Application Policy

NUMBER: SR&ED 96-08
DATE: September 4, 1996
SUBJECT: Eligibility of the preparation of new drug submissions

---

Issue: Does the preparation of a New Drug Submission (NDS) by the taxpayer in Canada meet subsection 2900(1) of the Income Tax Regulations (the "Regulations")?

Background:

A new drug submission in the context of clinical studies*is structured in five parts:

Part 1 - Master volume

Contains:

• Submission Certification
• Application Form
• Table of Contents
• Brief Summary
• Product Monograph
• Drafts of Labels
• List of Prior Related Submissions
• Non-Canadian Package Inserts

*For further information on clinical studies see Application policy 96-09: "Eligibility of clinical trials to meet Regulatory Requirements".

Part 2 - Chemistry and manufacturing

Requires:

• Details of the drug substance and dosage forms
• Methods of manufacture
• Test methods and specifications
• Structure and properties of the drug
• Details of the manufacturing facilities
• Characteristics of the manufactured product

Part 3 - Comprehensive summary

Comprises factual, concise descriptions of the methodology, results, conclusions, and evaluation of each relevant investigational and clinical study, presented in sufficient detail to allow an independent evaluation of their validity.

Part 4 - Sectional reports

Contain the detailed descriptions of each available, completed preclinical or clinical study, summarized in Part 3.

Part 5 - Raw data

Comprises the raw data pertaining to the investigational studies, not already in Part 4, and details of clinical case reports where a participant died or did not complete the study because of an adverse experience.

Policy:

The submission can be viewed as a pyramid of information: the peak being Part 1, the Master Volume, then Part 2, the Chemistry and Manufacturing, Part 3, the Comprehensive Summary, Part 4, the Sectional Reports, and at the base, Part 5, the Raw Data.

Only those parts of a New Drug Submission that are part of eligible clinical trials are eligible and these are: Part 3 - Comprehensive Summary, Part 4 - Sectional Reports and Part 5 - Raw Data. These parts collate results and draw conclusions from the clinical trials which have been carried out. This sort of documentation should be generated in order to see the overall results of the studies of the drug as part of the SR&ED process. In circumstances where there are no eligible clinical trials, Parts 3 -5 are not eligible.

The remaining parts of the NDS, Parts 1 and 2, require statements of specifications, descriptions of facilities, very condensed summaries of technical data, etc.; basically administrative information and reiterations of technical data in Parts 3 - 5. The preparation of these parts of a NDS does not contribute to, or be part of, the scientific or technological advancements, uncertainties, or content, and therefore is not considered eligible.

In allocating the costs to prepare a NDS, the corporation must break out the costs of preparing the portions of the work that are eligible from the total cost of preparing a given NDS.

Director/Directeur
Specialized Compliance Enhancement Division/
Division du renforcement de l'observation dans des secteurs spécialisés

Issued by: Tax Incentive Audit Section and Scientific Research Section