Application Policy

NUMBER - SR&ED 96-09R
DATE - May 17, 2001
SUBJECT - Eligibility of Clinical Research in the Pharmaceutical Industry

Issue
1. Introduction
2. Stages of clinical research
  2.1 Human safety trials (phase I)
  2.2 Early efficacy trials (phase II)
  2.3 Expanded therapeutic trials (phase III)
  2.4 Post approval or therapeutic use trials (phase IV)
3. Eligibility of clinical trials
  3.1 Clinical trials
    3.1.1 Phase I, II, and III clinical trials
    3.1.2 Pharmacoeconomic studies
    3.1.3 Epidemiology studies
    3.1.4 Phase IV clinical trials
4. Ineligible work associated with clinical trials
  4.1 Market research or sales promotion
  4.2 Quality control or routine testing of materials, devices, products or processes
  4.3 Research in social sciences or humanities
  4.4 Commercial production
  4.5 Routine data collection
5. Defining completion of eligible clinical trials
6. Claim substantiation
Appendix
  A.1 Pharmacoeconomic clinical trials
  A.2 Epidemiology studies
  A.3 Phase IV clinical trials

ISSUE

Is all clinical research undertaken by the pharmaceutical industry eligible Scientific Research and Experimental Development (SR&ED) activities?

1.   INTRODUCTION

This document serves as a guideline in determining those aspects of clinical research that are eligible as Scientific Research and Experimental Development (SR&ED) under subsection 248(1) of the Income Tax Act (the "Act").

2.   STAGES OF CLINICAL RESEARCH

A clinical trial is an investigation to provide evidence to establish the safety, efficacy, and quality of a drug for the diagnosis, treatment, mitigation, or prevention of a disease. All human drug clinical trials conducted in Canada are subject to assessment by the Therapeutic Products Program (TPP) of Health Canada.

Clinical trials undertaken to meet regulatory requirements for TPP approval are generally divided into four phases depending on the stage of drug development:

Phase I - Human safety trials

Phase II - Early efficacy trials

Phase III - Expanded therapeutic trials

Phase IV - Post-approval or therapeutic use trials

Before clinical research begins, the drug developer must obtain clearance from the TPP. The clearance is based on the review of a Preclinical New Drug Submission (PNDS), also called Investigational New Drug (IND) submission. The PNDS discloses chemistry and manufacturing information, preclinical research information, available clinical research information, the proposed clinical trial protocol, and the names of clinical researchers and facilities to be used. The conduct of the clinical trial is subject to an annual assessment by the TPP.

In addition, the clinical researchers at the institutions have a responsibility to submit various scientific and ethical documents to the local Research Ethics Board (REB), as defined in the Policy Statement "Ethical Conduct for Research Involving Humans" published in August 1998 by the three Canadian research councils. The proposed clinical trial protocol, the confidential information brochure (CIB), also called the Investigator's Brochure (IB), and a critical evaluation of the research proposal is included in the submission. The clinical trial can only proceed once the REB is satisfied from both the scientific and ethical points of view. The research is subject to continuous evaluation by the REB.

Each phase of clinical research is described below.

2.1   Human Safety Trials (Phase I)

Phase I clinical trials consist of the initial safety studies on a new drug, including the first administration of the drug into humans. Phase I clinical trials are usually conducted in healthy volunteers, though they may be conducted in subjects with medical conditions when administration of the drug to healthy volunteers is not ethical.

Phase I clinical trials are designed mainly to determine the pharmacological actions of the drug and the side effects associated with increasing doses. Pharmacokinetic and drug-drug interaction studies are usually considered as Phase I clinical trials regardless of when they are conducted during drug development as these are generally conducted in healthy volunteers. Phase I clinical trials also include trials in which new drugs are used as research tools to explore biological phenomena or disease processes.

2.2   Early Efficacy Trials (Phase II)

Phase II clinical trials consist of studies to evaluate the efficacy of the drug in subjects with medical conditions to be treated, diagnosed, or prevented and to determine the side effects and risks associated with the drug. If a new indication for a marketed drug is to be investigated, then those clinical trials may generally be considered Phase II clinical trials.

Phase II clinical trials may be open-labelled or controlled. Open-labelled clinical trials are performed with the investigational drug only. Controlled clinical trials compare the investigational drug to either a placebo (inactive substance) or another known drug within the same therapeutic category.

Phase II clinical trials are usually double-blind, in which neither the clinical researcher nor the study subject knows which drug (either investigational, placebo, or active comparator) has been administered until the treatment is unblinded. In fewer instances, the clinical trials may be single-blind, in which only the study subject is unaware of the drug administered.

The clinical research information is recorded on an individual subject basis in case report forms (CRF). CRFs contain clinical assessments, side effects and evaluations of causality, the dosing schedule, clinical and laboratory measurements, and any other relevant information.

2.3   Expanded Therapeutic Trials (Phase III)

Phase III clinical trials consist of open-labeled or controlled studies conducted after preliminary evidence suggesting efficacy of the drug has been demonstrated. These are intended to obtain pivotal evidence about efficacy and safety that is needed for further risk / benefit assessment of the drug. Again, the clinical trials may be conducted under double-blind or single-blind conditions.

In this phase, clinical trials are also conducted in special subject populations (e.g. in a population having renal failure) or under special medical conditions dictated by the nature of the drug and disease.

2.4   Post Approval or Therapeutic Use Trials (Phase IV)

Phase IV clinical trials consist of all studies performed after the drug has been approved by the regulator for the market. These clinical trials are related to the approved indication and can be important for furthering knowledge of the clinical properties of the drug.

The clinical trials may be of any type but must evaluate a hypothesis and have valid scientific objectives. Commonly conducted trials include drug-drug interaction, dose-response studies, and studies designed to support use under the approved indication, such as mortality and morbidity studies. As part of such trials, the long-term safety and efficacy of the drug is evaluated.

3.   ELIGIBILITY OF CLINICAL TRIALS

When considering the eligibility of clinical trials undertaken in Canada, a determination of whether the work complies with the definition of SR&ED specified in subsection 248(1) of the Act must be made. Information Circular IC86-4 explains this definition and outlines three eligibility criteria:

• scientific or technological advancement
• scientific or technological uncertainty
• scientific and technical content.

Clinical trials must satisfy these criteria to comply with subsection 248(1) of the Act.

The following situations may be encountered:

(A) Clinical trials undertaken in Canada that constitute eligible SR&ED

(B) Clinical trials or other studies undertaken in Canada that do not constitute eligible SR&ED

(C) Clinical trials undertaken outside of Canada; expenditures for such work are subject to a different tax treatment (under provisions of subsection 37(2) of the Act)

EXAMPLES OF (A)

• Phase I, II, and III clinical trials designed and undertaken to investigate the safety and efficacy of a drug in a new indication are eligible.
• Phase IV clinical trials satisfying the three eligibility criteria of SR&ED are also eligible.

EXAMPLES OF (B)

• Continuing medical education programs that are undertaken on an approved drug to obtain early market feedback (sales promotion).
• Passive monitoring that is undertaken to identify unexpected adverse reactions from use of the drug (post-marketing surveillance).
• Clinical trials undertaken to confirm results of previous studies that established safety and efficacy in the intended use and for which no further evidence is required and no additional scientific or technological uncertainty and no additional scientific or technological advancement have been identified.

3.1   Clinical trials

Specific examples of eligible work are provided in the Appendix. The examples are intended to illustrate broad principles and do not represent an exhaustive list of eligible work. Actual T661 project descriptions for SR&ED claims would require more detail and elaboration.

The examples provided highlight the scientific or technological objectives of the work claimed as well as the scientific or technological uncertainties and potential advancements. The scientific or technological content itself should be reflected in the clinical trial protocol based on the principles of the scientific method.

3.1.1   Phase I, II, and III clinical trials

Clinical trials undertaken by or on the behalf of the claimant in Canada to meet the phase I, II and III requirements of a New Drug Submission (NDS) are considered to be SR&ED if the work performed in Canada meets all three SR&ED eligibility criteria.

Situations may arise where a Canadian claimant undertakes a clinical trial that is jointly pursued in various countries. The contribution of the Canadian claimant to a multinational clinical trial (i.e. the work undertaken in Canada) must meet the definition of SR&ED under subsection 248(1) of the Income Tax Act in order to be eligible. The matter of the eligibility of the Canadian contribution to a multinational clinical trial is the object of a separate application policy (# 2001-02).

Clinical trials undertaken to address scientific uncertainties associated with bioequivalency and clinical trials undertaken to investigate the intended effect of an experimental drug in an indication are examples of eligible work.

When drug developers wish to change routes of chemical synthesis, formulations, dosage regimens, or claim new therapeutic indications for a drug, an amendment to a New Drug Submission (NDS) may be required. This amendment is achieved by way of a supplement to the NDS, referred to as a Supplementary New Drug Submission (SNDS). In order to carry out clinical trials to support the SNDS, the drug developer must again obtain approval by filing a Preclinical New Drug Submission (PNDS). Such clinical trials meet subsection 248(1) of the Act when the three eligibility criteria are satisfied.

Other types of studies may be conducted in phases I to III and beyond. These include pharmacoeconomic and epidemiology studies, as described below.

3.1.2   Pharmacoeconomic Studies

Pharmacoeconomic studies assess the value associated with a given drug in therapeutic and economic terms.

This type of study is multidisciplinary in nature and takes into consideration the social and economic costs (resource utilization costs including direct, indirect, and intangible costs) of drug therapy in addition to its direct therapeutic benefits. Pharmacoeconomic analyses relate the difference in therapeutic benefits to the difference in costs between treatment alternatives.

When considering the eligibility of pharmacoeconomic clinical trials and retrospective studies in this field undertaken in Canada, the claimed work must satisfy the three criteria for SR&ED in order to be eligible under subsection 248(1) of the Act. Thus, the therapeutic component in pharmacoeconomic studies may be eligible for SR&ED, whereas the economic or cost analysis component is not eligible as defined in subsection 248(1) g).

Pharmacoeconomic studies submitted for consideration as SR&ED must be separated into clearly identifiable therapeutic and economic components.

3.1.3   Epidemiology Studies

Epidemiology is a medical science that is concerned with the study of factors that determine and influence the frequency and distribution of disease and injury in a defined human population. The purpose is to establish programs to prevent or control the development and spread of these diseases and injuries.

When considering the eligibility of epidemiology studies (e.g. epidemiology trials and retrospective studies in this field) undertaken in Canada, the claimed work must satisfy the three criteria for SR&ED in order to be eligible under subsection 248(1) of the Act. Eligible epidemiology studies must state hypotheses and objectives. There must be a clear statement that demonstrates the technological or scientific uncertainty to be addressed and the scientific or technological advancements sought in the fields of medical and health sciences.

Examples of overall objectives addressed by potentially eligible epidemiology studies include:

• to identify (either prospectively or retrospectively) a causal relationship between a medical treatment (used therapeutically or as prophylaxis) and the status of a specific disease
• to identify causal relationships between putative biological determinants, markers or other similar factors and health outcomes for a disease condition or between biological determinants of treatment effect and response level
• to evaluate the effect of interventions at the level of diagnosis, treatment or adherence, on health outcomes (e.g. morbidity, mortality)

Creating a registry of epidemiology information and/or screening established databases for purely descriptive purposes without clearly defined scientific or technological content, uncertainties, and advancements is not SR&ED. However, such collection of epidemiology information may be eligible under subsection 248(1)(d) if the collection is commensurate with the needs, and directly in support, of eligible SR&ED work.

3.1.4   Phase IV clinical trials

Phase IV clinical trials (i.e. trials using approved drugs within the specified conditions) undertaken in Canada which satisfy the three criteria of SR&ED are eligible under subsection 248(1) of the Act.

Eligibility of Phase IV clinical trials can only be determined on case-by-case basis.

For instance, eligible Phase IV clinical trials undertaken in Canada could examine but are not limited to:

• Endpoints and/or subject subgroups not previously studied
• The efficacy and safety of a drug and an active comparator with different mechanisms of action or routes of biotransformation or excretion
• The relationship(s) between the approved drug and clusters of previously identified adverse events delineated, for example, through passive monitoring (post-marketing surveillance)
• Potential synergies between the drug and other medications based on specific physiological pathways

The following examples of Phase IV clinical trials and post-approval projects would not constitute SR&ED under subsection 248(1) of the Act:

• Continuing medical education programs that are undertaken on an approved drug to obtain early market feedback (sales promotion)
• Passive monitoring that is undertaken to identify unexpected adverse reactions from use of the drug (post-marketing surveillance)
• A comparative trial of two approved drugs, with previously established efficacy and safety profiles, for which no additional scientific or technological uncertainty and no additional scientific or technological advancement have been identified in the protocol

4.   INELIGIBLE WORK ASSOCIATED WITH CLINICAL TRIALS

It does not follow that all work and expenditures undertaken in Canada to meet regulatory requirements are eligible as SR&ED. For example, the provision of commercial labels and the issuance of Drug Identification Numbers (DIN) by the Therapeutics Products Programme (TPP) do not represent a scientific and analytical activity and is not eligible as SR&ED. Similarly, compassionate use and special or expanded access programs would generally not be eligible as SR&ED.

Subsection 248(1) of the Act states that SR&ED "[...] does not include work with respect to:

(e) market research or sales promotion;
(f) quality control or routine testing of materials, devices, products or processes;
(g) research in the social sciences or the humanities;
(i) commercial production;
(j) style changes;
(k) routine data collection.

The following work associated with clinical trials is not SR&ED under subsection 248(1) of the Act and would not qualify for SR&ED investment tax credit purposes.

4.1   Market research or sales promotion

An example of market research or sales promotion is a drug usage project or continuing medical education program that is undertaken on an approved drug to obtain early feedback from the field.

4.2   Quality control or routine testing of materials, devices, products or processes

An example of quality control or routine testing is passive monitoring that is undertaken to identify unexpected adverse reactions from use of the drug (post-marketing surveillance).

4.3   Research in social sciences or humanities

An example is research in bioethics.

4.4   Commercial Production

An example is work undertaken to ensure that a drug meets specifications for commercial production in the course of the commissioning of a manufacturing facility.

4.5   Routine data collection

An example is the creation of a registry of epidemiology information and/or screening established databases for purely descriptive purposes.

5.   DEFINING COMPLETION OF ELIGIBLE CLINICAL TRIALS

The Therapeutic Products Programme (TPP) issues a Notice of Compliance (NOC) once it is satisfied with the safety and efficacy profile of a given drug. Whereas the issuance of an NOC does not necessarily determine the end of the clinical research, the date of the NOC may assist in determining its completion.

Three examples illustrate the possible lack of definition:

• Some clinical trials, which are initiated as late Phase III trials and continue beyond the date of issuing a NOC, may be eligible
• Additional work required as part of a conditional NOC could be viewed as a continuation of the clinical trial work. If this work is integral to achieving the scientific or technological objectives of the original clinical trial that was eligible, this additional work could also be eligible
• In cases where the development of a drug is discontinued and does not proceed to a drug submission, clinical trials carried out to that point may still be eligible

Any subsequent work claimed on the approved drug would have to stand on its own as SR&ED under subsection 248(1) of the Act.

6.   CLAIM SUBSTANTIATION

Eligible clinical trials should be reported as part of a SR&ED project description. The information that should be provided in the description is listed in Part 2 of Schedule 32 (Form T661).

All documentation to substantiate the claim should be maintained and retained in respect of work carried on by the claimant for verification purposes. Failure to have supporting information may indicate the absence of scientific or technical content (see Information Circular 86-4R3, parts 2.10.3 and 3). Clinical trials are not SR&ED in Canada without supporting information to substantiate that eligible SR&ED was undertaken in Canada.

Original signed by:

Norine Heselton
Director General
SR&ED Directorate

Attachment: Appendix

APPENDIX

This Appendix lists some specific examples of work that is eligible for SR&ED.

As indicated in section 3.1, the examples are intended to illustrate broad principles and do not represent an exhaustive list of work that is eligible. Actual T661 project descriptions for SR&ED claims would require more detail and elaboration.

The examples provided highlight the scientific or technological objectives of the work claimed as well as the scientific or technological uncertainties and potential advancements. The scientific or technological content itself should be reflected in the clinical trial protocol based on the principles of the scientific method.

A.1    Pharmacoeconomic Clinical Trials

The following examples illustrate cases of pharmacoeconomic clinical trials where only the therapeutic component of the trials meets the criteria of being eligible for SR&ED. Any economic content, uncertainties, or advancements provided with the trials is not relevant to the determination of eligibility and therefore these economic aspects are not eligible.

A.1.1   Example #1

Title
A randomized, double-blind, placebo-controlled trial studying the efficacy, tolerability, and cost-effectiveness of drug "A" in paediatric subjects with symptomatic asthma.

Scientific or Technological Objectives (including economic objectives)
The objective of this clinical trial is to study the clinical efficacy, tolerability, and cost-effectiveness of adding drug "A" compared to placebo to the usual dose of inhaled corticosteroid (ICS) in paediatric subjects whose asthma is not well-controlled while taking their current dose of ICS.

Scientific or Technological Advancements
Despite receiving an adequate dose of ICS, some subjects still experience breakthrough symptoms or the need for additional use of drug "A"-like medications. Long-acting drug "A"-like medications have been identified as a suitable additional therapy for such subjects and they are well established in the treatment of asthma in adults.

Scientific or Technological Uncertainties
Uncertainty exists as to whether the drug therapy in this trial can reduce the severity and incidence of asthma exacerbations in paediatric subjects currently receiving optimal ICS therapy.

A.1.2 Example #2

Title
A clinical trial comparing the efficacy of drugs A and B for the relief of heartburn.

Scientific or Technological Objectives (including economic objectives)
The objective of this trial is to compare the safety, efficacy, and health resource utilization of drug "A" and drug "B" for the relief of heartburn symptoms. Variables studied include the safety and clinical efficacy of the "step up" approach in the treatment of heartburn symptoms and the health resource utilization within each treatment strategy.

Scientific or Technological Advancements
This clinical trial has been developed to define effective treatment strategies for uninvestigated dyspepsia at the primary care level.

Scientific or Technological Uncertainties
In practice, the primary care provider may treat dyspeptic subjects in a stepped-up or stepped-down fashion, although there is no evidence of the suitability of either approach.

A.2   Epidemiology Studies

The following examples are illustrative cases of epidemiology studies that meet the criteria for SR&ED.

A.2.1 Example # 1

Title
An epidemiology trial to investigate the significance of deletion polymorphism in an enzyme-coding gene in the progression of diabetic nephropathies treated with a specific enzyme inhibitor.

Scientific or Technological Objectives
To evaluate the effect of an insertion/deletion polymorphism of an enzyme-coding gene implicated in the progression of diabetic nephropathies treated with a specific inhibitor for this enzyme.

Scientific or Technological Advancements
Evidence will be obtained whether an insertion/deletion in the gene reduces the long-term beneficial effect of specific enzyme inhibitors on the progression of diabetic nephropathy in subjects with insulin-dependant diabetes.

Scientific or Technological Uncertainties
It is uncertain if polymorphism of the enzyme-coding gene influences the progression of diabetic nephropathies in subjects with insulin-dependant diabetes treated with specific enzyme inhibitors.

A.2.2 Example # 2

Title
An epidemiology trial to investigate the effectiveness of antidepressants in elderly depressed subjects in the community.

Scientific or Technological Objectives
This epidemiology trial will compare the effectiveness (by assessing depression prevalence and severity) of anti-depressant treatments in a group of elderly depressed subjects currently receiving antidepressant therapy in the community.

Scientific or Technological Advancements
To date there has been no comprehensive clinical trial of the effectiveness of various antidepressants in elderly depressed subjects in the community. This trial will evaluate the effectiveness of the major types of antidepressant medications, having different mechanisms of action, in elderly patients diagnosed with severe affective disorder (SAD).

Scientific or Technological Uncertainties
Uncertainty exists as to the relative effectiveness of the major types of antidepressants in treating an elderly population of subjects under real world conditions.

A.2.3 Example #3

Title
A (retrospective) meta-analysis to determine whether anaemia is an independent predictor of survival in cancer patients.

Scientific or Technological Objectives
To determine if anaemic compared to non-anaemic cancer patients have a significant reduction of survival.

Scientific or Technological Advancements
Despite the number of individual studies addressing this subject, there has been no quantitative, comprehensive analysis of the relationship between anaemia and survival in cancer patients. This study attempts to advance clinical scientific knowledge of a factor (anaemia) that may independently predict cancer survival.

Scientific or Technological Uncertainties
Uncertainty exists as to whether anaemia can be used as an independent predictor of survival in cancer patients. By not undertaking this systematic quantitative analysis of results from studies published in the medical literature, we would remain without strong inference that anaemia is predictive of cancer survival.

A.3   Phase IV Clinical Trials

The following examples are illustrative cases of Phase IV clinical trials that meet the criteria of being SR&ED.

A.3.1 Example #1

Title
A comparison of the combination therapy of drug "A" plus drug "B" versus drug "B" alone in the treatment of moderate asthma.

Scientific or Technological Objectives
To compare the efficacy and the impact on Health-Related Quality of Life (HRQoL)) of the combination of drug "A" plus drug "B" versus drug "B" alone in subjects with symptomatic asthma. The HRQoL instrument is used to assess treatment outcomes including changes in function and symptoms.

Scientific or Technological Advancements
It will be determined if treatment with drugs "A" plus "B" or drug "B" alone is safe and efficacious in treating asthma in those subjects currently receiving optimal anti-inflammatory medications yet still experiencing breakthrough asthma symptoms.

Scientific or Technological Uncertainties
Uncertainty exists as to whether either of the two therapies can reduce the severity and incidence of asthma exacerbations in subjects currently receiving optimal anti-inflammatory medications.

A.3.2 Example #2

Title
A multicentre, open-label clinical trial to assess safety and efficacy of drug "X" plus drug "Y" in the eradication of Helicobacter pylori in H pylori-positive subjects with active duodenal ulcer.

Scientific or Technological Objectives
This clinical trial is designed to assess the efficacy of twice-daily treatment with drugs "X" and "Y", followed by monotherapy with drug "Y", in the eradication of H pylori in duodenal ulcer subjects.

Scientific or Technological Advancements
It will be determined whether, by treating with drug "X" plus drug "Y", followed by a further treatment with drug "Y", H pylori can be eradicated in subjects with duodenal ulcer who are refractory to treatment with conventional medications.

Scientific or Technological Uncertainties
The safety and efficacy of the proposed drug treatment to eradicate H. pylori cannot be predicted in the type of subject described above.

A.3.3 Example #3

Title
A clinical trial to investigate the safety and efficacy of short courses of drug "P" in managing subjects with a chronic autoimmune disease inadequately controlled with current therapies.

Scientific or Technological Objectives
With respect to drug "P", this clinical trial will compare the efficacy of gradual versus abrupt drug withdrawal in terms of relapse once disease remission has been achieved.

Scientific or Technological Advancements
It will be determined which method, if any, of withdrawing drug "P" can delay or avoid relapse in subjects once disease remission has occurred.

Scientific or Technological Uncertainties
Uncertainty exists as to whether either of the two methods of therapy withdrawal can reduce the severity and incidence of rebound disease recurrence in subjects currently receiving drug "P" for the treatment of this chronic disease.