs 20042012; biotechnology, 14.1% to 4.6% in 1994-2004 vs 20042012), or declined (pharmaceutical firms, 6.8% to 0.6% in 19942004 vs 2004-2012).
Figure 2. US Funding for Medical Research by Source, 1994-2012

Funding source
Foundations, charities, and other private funds
Biotechnology firmsc
Research Funding
Other federalb
Biomedical Research
National Institutes of Healthb
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rate, 6.3% d

rate, 0.8% d
140
Medical Research Funding, $, in Billions a
The distribution of investments across the types of medical research changed from 2004 to 2011. 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 2004 to 2011 (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 $7.0
billion in 2007 (eFigure 3 in the Supplement). During that period,
investment in biotechnology companies as a share of total venture
capital investment increased from 10% 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 2008-2009, declining to a low of $4.3 billion in
2009. Venture capital investment still has not recovered to its pre2008 levels, with only $4.5 billion invested in 2013. 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 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 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
120
100
80
60
40
20
0
1994
1996
1998
2000
2002
2004
Year
2006
2008
2010
2012
Includes
ARRA Fundingb

Supplement. ARRA indicates American Recovery and Reinvestment Act.
a
The National Institutes of Health and other federal sources include stimulus
provided by ARRA in 2009 and 2010.
Data from 1994-2002 and 2011-2012 were estimated based on linear

regression analysis of industry market share.
y, CAGR = (y/x){1/(BA)}1. The CAGR was calculated separately for 2 different
periods with a single overlapping year: 1994-2004 and 2004-2012. The cut
point was chosen at 2004 given the changes seen in funding from the
National Institutes of Health in that year.
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 2011, 42% of total
not-for-profit funding was by the top 10 public medical charities and
top 10 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
Statesbased 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 0.2% and
177
Clinical Review & Education Special Communication
Figure 3. Growth in US Funding for Medical Research by Source, 1994-2012

Compound Annual
Growth Rate, % b
Medical Research Funding,

$ (%), in Billions a
Medical Research Funding,

$, in Billionsa
120
1994
2004
2012
1994-2004
2004-2012
Foundations, charities, other private
2.6 (4)
3.9 (4)
4.2 (4)
4.2
1.0
3.9 (7)
5.9 (5)
6.3 (5)
4.1
0.9
Other federal
8.0 (13)
4.8 (4)
7.1 (6)
4.9
5.0
17.6 (29)
35.6 (33)
30.9 (27)
7.3
1.8
6.2
Funding Source
100
80
National Institutes of Health
60
40
20
3.8 (6)
7.1 (6)
11.5 (10)
6.6
Biotechnology firms
3.7 (6)
13.7 (12)
19.6 (17)
14.1
4.6
20.0 (34)
38.6 (35)
36.8 (32)
6.8
0.6
Overall
59.5
6.3
0.8
116.5
109.7
0
1994
2004
2012
Year
b

Supplement.
a
y, CAGR = (y/x){1/(BA)}1.
Adjusted to 2012 dollars using the Biomedical Research and Development

Price Index.4
Figure 4. Pharmaceutical Industry Medical Research Funding by Phase of Research, 2004-2011

Industry Medical Research
Funding, $, (%), in Billions a
2004
2011
2004-2011
50
Uncategorizedc
4.2 (9)
1.7 (3)
11.9
40
Phase 4
6.4 (13)
4.8 (10)
3.9
Approval
4.5 (9)
4.1 (8)
1.2
Phase 3
12.6 (26)
17.6 (36)
4.9
20
Phase 2
4.9 (10)
6.2 (13)
3.3
10
Phase 1
3.2 (7)
4.3 (9)
4.1
Prehuman/preclinical
12.5 (26)
10.6 (22)
2.3
Overall
48.3
49.3
Industry Medical Research

Funding, $, in Billionsa
Phase of Research
30
2004
2011
Pharmaceutical industry funding by phase was obtained from Pharmaceutical

Research and Manufacturers of America (PhRMA) annual reports, 2004-2011.6
Data were 2 years old at time of publication and include both domestic and
international research funding from PhRMA members.
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 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
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, 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 0.1% of revenue), which was well below
the median for industrial sectors ($5.5-$7.3 billion for total fund178
Compound Annual
Growth Rate, % b
y, CAGR = (y/x){1/(BA)}1.
Uncategorized funding could not be allotted to a single phase of research.
ing, 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
increased from $208.8 billion in 2004 to $265.0 billion in 2011, 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 $28.0 billion in 2004 to $52.4 billion in 2011,
JAMA January 13, 2015 Volume 313, Number 2 (Reprinted)
0.3
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or 9.4% per year, with especially large increases in China, 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 2004 to 2012, and Asian economies increased by approximately the same share (13% in 2004 to 20% in 2011). Although absolute growth of Asian investment from 2004 to 2011 reached $24
billion, the United States remained the leading sponsor of global
medical research in 2011 (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 2011. However, US contributions increased slowly from both public (0.1%/year) and industry sources (1.7%/year).
Public funding in the United States decreased to a 49% share
of the worlds public research investment by 2011, down from 57%
in 2004 (Figure 8). United States industry, which accounted for
nearly half of global industry medical research expenditures in 2004,
declined to 41% of global industry funding in 2011 (Figure 8). Japan
demonstrated the greatest increase in the worlds 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 worlds leading sponsor for
both public and industry medical research funding in 2011.
Science and Technology Workforce

From 1996 to 2011, the US science and technology workforce increased by 2.7% annually to reach 1.25 million workers (Figure 9).
Over the same period, Chinas 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 China led the world in the overall size of their science
and technology workforce, it had only 1.9 science and technology
workers per 100 000 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 100 000 full-time
equivalents in its total workforce, or the median for the 10 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 10 Therapeutic Areas, 2013

Therapeutic areaa
Anticancer, otherb
Anticancer,
immunological
Prophylactic vaccine,
anti-infective
Antidiabetic
Analgesic
Rare diseasec
Anti-inflammatory
Recombinant vaccine
Cognition enhancer
0
200
400
600
800 1000 1200 1400 1600 1800
No. of Compounds in Clinical Trialsa
Data for the number of compounds in development were from the Citeline
Pharma R&D Annual Review 2014.10 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 10 479 compounds in 2013.
Includes all nonimmunological anticancer compounds.
Rare diseases were defined as those affecting 200 000 or fewer people in the
United States.
Figure 6. US Funding for Health Services Research by Source, 2004-2011

Health Services Research
Funding, $, in Millions (%) a
Health Services Research
Funding, $, in Billions a
Funding source
6
2004
2011
2004-2011
Health services industryc
653 (18)
1352 (27)
11.0
AHRQ
365 (10)
1018 (20)
15.8
1158 (32)
1189 (24)
0.4
Other federald
442 (12)
494 (10)
1.6
Foundationse
1034 (28)
967 (19)
1.0
Overall
3652
NIH
Compound Annual
Growth Rate, % b
5019
4.6
2004
2011
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

Price Index.4
y, CAGR = (y/x){1/(BA)}1.
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
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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 2011 only).
Foundation funding includes total giving from the Robert Wood Johnson
Foundation, California Endowment, Pew Charitable Trusts, W. K. Kellogg
Foundation, and Commonwealth Fund.
179
Figure 7. Research and Development Investment Ranking of Industrial Sectors Among US-Based Companies, 2011
Total research and development fundinga
Share of revenue spent on research and developmenta
Pharmaceuticals and biotechnology
Pharmaceuticals and biotechnology
Computer and electronics manufacturing
Internet service provider and web search
Software and paper publishing
Software and paper publishing
Automobiles and parts
Physical, engineering, and life sciences
Medical devices
Computer and electronics manufacturing
Machinery
Medical devices
Computer software and systems design
Aerospace and defense
Chemicals
Computer software and systems design
Aerospace and defense
Data processing and hosting

Machinery
Plastics, minerals, and metal products

Internet service provider and web search
Automobiles and parts
Median
Food and beverage
Chemicals
Mining, extraction, and support activities
Plastics, minerals, and metal products
Data processing and hosting
Mining, extraction, and support activities
Banking, credit, and securities
Architectual engineering
Telecommunications
Food and beverage
Physical, engineering, and life sciences
Telecommunications
Architectual engineering
Utilities
Health care servicesc
Banking, credit, and securities
Utilities
Health care servicesc
Domestic
Insurance carriers
Transportation services
Foreign
0.2
Transportation services
0
0.04
Insurance carriers
20
40
60
80
0.04
0
Research and Development

Spending, $, in Billions b
10
15
Research and Development

Spending as % of Revenue
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 Foundation13 or US
Census Bureau14 based on the availability of data. Revenues and research and
development expenditures were matched by industry using North American
Industry Classification System codes.
The pharmaceuticals and biotechnology, medical devices, and health care

services industries are highlighted in red.

Price Index.4
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, China contributes only 1.8% of global funding for
medical research but comprises 22.3% of the global science and technology 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.
eFigure 7 in the Supplement). The proportion of US inventors filing

patents in the United States decreased from 57% to 51% from 1981
to 2011. 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)
Outputs of Medical Research

Life Science Patent Filings
China filed 30% of global life science patent applications in 2011, increasing from 1% of global applications in 1991 (Figure 10). This includes applications from a number of patenting offices throughout
the world, including offices in China, the United States, and the
European Union. The United States followed with 24% of patent filings globally, increasing from an 11% share in 1991.
United States inventors led in the number of life science patent filings in both the United States and EU, where China accounted for less than 2% of filings in both regions (Figure 11 and
180
Median
Publications
The United States led the world with 33% of published biomedical
research articles in 2009 (Figure 13A). In the United States, the number of biomedical research articles increased at 0.6% per year from
2000 to 2009. During the same period, the number of articles published in China 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
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Medical Research Funding, in Billionsa
Figure 8. Global Medical Research Funding in Select Countries/Regions, 2011

280
260
240
220
200
180
160
140
120
100
80
60
40
20
0
Publicb
Industryc
Globale
United
States
Europe
Japan
China
Other
Asiaf
Canada
Australia
Medical research funding,

$, in billions (%) a
Overall
265.0 (100) 117.2 (44) 88.6 (33)
37.8 (14)
4.9 (1.2)
9.7 (4)
3.1 (1.2)
3.8 (1.4)
Publicb
102.8 (100) 50.5 (49) 26.9 (26)
17.0 (17)
1.3 (2)
2.4 (2)
1.8 (2)
2.8 (3)
Industryc
162.2 (100) 66.6 (41) 61.6 (38)
20.8 (13)
3.6 (0.8)
7.3 (4)
1.3 (0.8)
1.0 (0.6)
4.5
9.3

rate, % (2004-2011)d
3.5
1.0
4.1
The regions/countries/economies in the analysis include the major countries of

North America (United States, Canada), Europe (including the 10 largest
European countries in the Organisation for Economic Co-operation and
Development), and Asia-Oceania (Australia, China, India, Japan, 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 year15 and adjusted to 2012 dollars using the Biomedical
Research and Development Price Index.4
articles in 2000 and 56% in 2010; however, the growth of highly

cited literature published by the United States trails other major countries, regions, and economies (Figure 13B). After controlling for the
share of the worlds biomedical research articles using a citation index, the United States declined from 2000 to 2010 at 0.2% per
year as the rest of the world increased by approximately 1% per year.
New Drugs and Devices
Since 2003, 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 2011 and
2012, they returned closer to average in 2013 with 27 approvals (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 2009 to 39
approvals in 2012, only 22 new devices were approved in 2013.
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 2013, 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 industrys value in comparison with others. Since 2003, market return for the entire health care industry (including medical device,
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6.8
16.9
20.8
Public research and development funding included that from government

agencies, higher educational institutes, and not-for-profit organizations.
Industry research and development funding included pharmaceutical,

biotechnology, and medical device firms.
y, CAGR = (y/x){1/(BA)}1.
Global total for medical research funding includes research and development
expenditures from 36 major world countries across 4 continents.
Other Asia includes India, Singapore, and South Korea.
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 & Poors 500 (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
& Poors 500, increasing annually at 7.3%, 6.8%, and 5.8%, respectively. The financial crisis of 2008 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, and health insurance companies performed exceptionally well
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 the US lead in these categories is declining. For example, whereas the United States funded 57% of medical research
in 2004, in 2011 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(Reprinted) JAMA January 13, 2015 Volume 313, Number 2
181
Figure 9. Top 10 Countries by Size of Science and Technology Workforce, 1996-2011

A Work force sizea
Full-time Equivalents, in Thousands
1400
1996
1200
2011
1000
800
600
400
200
0

rate, % (1996-2011)b
B
Chinac
United
States
Japan
Russian
Federation
Germany
United
Kingdom
Korea
France
Canada
Spain
6.0
2.7
0.4
1.5
2.6
3.7
7.4
3.2
3.8
6.4
Work force size per 1000 total employment
No. per 1000 Total Employment
12
1996
10
2011
8
6
4
2
0

rate, % (1996-2011)b
Korea
Japan
France
Canada
United
States
Germany
6.2
0.5
2.5
2.2
1.8
2.2
2.9
2.1
Spain
Chinac
4.1
5.2
The sizes of national science and technology workforces were obtained from
the Organisation for Economic Co-operation and Development.16
y, CAGR = (y/x){1/(BA)}1.
Annual growth in Chinas science and technology workforce may be

underestimated because of a change in reporting methods for China in 2009.
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.
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 research has become global. It has been transformed by 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
182
United
Russian
Kingdom Federation
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. Year to year variability in funding is a threat to that stability.
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Figure 10. Global Life Science Patent Applications by Country of Origin, 1981-2011
No. of patent family applications
in life sciencea
400 000
Percentage distribution by country

100
Other
Other
Germany
Germany
80
Japanb
300 000
Japanb
Russia
Percentage
Russia
No.
Taiwan
India
200 000
Australia
60
Taiwan
India
Australia
40
Canada
100 000
Canada
Korea
Korea
20
United States
United States
China
0
1981
1991
2001
China
2011
1981
1991
Year
2011
Year
biotechnology, pharmaceuticals, macromolecular chemistry and polymers,

and microstructural and nanotechnology.
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
2001
Life science was defined to include the following categories: analysis of

biological materials, medical technology, organic fine chemistry,
Only patent grants, not all patent applications, are counted for Japan, 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, 1981-2011

No. of patent application families
in life science by country of inventor a
80 000
Percentage distribution
by country of inventor
100
Other
Netherlands
Great Britain
60
Switzerland
40
France
20 000
Germany
France
Germany
20
Japan
United States
0
1981
1991
2001
2011
Taiwan
Percentage
No.
Korea
40 000
Great Britain
China
Taiwan
Switzerland
Korea
Netherlands
80
China
60 000
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.
Other
Japan
United States
0
1981
Year
1991
2001
2011
Year
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.
Todays 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 developjama.com
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.
ment 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
183
Figure 12. Highly Valuable US Life Science Patents by Country of Origin, 1981-2011
No. of life science patent applications
in top 10% of patents by inventor countrya,b
8000
Percentage distribution of top 10%

of patents by country of inventor b
100
Other
Other
China
China
80
Netherlands
6000
Netherlands
Korea
Percentage
Korea
No.
Canada
Switzerland
4000
France
60
Canada
Switzerland
France
40
Great Britain
2000
Great Britain
Germany
Germany
20
Japan
Japan
United States
0
1981
1991
2001
United States
2011
1981
1991
Year
2011
Year
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
2001
and microstructural and nanotechnology.

b
Life science was defined to include the following categories: analysis of

biological materials, medical technology, organic fine chemistry,
biotechnology, pharmaceuticals, macromolecular chemistry and polymers,
Top 10% 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 patents age, the number of patent claims, and
the strength of a patents 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, 2000-2010
400 000
300 000
2000
2009
Otherb
49 946
63 483
Other Asiac
10 029
20 790
8.4
3937
18 399
18.7
No.
China
100 000
2.7
26 755
21 477
2.4
114 970
120 421
0.5
United States
116 156
122 659
0.6
Overall
321 795
367 229
1.5
2000
2000-2009
European Uniond
Japan
200 000
Annual
Growth Rate, % a
No. of Medical
Research Articles
A No. of medical research articles
2009
Year
No. of Highly Cited

Medical Research
Articles
No. of highly cited medical research articles
No.
2000
Citation Index
of Highly
Cited Articles
Compound
Annual Growth
Rate (Citation
Index), % a
2000
2010
2000-2009
763
1034
0.57
0.59
0.4
Other Asiac
20
113
0.1
0.22
8.6
8000
China
16
82
0.22
0.22
0.3
6000
Japan
345
294
0.5
0.45
1.0
4000
European Uniond
2079
2936
0.68
0.86
2.5
United States
5402
5729
1.67
1.63
0.2
Overall
8626
10 189
NA
NA
NA
12 000
Otherb
10 000
2000
0
2000
2010
2009
Year
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 2000
are references made in articles in 2000 to articles published in 1996-1998. The
citation index of highly cited articles was defined as the share of the worlds top
184
1% cited biomedical research articles divided by the share of the worlds

biomedical research articles in the cited year window.
a
y, CAGR = (y/x){1/(BA)}1.
Other includes the remaining 159 nations of the world within the original
database.
Other Asia includes India, Indonesia, Malaysia, Philippines, Singapore, South

Korea, Taiwan, and Thailand.
The European Union includes 27 European nations.
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Figure 14. Market Performance of Publicly Traded Life Sciences and Health Care Companies, 2003-2013
NYSE Arca Biotechnology Index
Health insurance
Standard & Poor 500 index
Dow Jones US health care index
Dow Jones US medical equipment index
NYSE Arca Pharmaceutical Index
Hospital chains
Value of $100 Invested January 2003, $
700
600
500
400
300
200
100
0
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Year
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
Foreign capital repatriation, with new tax provisions that allow companies 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 50% 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.
jama.com
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 $100 on
January 3, 2003, at various future
time points. More detail regarding the
indexes can be found at Standard &
Poors Dow Jones and New York
Stock Exchange sector
classifications.19,20
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.30
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,
as well as access to material, reagents, clinical information, samples,
and ultimately patients who are willing to participate in clinical trials.
Therefore, recent efforts have been aimed at facilitating those critical interactions. An example is the Accelerating Medicines
Partnership31 (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
biological questions were identified that can best be answered using
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
between industrial-scale and individual-inspired laboratories.21 Specifically, further experimentation with new organizational models
185
should be aimed at obviating current limitations of the existing balkanized corporate, venture capital, NIH, and university practices.
Examples of new models are the Broad Institute in Cambridge, 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 $5.0 billion over the last decade (Figure 6). However,
this growth has occurred on a very small base. Total funding for health
services research is 0.3% 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 $5.0 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 al32 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
benefit is enormous and total savings may exceed the return on many
categories of blockbuster drugs.35
Three other factors pose barriers:
Behavior change. Disruption of the current patterns of care is threatening 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
research34-37 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
many individuals to adjust the way they interact, 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.40 Therefore, research should focus on devising reliable, effective inter186
ventions 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 50% all
savings generated over the next decade by CMS demonstration
projects and by creating new regional private hospitalphysician
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 countrys 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, with the longer life expectancy that was achieved between 1970
and 1990 estimated to have added about 35% to US GDP by 2000.43
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 worlds leader for 6 decades in investment in science
and technology research and development. In 2012, 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 2000
to 10th in 2012 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
China now each spend about 2% of GDP, with China expected to surpass the United States in absolute funding within a decade.45 This
trend, along with aggressive patent practices by some countries (notably China) or disregard of intellectual property rights (in Africa, Cen-
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tral Europe, and India), raise barriers to the diffusion of clinical innovations between countries.
Two areas are of particular concern: erosion of the publics 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 2000 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.
ated by intellectual property practices, which reward patenting any

discovery or technique, no matter how incremental or trivial.
A patents primary purpose is to foster innovation by making new
knowledge generally available in order that successors may improve on the original invention. In return, the inventor receives a temporary monopoly. Recently, however, patents have been used to capture financial value of a discovery or product at the expense of further
invention, a practice known as rent-seeking. Current intellectual
property practices inhibit rather than enhance 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 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
formally as nonperforming entities or pejoratively as patent trolls),
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
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 China, 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 countrys 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 applied here. This optimistic view neglects the strong barriers crejama.com
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(Reprinted) JAMA January 13, 2015 Volume 313, Number 2
187
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.
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.
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