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 Supplemental content at
research supports improved delivery, access, and cost. Few previous analyses have compared jama.com
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 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
Author Affiliations: The Alerion
pools, and public-private risk sharing collaborations. Given international trends, the United Institute and Alerion Advisors LLC,
States will relinquish its historical international lead in the next decade unless such measures North Garden, Virginia (Moses);
are undertaken. Johns Hopkins School of Medicine,
Baltimore, Maryland (Moses); Boston
Consulting Group, Boston,
Massachusetts (Matheson, Cairns-
Smith, Palisch); University of
Rochester School of Medicine,
Rochester, New York (George,
Dorsey); Stanford University School
of Medicine, Stanford, California
(Palisch).
Corresponding Author: Hamilton
Moses III, MD, Alerion, PO Box 150,
North Garden, VA 22959
JAMA. 2015;313(2):174-189. doi:10.1001/jama.2014.15939 (hm@alerion.us).

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 The Anatomy of Medical Research
T
he promise of new drugs, vaccines, medical procedures, and
devices captures the imaginations of the public, scien-
tists, and physicians alike. For the last century, medical re-
search, including public health advances, has been the primary source
of and an essential contributor to improvement in the health and lon-
gevity 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 fund-
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, study groups, and coalitions of researchers. This orga-
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
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 im-
proved national competitiveness. Hospital executives expect re-
search 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 regula-
tor aims for the appropriate amount of risk while still getting inno-
vations that matter to the market. For philanthropists and public
health campaigners, research represents the best hope for 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
constituents play a role in how research is funded and brought from
bench to bedside. Meeting their collective needs produces a com-
plex 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 inter-
national context to understand the key forces of change and sug-
Figure 1. The Anatomy of Medical Research: US and International Comparisons
Medical Research Funding Medical Research Activities
Sources of funding
Government, industry,
foundations, charities, Biomedical research
and universities Historical funding trends
Historical trends Funding by phase of
International comparisons research
Funding by therapeutic area
Science and Technology Health services research
Workforce Historical funding trends
Industrial sector comparisons
Workforce size
Historical trends
International comparisons
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Special Communication Clinical Review & Education
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 pri-
vate sponsors at a time when scientific opportunity has never
been greater but when support for sustained, long-term invest-
ments is limited and short-term performance is rewarded dis-
proportionately
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 prom-
ise of the cumulative investment in biomedical science and oppor-
tunity for improved services are to be realized.
Information in 8 areas has been assembled to inform the dis-
cussion (Figure 1). Two areas involve the current and historical land-
scape in the United States of investment and employment 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 areas quantify the value of that investment
as judged by resulting patents, publications, drug and device ap-
provals, 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 vari-
ous 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 gen-
eral, 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 Ad-
ditionally, in this study, the 40 largest developed nations were ex-
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
EMA indicates European Medicines
with market average
Agency; FDA, US Food and Drug
Administration.
(Reprinted) JAMA January 13, 2015 Volume 313, Number 2 175
 Clinical Review & Education Special Communication
Box. List of Included and Supplementary Figures and Tables
Included figures
Figure 1. The Anatomy of Medical Research: US and International
Comparisons
Figure 2. US Funding for Medical Research by Source, 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
Figure 6. US Funding for Health Services Research by Source, 2004-
2011
Figure 7. Research and Development Investment Ranking of Indus-
trial Sectors Among US-Based Companies, 2011
Figure 8. Global Medical Research Funding in Select Countries/
Regions, 2011
Figure 9. Top 10 Countries by Size of Science and Technology Work-
force, 1996-2011
Figure 10. Global Life Science Patent Applications by Country of
Origin, 1981-2011
Figure 11. US Life Science Patent 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 Care Companies, 2003-2013
amined using comparable, standard measures of investment, em-
ployment, economic value, patents, and publications.
Although reliable international comparisons of biomedical sci-
ence funding are possible, comparable data for health services re-
search are not available because other countries do not distinguish
them from costs of insurance and expenditures on provision of care.
A complete description of methods is included in the foot-
notes accompanying each table and figure.
Information, Trends, and Analysis
Medical Research Funding
In 2012, total US funding of biomedical and health services
research was $116.5 billion (Figure 2 and 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
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The Anatomy of Medical Research
Supplementary figures and tables
eFigure 1. Historical Growth Trajectory of US Medical Research Fund-
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 for Selected Conditions
eFigure 5. Growth in Global Medical Research Funding in Select Coun-
tries/Regions, 2004-2011
eFigure 6. Medical Research and Development Funding and Sci-
ence and Technology Workforces in Select Countries/Regions, 2011
eFigure 7. European Life Science Patent Applications by Country of
Origin, 1981-2011
eFigure 8. Highly Valuable European Life Science Patents by Coun-
try of Origin, 1981-2011
eFigure 9. Comparison of New Approvals by US Food and Drug Ad-
ministration and European Medicines Agency, 2003-2013
eTable 1. US Funding for Medical Research by Source, 1994-2012
eTable 2. NIH Medical Research Funding by Type of Research, 2004-
2012
eTable 3. NIH Disease Research Funding and Burden of Disease for
Selected Conditions
eTable 4. Medical Research Funding From (A) Public Charities and
(B) Private Foundations, 2011
eTable 5. US Funding for Health Services Research by Source, 2004-
2012
eTable 6. Methods and Data Sources for Medical Research Funding
by Select Countries/Regions
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 investment
either 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
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 The Anatomy of Medical Research Special Communication Clinical Review & Education

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

Figure 2. US Funding for Medical Research by Source, 1994-2012
2012; biotechnology, 14.1% to 4.6% in 1994-2004 vs 2004-
2012), or declined (pharmaceutical firms, 6.8% to 0.6% in 1994- Funding source
2004 vs 2004-2012). 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

The distribution of investments across the types of medical re-

Compound annual growth Compound annual growth
search changed from 2004 to 2011. Pharmaceutical companies rate, 6.3% d rate, 0.8% d
shifted funding to late-phase clinical trials and away from discov-
140
ery activity such as target identification and validation. The share

Medical Research Funding, $, in Billions a

of pharmaceutical industry funding (including that by US compa- 120
nies outside of the United States) spent on phase 3 trials increased
100
by 36% (5%/year growth rate) from 2004 to 2011 (Figure 4), and
the share of investment in prehuman/preclinical activities de- 80
creased by 4% (2%/year average decline). This shift toward clinical
60
research and development reflects the increasing costs, complex-
ity, and length of clinical trials but may also reflect a deemphasis of 40
early discovery efforts by the US pharmaceutical industry. While in-
20
dustry has shifted funding to clinical trials, the share of NIH contri-
butions dedicated to basic science and clinical research was un- 0
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
changed (eTable 2 in the Supplement), with the majority of funds
Year Includes
still focused on basic research. These data may not accurately re-
ARRA Fundingb
flect the true division of NIH investment for basic science vs disease-
focused research, as a growing proportion of NIH expenditures is Data were calculated according to methods outlined in eTable 1 in the
for projects having potential clinical application in many diseases or Supplement. ARRA indicates American Recovery and Reinvestment Act.
organ systems.7 a
Data were adjusted to 2012 dollars using the Biomedical Research and
In real terms, venture capital investment in biotechnology com- Development Price Index.4
b
panies steadily increased from $1.5 billion in 1995 to a peak of $7.0 The National Institutes of Health and other federal sources include stimulus
provided by ARRA in 2009 and 2010.
billion in 2007 (eFigure 3 in the Supplement). During that period, c
Data from 1994-2002 and 2011-2012 were estimated based on linear
investment in biotechnology companies as a share of total venture regression analysis of industry market share.
capital investment increased from 10% to 18%, and the number of d
Compound annual growth rate (CAGR) supposing that year A is x and year B is
investments increased from 176 to 538. Investment levels and the y, CAGR = (y/x){1/(BA)}1. The CAGR was calculated separately for 2 different
number of transactions of biotechnology decreased following the 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
financial crisis in 2008-2009, declining to a low of $4.3 billion in
National Institutes of Health in that year.
2009. Venture capital investment still has not recovered to its pre-
2008 levels, with only $4.5 billion invested in 2013. Size of invest-
ment per transaction (median, $11 million, inflation adjusted) has re- to provisions of the Orphan Drug Act and relative ease of clinical
mained unchanged for 2 decades. trials. Investment can be expected to increase as diseases are
Public funding of medical research by condition was only mar- defined by biomarkers that allow the development of targeted
ginally associated with disease burden in the United States in 2010 therapies.12
(eFigure 4 in the Supplement). A set of 27 diseases that account Support from private foundations, public charities, and other
for 84% of US mortality, 52% of years of life lived with disability, entities comes from only a few organizations. In 2011, 42% of total
84% of years of life lost, and 70% of disability-adjusted life-years not-for-profit funding was by the top 10 public medical charities and
receive 48% of NIH funding (R2 = 0.26) (eTable 3 in the Supple- top 10 private foundations (eTable 4 in the Supplement). The How-
ment). Several factors other than disease burden may influence ard Hughes Medical Institute (which supports domestic research pri-
funding, including the quality of research, scientific opportunity, marily) and the Bill and Melinda Gates Foundation (which supports
portfolio diversification, or building of infrastructure, and the com- international research primarily) account for 87% of biomedical re-
bination of these factors complicates the relationship of funding to search funding by private foundations (eTable 4, panel B). United
particular conditions.8,9 Cancer and HIV/AIDS were funded well Statesbased medical charities direct most monies in the United
above the predicted levels based on US disability alone (eFigure 4 States, though the amount spent on research (as opposed to edu-
in the Supplement), with cancer accounting for 16% ($5.6 billion) cation, disease screening, and other activities) cannot be quanti-
of total NIH funding and 25% of all medicines currently in clinical fied using public data.
trials (Figure 5).
Rare diseases have emerged for industry as a preferential area Health Services Research Funding
of therapeutic development, with nearly as many compounds in Health services research, which examines access to care, the qual-
trials as analgesics and antidiabetic drugs (Figure 5). Industry ity and cost of care, and the health and well-being of individuals,
favors rare diseases because they are commercially attractive due communities, and populations, accounted for between 0.2% and

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 Clinical Review & Education Special Communication The Anatomy of Medical Research

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

Medical Research Funding, Compound Annual

$ (%), in Billions a Growth Rate, % b
120
Funding Source 1994 2004 2012 1994-2004 2004-2012

100
Foundations, charities, other private 2.6 (4) 3.9 (4) 4.2 (4) 4.2 1.0
Medical Research Funding,

State and local government 3.9 (7) 5.9 (5) 6.3 (5) 4.1 0.9
80 Other federal 8.0 (13) 4.8 (4) 7.1 (6) 4.9 5.0
$, in Billionsa

National Institutes of Health 17.6 (29) 35.6 (33) 30.9 (27) 7.3 1.8
60
Medical device firms 3.8 (6) 7.1 (6) 11.5 (10) 6.6 6.2
40 Biotechnology firms 3.7 (6) 13.7 (12) 19.6 (17) 14.1 4.6
Pharmaceutical firms 20.0 (34) 38.6 (35) 36.8 (32) 6.8 0.6
20 Overall 59.5 109.7 116.5 6.3 0.8

0
1994 2004 2012
Year

b
Data were calculated according to methods outlined in eTable 1 in the Compound annual growth rate (CAGR) supposing that year A is x and year B is
Supplement. y, CAGR = (y/x){1/(BA)}1.
a
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 Compound Annual

Funding, $, (%), in Billions a Growth Rate, % b
Phase of Research 2004 2011 2004-2011
50
Uncategorizedc 4.2 (9) 1.7 (3) 11.9
Industry Medical Research
Funding, $, in Billionsa

40 Phase 4 6.4 (13) 4.8 (10) 3.9

Approval 4.5 (9) 4.1 (8) 1.2
30
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
0
2004 2011 Overall 48.3 49.3 0.3

a
Pharmaceutical industry funding by phase was obtained from Pharmaceutical Data were adjusted to 2012 dollars using the Biomedical Research and
Research and Manufacturers of America (PhRMA) annual reports, 2004-2011.6 Development Price Index.4
Data were 2 years old at time of publication and include both domestic and b
Compound annual growth rate (CAGR) supposing that year A is x and year B is
international research funding from PhRMA members. y, CAGR = (y/x){1/(BA)}1.
c
Uncategorized funding could not be allotted to a single phase of research.

0.3% of national health expenditures between 2003 and 2011, an ing, or 1.7%-2.5% of revenue). Health insurers may provide addi-
approximately 20-fold difference in comparison with total medical tional health services research funding that cannot be distin-
research funding (eFigure 1 in the Supplement). Health services guished from the insurance industry as a whole, although these
research funding increased 4.6% per year from $3.7 billion in funds are small and unlikely to change the results for industry
2004 to $5.0 billion in 2011 (Figure 6 and eTable 5 in the Supple- funding (Figure 7).
ment). Investment from foundations decreased in real terms at 1%
per year over the period, following declines after the recession of International Medical Research Funding
2008. Increases in health services research funding were largely Global medical research expenditures by public and industry sources
driven by AHRQ (15.8%/year growth) and the health care services in the United States, Europe, Asia, Canada, and Australia combined
industry (11.0%/year growth), which includes hospitals, ambula- increased from $208.8 billion in 2004 to $265.0 billion in 2011, grow-
tory health care services, and nursing care facilities. Although ing at 3.5% annually (Figure 8 and eTable 6 in the Supplement). Al-
health care industry funding is likely underestimated because though there may be medical research funding from other areas of
research funds may not account for hidden costs of quality the world (eg, South America), these data represent the most reli-
improvement, research investment was especially low when com- able and current sources of global medical research investment.
pared with other industrial sectors (Figure 7). Insurers and health Among the regions included in the analysis, the United States dem-
systems rank among the lowest in research and development onstrated the slowest annual growth in investment (1.5%/year), fol-
(funding $1.3 billion, or 0.1% of revenue), which was well below lowed by Europe (4.1%/year) and Canada (4.5%/year). Asian coun-
the median for industrial sectors ($5.5-$7.3 billion for total fund- tries increased from $28.0 billion in 2004 to $52.4 billion in 2011,

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 The Anatomy of Medical Research Special Communication Clinical Review & Education

or 9.4% per year, with especially large increases in China, India, South Although China led the world in the overall size of their science
Korea, and Singapore. and technology workforce, it had only 1.9 science and technology
These trends resulted in the restructuring of the share of total workers per 100 000 full-time equivalents, the lowest among the
global investment (eFigure 5 in the Supplement). As a percentage countries included in the analysis (Figure 9). The United States em-
of global funding, the United States declined by approximately 13% ployed 8.1 science and technology workers per 100 000 full-time
from 2004 to 2012, and Asian economies increased by approxi- equivalents in its total workforce, or the median for the 10 largest
mately the same share (13% in 2004 to 20% in 2011). Although ab- workforces in the world.
solute growth of Asian investment from 2004 to 2011 reached $24 The investment in capital terms and in labor terms differ widely
billion, the United States remained the leading sponsor of global across countries and regions. The United States contributes 44.2%
medical research in 2011 (44% share), and Europe the next largest of global medical research funding but comprises only 21.2% of the
sponsor (33% share).
Overall growth was slightly greater for industry outside the
United States compared with public sources (4.3% vs 2.2%), and in- Figure 5. Compounds in Development for Top 10 Therapeutic Areas, 2013
dustry accounted for two-thirds of funds in 2011. However, US con-
Therapeutic areaa
tributions increased slowly from both public (0.1%/year) and indus-
Anticancer, otherb
try sources (1.7%/year).
Anticancer,
Public funding in the United States decreased to a 49% share immunological
of the worlds public research investment by 2011, down from 57% Prophylactic vaccine,
anti-infective
in 2004 (Figure 8). United States industry, which accounted for
Antidiabetic
nearly half of global industry medical research expenditures in 2004, Analgesic
declined to 41% of global industry funding in 2011 (Figure 8). Japan
Rare diseasec
demonstrated the greatest increase in the worlds share of indus-
Anti-inflammatory
try funding (+3.9%), and European countries gained the most in pub-
Recombinant vaccine
lic investment (+3.5%). Despite decreases in the US share of invest-
Cognition enhancer
ment, the United States remained the worlds leading sponsor for
0 200 400 600 800 1000 1200 1400 1600 1800
both public and industry medical research funding in 2011.
No. of Compounds in Clinical Trialsa

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 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 ob-
tained.
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.
b
Includes all nonimmunological anticancer compounds.
c
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 Compound Annual

Funding, $, in Millions (%) a Growth Rate, % b
Funding source 2004 2011 2004-2011
6
Health services industryc 653 (18) 1352 (27) 11.0
Health Services Research
Funding, $, in Billions a

AHRQ 365 (10) 1018 (20) 15.8

4 NIH 1158 (32) 1189 (24) 0.4
Other federald 442 (12) 494 (10) 1.6

2 Foundationse 1034 (28) 967 (19) 1.0

Overall 3652 5019 4.6

0
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
Adjusted to 2012 dollars using the Biomedical Research and Development
Price Index.4
b
Compound annual growth rate (CAGR) supposing that year A is x and year B is
y, CAGR = (y/x){1/(BA)}1.
c
Health services industry includes funding from hospitals, ambulatory health
care services, nursing and residential facilities. Health insurance companies
were not included. Data may not fully capture the entirety of funding for
health services research and quality improvement initiatives for the US health
care services industry.
d
Other federal funding includes the Centers for Disease Control and Prevention,
Centers for Medicare & Medicaid Services, Veterans Health Administration,
Health Resources and Services Administration, and Patient Centered
Outcomes Research Institute (in 2011 only).
e
Foundation funding includes total giving from the Robert Wood Johnson
Foundation, California Endowment, Pew Charitable Trusts, W. K. Kellogg
Foundation, and Commonwealth Fund.

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 Clinical Review & Education Special Communication The Anatomy of Medical Research

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

Plastics, minerals, and metal products Machinery

Internet service provider and web search Median 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 Foreign Transportation services 0.04

Transportation services 0.2 Insurance carriers 0.04

0 20 40 60 80 0 5 10 15
Research and Development Research and Development
Spending, $, in Billions b Spending as % of Revenue

a
Research and development expenditures for US-based companies performing The pharmaceuticals and biotechnology, medical devices, and health care
research by the industrial sector were obtained from the National Science services industries are highlighted in red.
Foundation.13 Data include research funds spent both domestically and abroad. b
Adjusted to 2012 dollars using the Biomedical Research and Development
Industry revenues were obtained from the National Science Foundation13 or US Price Index.4
Census Bureau14 based on the availability of data. Revenues and research and c
Health care services industry includes US-based hospitals, ambulatory health
development expenditures were matched by industry using North American
care services, and nursing and residential facilities.
Industry Classification System codes.

global science and technology workforce (eFigure 6 in the Supple-
ment). Conversely, China contributes only 1.8% of global funding for
medical research but comprises 22.3% of the global science and tech-
nology workforce. This difference in investment represents a natu-
ral experiment in productivity management and has broad implica-
tions for patents and intellectual property ownership, which will
evolve over the next few years.
Outputs of Medical Research
Life Science Patent Filings
China filed 30% of global life science patent applications in 2011, in-
creasing from 1% of global applications in 1991 (Figure 10). This in-
cludes 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 fil-
ings globally, increasing from an 11% share in 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 11 and
eFigure 7 in the Supplement). The proportion of US inventors filing
patents in the United States decreased from 57% to 51% from 1981
to 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 all other countries in the analysis increased their
share of highly valuable patents. Similar trends were observed for
highly valuable patents filed through the European Patent Office
(eFigure 8 in the Supplement). Highly valuable patents are defined
by the frequency they are cited by other inventors in subsequent
patent applications (Figure 12, footnote b)
Publications
The United States led the world with 33% of published biomedical
research articles in 2009 (Figure 13A). In the United States, the num-
ber of biomedical research articles increased at 0.6% per year from
2000 to 2009. During the same period, the number of articles pub-
lished 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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 The Anatomy of Medical Research Special Communication Clinical Review & Education

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

280
260 Publicb

Medical Research Funding, in Billionsa

240
Industryc
220
200
180
160
140
120
100
80
60
40
20
0
Globale United Europe Japan China Other Canada Australia
States Asiaf
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)
Compound annual growth 3.5 1.0 4.1 6.8 16.9 20.8 4.5 9.3
rate, % (2004-2011)d

b
The regions/countries/economies in the analysis include the major countries of Public research and development funding included that from government
North America (United States, Canada), Europe (including the 10 largest agencies, higher educational institutes, and not-for-profit organizations.
European countries in the Organisation for Economic Co-operation and c
Industry research and development funding included pharmaceutical,
Development), and Asia-Oceania (Australia, China, India, Japan, Singapore, and biotechnology, and medical device firms.
South Korea). Data for African and South American countries and Russia were d
Compound annual growth rate (CAGR) supposing that year A is x and year B is
not available. Data were calculated according to methods outlined in eTable 6 in
y, CAGR = (y/x){1/(BA)}1.
the Supplement.
e
a Global total for medical research funding includes research and development
Data were converted to US currency using an average annual exchange rate
expenditures from 36 major world countries across 4 continents.
for the respective year15 and adjusted to 2012 dollars using the Biomedical
f
Research and Development Price Index.4 Other Asia includes India, Singapore, and South Korea.

articles in 2000 and 56% in 2010; however, the growth of highly
cited literature published by the United States trails other major coun-
tries, regions, and economies (Figure 13B). After controlling for the
share of the worlds biomedical research articles using a citation in-
dex, 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 Administra-
tion (FDA) have remained unchanged with an average of 26 approv-
als per year. Although drug approvals increased slightly in 2011 and
2012, they returned closer to average in 2013 with 27 approvals (eFig-
ure 9 in the Supplement). United States device approvals have also
remained relatively constant over the last decade. While the num-
ber 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 ap-
provals (42/year) than the FDA (eFigure 9). In 2013, the EMA re-
ceived 22 more applications and approved 16 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, 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, re-
spectively. 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%, respec-
tively. The financial crisis of 2008 led to a decrease in market per-
formance for all life sciences industries. Generally, all sectors recov-
ered 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 ex-
ample, whereas the United States funded 57% of medical research
in 2004, in 2011 that had declined to 44%. Basic research and prod-
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-

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 Clinical Review & Education Special Communication The Anatomy of Medical Research

Figure 9. Top 10 Countries by Size of Science and Technology Workforce, 1996-2011

A Work force sizea

1400

1996

Full-time Equivalents, in Thousands

1200
2011
1000

800

600

400

200

0
Chinac United Japan Russian Germany United Korea France Canada Spain
States Federation Kingdom
Compound annual growth 6.0 2.7 0.4 1.5 2.6 3.7 7.4 3.2 3.8 6.4
rate, % (1996-2011)b

B Work force size per 1000 total employment

12

1996
10
No. per 1000 Total Employment

2011

0
Korea Japan France Canada United Germany United Russian Spain Chinac
States Kingdom Federation
Compound annual growth 6.2 0.5 2.5 2.2 1.8 2.2 2.9 2.1 4.1 5.2
rate, % (1996-2011)b

b
The sizes of national science and technology workforces were obtained from Compound annual growth rate (CAGR) supposing that year A is x and year B is
the Organisation for Economic Co-operation and Development.16 y, CAGR = (y/x){1/(BA)}1.
a c
Workforce size was measured in number of full-time equivalents and includes Annual growth in Chinas science and technology workforce may be
all science and technology sectors (eg, engineering, physical sciences) in underestimated because of a change in reporting methods for China in 2009.
addition to the medical and health sciences.

cline in real terms, combined with companies focus on late-stage The information assembled demonstrates that 3 factors, wa-
products (with diminished discovery-level investment) indicate that vering financial support for science, underinvestment in service in-
difficulties may soon appear in the ability of clinicians to fully real- novation, and globalization, pose the chief challenges of the cur-
ize the value of past investments in basic biology. rent era.
In addition, the limited support of ambitious but scientifically
rigorous methods to improve delivery of health services repre- Biomedical Research
sents a major missed opportunity to improve many aspects of health, New knowledge about disease has a 15- to 25-year gestation from
especially as the burden of chronic illness, aging populations, and basic discovery to clinical application, an interval that may be
the need for more effective ways to deliver care are appreciated.1 lengthening.22,23 Hence, the cumulative investment in biomedical
Over the past 2 decades, the period of this analysis, medical re- research of the past 3 decades will soon mature. Therefore, ensur-
search has become global. It has been transformed by multiple, com- ing sufficient support for its clinical development is a pressing need.
plex and subtle transitions, from small laboratories to large, in- Equally important are stable academic institutions and companies
dustrial-scale institutes, from hypothesis-driven inquiries to data- along with skilled researchers that have the capability to organize
driven compilations, from experiments by single individuals to those the research process and to sustain the innovation cycle,24 particu-
requiring large teams, and from finding causes of specific diseases larly since the size of research teams and scale of activities have
to learning how entire systems become disordered.21 grown. Year to year variability in funding is a threat to that stability.

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 The Anatomy of Medical Research Special Communication Clinical Review & Education

Figure 10. Global Life Science Patent Applications by Country of Origin, 1981-2011

No. of patent family applications Percentage distribution by country

in life sciencea
400 000 100
Other Other
Germany Germany
Japanb 80 Japanb
300 000
Russia Russia

Percentage
Taiwan 60 Taiwan
No.

200 000 India India

Australia 40 Australia
Canada Canada
100 000 Korea Korea
20
United States United States
China China
0 0
1981 1991 2001 2011 1981 1991 2001 2011
Year Year

The number of patent family applications by country filed was calculated based
on data obtained from Thomson Innovation.17 Only the most recent patent
application in a patent family was counted for this analysis. Data are included for
all countries available in the Thomson data set.
a
Life science was defined to include the following categories: analysis of
biological materials, medical technology, organic fine chemistry,
biotechnology, pharmaceuticals, macromolecular chemistry and polymers,
and microstructural and nanotechnology.
b
Only patent grants, not all patent applications, are counted for 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 Percentage distribution

in life science by country of inventor a by country of inventor
80 000 100
The number of patent application
Other Other families by country was calculated
Netherlands Netherlands counting the most recent application
China 80 China
60 000 in family of patents based on data
Taiwan Taiwan obtained from Thomson Innovation.17
Percentage

Switzerland 60 Switzerland Data are included for all countries

No.

40 000 Korea Korea available in the Thomson data set.

Great Britain 40 Great Britain a
Life science was defined to include
France France the following categories: analysis of
20 000 Germany Germany
20 biological materials, medical
Japan Japan technology, organic fine chemistry,
United States United States biotechnology, pharmaceuticals,
0 0
1981 1991 2001 2011 1981 1991 2001 2011 macromolecular chemistry and
Year Year polymers, and microstructural and
nanotechnology.

Although the biomedical research enterprise is basically healthy,
to fully capture the clinical value of past investment in science and
its promise for the future, 2 areas require particular attention: (1) 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 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 conclu-
sion. 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 high-
resolution mapping of the central nervous system, analysis of com-
plex biological systems and networks, or insights into develop-
ment of cell maturation and differentiation) show potential clinical
value. This is an unfortunate paradox because many of the dis-
eases associated with substantial morbidity and mortality may ben-
efit the most from these new discoveries.
Various new sources for long-term investments have been pro-
posed. 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 defense-
related biological risks. Most advocates look to government for sup-
port of high-risk, early-stage research, given private companies fo-
cus 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 un-
likely that these conventional sources of research investment will
be sufficient to meet the challenges of an aging population, the ag-
gregate burden of disease, or the promise of emerging science.
The reduced funding of large pharmaceutical and biotechnol-
ogy companies on early, basic, discovery-stage research (with con-
comitant growth of late-stage clinical trials) is apparent from our

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 Clinical Review & Education Special Communication The Anatomy of Medical Research

Figure 12. Highly Valuable US Life Science Patents by Country of Origin, 1981-2011

No. of life science patent applications Percentage distribution of top 10%

in top 10% of patents by inventor countrya,b of patents by country of inventor b
8000 100
Other Other
China China
Netherlands 80 Netherlands
6000
Korea Korea

Percentage
Canada 60 Canada
No.

4000 Switzerland Switzerland

France 40 France
Great Britain Great Britain
2000 Germany Germany
20
Japan Japan
United States United States
0 0
1981 1991 2001 2011 1981 1991 2001 2011
Year 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
Life science was defined to include the following categories: analysis of
biological materials, medical technology, organic fine chemistry,
biotechnology, pharmaceuticals, macromolecular chemistry and polymers,
and microstructural and nanotechnology.
b
Top 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

No. of Medical Annual

A No. of medical research articles
Research Articles Growth Rate, % a
2000 2009 2000-2009
400 000
Otherb 49 946 63 483 2.7
Other Asiac 10 029 20 790 8.4
300 000
China 3937 18 399 18.7
No.

200 000 Japan 26 755 21 477 2.4

European Uniond 114 970 120 421 0.5
100 000 United States 116 156 122 659 0.6
Overall 321 795 367 229 1.5
0
2000 2009
Year Compound
No. of Highly Cited Citation Index Annual Growth
Medical Research of Highly Rate (Citation
B No. of highly cited medical research articles
Articles Cited Articles Index), % a
2000 2010 2000 2010 2000-2009
12 000
Otherb 763 1034 0.57 0.59 0.4
10 000 Other Asiac 20 113 0.1 0.22 8.6
8000 China 16 82 0.22 0.22 0.3
No.

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
2000
Overall 8626 10 189 NA NA NA
0
2000 2009
Year

NA indicates not available. Medical research was defined as the life sciences and 1% cited biomedical research articles divided by the share of the worlds
psychology, excluding agricultural science. Article counts reported by the biomedical research articles in the cited year window.
National Science Foundation were from the Thomas Reuters Science Citation a
Compound annual growth rate (CAGR) supposing that year A is x and year B is
Index and Social Science Citation Index,18 classified by year of publication and y, CAGR = (y/x){1/(BA)}1.
assigned to countries on the basis of institutional addresses listed on each b
Other includes the remaining 159 nations of the world within the original
article. Articles were counted on a fractional basis; ie, for articles with
database.
collaborating institutions from multiple countries, each country received
c
fractional credit on the basis of proportion of its participating institutions. Other Asia includes India, Indonesia, Malaysia, Philippines, Singapore, South
Citations were based on a 3-year period with 2-year lag; eg, citations for 2000 Korea, Taiwan, and Thailand.
are references made in articles in 2000 to articles published in 1996-1998. The d
The European Union includes 27 European nations.
citation index of highly cited articles was defined as the share of the worlds top

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 The Anatomy of Medical Research
Figure 14. Market Performance of Publicly Traded Life Sciences and Health Care Companies, 2003-2013
700
Value of $100 Invested January 2003, $
600
500
400
300
200
100
0 indexes can be found at Standard &
2003
analysis. This trend will likely continue. A combination of the lim-
ited recent record of industry research and development and the un-
predictability of outcomes and length of time required to observe
results produces uncertain returns on investment, which are not tol-
erated in an economy that values short-term performance dispro-
portionally.
Therefore, altogether new funding sources are required. As we
and others have proposed previously,25,26 a variety of new financ-
ing vehicles are feasible and attractive. These might include
Foreign capital repatriation, with new tax provisions that allow com-
panies to return funds held outside the United States if used for
research.27 Because of the size of these holdings, a yearly incre-
ment 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 con-
verted 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 dis-
eases or those of high public health importance, in return for tax
credits (not deductions), as have been used previously to pre-
serve land, create parks, and build factories. These new trusts can
be structured to permit investments by public and company pen-
sion funds or individual retirement programs, which are currently
precluded from most early-stage, speculative investments. Aus-
tralia, 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 prac-
tice 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 di-
rect federal or state funding. They potentially can mobilize new pri-
vate sources of funds without requiring tax increases or direct pub-
lic appropriations.
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Special Communication Clinical Review & Education
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
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
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Poors Dow Jones and New York
Year Stock Exchange sector
classifications.19,20
Productivity
New science and technology have been slow to address the mor-
bidity and cost of chronic diseases and the growing number of el-
derly persons. Consequently, some have suggested that changing
patient behavior and education (for adherence and lifestyle modi-
fication), not technology, should become the priority.29 Others fo-
cus on changing the NIH mission to emphasize prevention and clini-
cal evaluation rather than basic scientific discovery, or altering
incentives of industry to encourage their investment in high-
prevalence, high-cost conditions rather than lucrative niches such
as cancer and orphan diseases.8,9,12 Some observers have even sug-
gested 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 dissatis-
factions. Therefore, greater attention is required to introduce meth-
ods 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. More-
over, 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 criti-
cal interactions. An example is the Accelerating Medicines
Partnership31 (between companies and the NIH), which identi-
fied common diseases for which few effective therapies exist but
science is especially promising. Four conditions meeting those cri-
teria were selected: Alzheimer disease, type 2 diabetes, rheuma-
toid 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 com-
bined, who would otherwise be limited if working on their own.
Enhance benefits of large-scale, industrialized biology and small-
scale 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 interpreta-
tion and application by skilled individual scientists. Many astute ob-
servers suggest that the desirable balance has not yet been struck
between industrial-scale and individual-inspired laboratories.21 Spe-
cifically, further experimentation with new organizational models
(Reprinted) JAMA January 13, 2015 Volume 313, Number 2 185
Copyright 2014 American Medical Association. All rights reserved.
 Clinical Review & Education Special Communication
should be aimed at obviating current limitations of the existing bal-
kanized corporate, venture capital, NIH, and university practices.
Examples of new models are the Broad Institute in 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-
tional contributions while ensuring funding. Each orchestrates 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 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 de-
vices. 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, ser-
vice innovations can reduce morbidity and mortality while also re-
ducing cost, but financial returns to innovators may be negligible or
even negative. For example, as shown by Arriaga et al32 and Prono-
vost and Wachter,33 procedure checklists and other simple precau-
tions are effective but may result in lower payments to hospitals.34
This mismatch between who invests (the hospital) and who is re-
warded (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 threat-
ening to physicians and hospitals, even when shown to produce
comparable or better clinical outcomes, higher patient satisfac-
tion, and lower cost than traditional care.36 Examples include 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-
able to inform research. Recent initiatives are aimed at linking sepa-
rate sources of data and introducing standards to support
research34-37 and are a specific goal of international measure-
ment collaborations for chronic illnesses (eg, the International Con-
sortium 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 barri-
ers are potent reasons why small-scale demonstration projects are
rarely generalized, even when they are initially effective.40 There-
fore, research should focus on devising reliable, effective inter-
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The Anatomy of Medical Research
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 organiza-
tions) or other incentives will prove to be adequate for the same rea-
son. Therefore, more fundamental 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, 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 Medi-
care & Medicaid (CMS), Patient-Centered Outcomes Research In-
stitute, 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 de-
livery.
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 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 artificial intelligence agents for asthma and diabetes con-
trol. Such examples are threatening to many physicians and hos-
pitals 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, longev-
ity) has corresponded with a 4-decade-long improvement in real per-
sonal 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 in-
vestment compared with the 34-country Organisation for Eco-
nomic Co-operation and Development. In Asia, South Korea and
China now each spend about 2% of GDP, with China expected to sur-
pass the United States in absolute funding within a decade.45 This
trend, along with aggressive patent practices by some countries (no-
tably China) or disregard of intellectual property rights (in Africa, Cen-
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 The Anatomy of Medical Research
tral Europe, and India), raise barriers to the diffusion of clinical in-
novations between countries.
Two areas are of particular concern: erosion of the publics sup-
port for science in the United States and hesitancy to reform the pat-
ent system.
Public Opinion
Recent polls show erosion of public support for biomedical re-
search 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 interna-
tional affairs.46,47 The trend is not confined to the United States but
is also evident in Europe. Despite the demonstrable successes of ear-
lier 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 au-
tism, Alzheimer disease, and most cancers remain elusive, with nei-
ther effective prevention nor treatment, despite intensive re-
search. 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 grow-
ing pressure to justify clinical value using objective criteria, formal
tools of technology assessment, and consideration of quality-of-
life measures separately from those that affect mortality. Some tech-
nology skeptics have even urged that the United States take a tech-
nology 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 mor-
tality comparisons. Skepticism of 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 are heavily driven by engineering advances, which
in turn depend more on the physical sciences and less on the bio-
logical sciences. These trends imply that pressure will mount to di-
vert resources away from challenging but high-potential avenues in
biology.
Patents and Intellectual Property
As this analysis demonstrates, at the same time support for bio-
medical 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, automo-
biles, industrial manufacturing) that over 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-
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Special Communication Clinical Review & Education
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 im-
prove on the original invention. In return, the inventor receives a tem-
porary monopoly. Recently, however, patents have been used to cap-
ture 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 demon-
strated (such as of cancer-related genes), tying surgical proce-
dures (such as deep brain stimulation) to specific patented de-
vices, 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 dis-
coveries rarely results in financial returns because costs exceed roy-
alty 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 en-
tity demonstrating clinical utility as well as the inventor. Because
costs are greatest and risks highest to those who finance and 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, 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 technol-
ogy standards. Patent pools have operated successfully since the
19th century and are today common in semiconductors, aero-
space, and entertainment.51,53
Taken together, these changes could foster fundamental, not
incremental, innovation and could facilitate more effective collabo-
rations. They are also prerequisites for generating new sources of
investment.
Conclusions
The information assembled in this article does not do justice to the
breadth and depth of medical research in the United States and other
countries. For any current or future patient, research provides hope.
For the researcher, unanswered biological and clinical questions are
endlessly fascinating. For a company or its investors, new products
and services promise financial return, often at levels greater than
other industries. For the policy maker, biomedical research is a route
to national competitiveness as well as to enhanced public health and
economic vitality.
Our perspective for this examination has been primarily 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-
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 Clinical Review & Education Special Communication The Anatomy of Medical Research

nized: as a source of competitiveness on the international stage; as
a vehicle to satisfy curiosity; as a means to provide realistic hope to
patients and families who must confront grave conditions. None of
those roles will necessarily be reflected in reduced health care costs.
Therefore, a new calculus is required to weigh them as decisions of
cost and value are made.
Clearly, the pace of scientific discovery and need for service im-
provement have outstripped the capacity of current financial and
organizational models to support the opportunities afforded.
The analysis underscores the need for the United States to find
new sources to support medical research, if the clinical value of its
past science investment and opportunities to improve care are to
be fully realized. Substantial new private resources are feasible,
though public funding can play a greater role. Both will require non-
traditional approaches if they are to be politically and economically
realistic. Given global trends, the United States will relinquish its his-
torical innovation lead in the next decade unless such measures are
undertaken.

ARTICLE INFORMATION
Author Contributions: Dr Moses had full access to
all of the data in the study and takes responsibility
for the integrity of the data and the accuracy of the
data analysis. Dr George and Mr Palisch contributed
equally.
Study concept and design: Moses, Matheson,
Cairns-Smith, Dorsey.
Acquisition, analysis, or interpretation of data: All
authors.
Drafting of the manuscript: Moses, Matheson,
Cairns-Smith, George, Palisch.
Critical revision of the manuscript for important
intellectual content: All authors.
Statistical analysis: Moses, George, Palisch.
Administrative, technical, or material support:
Moses, Matheson, Cairns-Smith, Dorsey.
Study supervision: Moses, Matheson, Cairns-Smith,
Dorsey.
Conflict of Interest Disclosures: All authors have
completed and submitted the ICMJE Form for
Disclosure of Potential Conflicts of Interest. Dr
Moses reports membership in a variety of
foundation and company boards in health care and
financial services. Dr Moses, Messrs Matheson and
Palisch, and Dr Cairns-Smith report providing
management consulting services to hospital
systems, insurers, foundations, and
pharmaceutical, device, and IT companies. Dr
Dorsey reports consultancy for Amgen, Avid
Radiopharmaceuticals, Clintrex, Lundbeck,
Medtronic, the National Institute of Neurological
Disorders and Stroke, and Transparency Life
Sciences; a filed patent related to telemedicine and
neurology; and stock/stock options in Grand
Rounds (a second opinion service). No other
disclosures were reported.
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