Beginning a program of pharmaceutical research and development (R&D) is like any other major initiative in that it needs a good starting point. The endpoint may not be as well defined, simply because it is not always known which direction the R&D will ultimately take.

Having a general framework for the process can be very helpful because that will serve to keep efforts on track and reduce the randomness that would otherwise dominate the proceedings. The five primary steps involved at the beginning of a pharmaceutical R&D project are described below, more or less in the order in which they would be addressed in an actual R&D setting.

Discovery and development 

New drugs are typically discovered when insights are gained about a specific disease that encourages researchers to design a product that can prevent or reverse the effects of said disease. In some cases, unanticipated effects from existing treatments are discovered, and these lead researchers in a new direction.

Then too, new technologies are often critical in discovering the potential for new drugs to manage some kind of disease. During the drug discovery process, hundreds and perhaps thousands of compounds may undergo early testing, but most will be discarded. However, a few promising candidates will warrant additional study and further drug development.

For those compounds that proceed to the next step, the development phase will include research into how the compound might be absorbed, metabolized, distributed, and any benefits that it might provide will be noted.

It will also be determined what the best dosage would be, as well as the optimal method for administering the drug. Any side effects will be noted, as well as any interactions with other drugs. It will also be compared to the effectiveness of existing drugs, to see if it performs better, worse, or about the same.

Preliminary research 

Prior to having any drug tested upon human beings, it must be determined whether there is any potential for toxicity. Pharmaceutical companies must conduct their research in accordance with the Food and Drug Administration’s (FDA) requirements for Good Laboratory Practices.

These regulations establish basic requirements for the facilities and equipment involved, personnel conducting the research, operating procedures, written protocols, study reports, and a rigid quality control initiative that guarantees the safety of any product regulated by the FDA.

Most preclinical studies are not very broad in their scope, but they must include specific information on the dosage levels and toxicity levels. After this phase of research has been concluded, it will be determined whether or not the new drugs should be tested on people.

Clinical research 

During this phase of research, a drug is studied in order to determine how it affects the human body. Before clinical research can begin, however, researchers must establish an Investigational New Drug Process. Clinical trials are designed to supply the answers to specific questions related to any new drug, and all trials must follow a protocol developed by the researchers or the manufacturer.

As these trials are designed, it must be determined who will actually participate, how many people will be involved in the study, how long it will last, whether there will be a control group, how the drug will be administered, what type of assessments will be conducted, and how data will be analyzed.

Developers or sponsors of any new drug are required to submit an Investigational New Drug (IND) application to the FDA prior to the initiation of clinical research. This application has to provide information about toxicity levels, manufacturing information, clinical protocols, any prior data from human research, and information about the investigator.

Once this application has been submitted, an FDA review team will have 30 days to review the submission. All applications will be responded to by either granting approval to begin clinical trials or by placing a clinical hold on the process to temporarily halt the investigation.

A hold might be applied because there is significant risk involved in the process, investigators are unqualified, or because the IND application lacks sufficient information about the risks inherent in the clinical trials.

Review by the FDA 

When research from early tests, preclinical research, and clinical research indicates that a drug is safe and that it is effective for the purpose it was intended, a company can apply to have the drug marketed.

At this point, the FDA will allocate a review team to examine all data submitted about the drug and make a decision on whether or not to approve it. As part of its review, the FDA will consider whether the application is complete as submitted, and if it is not considered complete, it will be rejected.

The review team has between six and ten months to decide whether or not to approve the drug. Part of the approval process will be to have FDA inspectors visit the clinical study sites to carry out an inspection of the process and to make sure that no results were misrepresented by the applicants.

Each member of the FDA review team will conduct a complete review of their own specific section of the review, and there will also be a supervisory level review. The review team will then issue a recommendation, and a senior-level FDA officer will make the final decision on approval.

Ongoing safety monitoring 

Preclinical and clinical research trials do provide a wealth of information about the safety and usefulness of any drug, but it is still literally impossible to be in possession of all information about any drug at the time of its approval. There are still limitations to the process, regardless of how rigorously any drug is tested and researched.

This means that a significant amount of ongoing monitoring and testing must be conducted after a drug has reached the marketplace, and this might go on for a period of months or even years. The FDA will constantly be reviewing reports of any problems with new drugs, and it may decide to add warnings to certain products regarding dosage or usage

The FDA has developed the Sentinel Initiative which allows it to act more quickly when any safety issues are identified with new drugs. This initiative makes use of a vast electronic health database that includes insurance claims, registries, and health records systems so that it can monitor the safety of drugs that have been approved.

In this way, the FDA can continue to ensure that newly developed drugs are used by patients in the safest possible manner and that no highly negative side effects are imparted to users.

Save money on R&D costs with help from Tri-Merit

Whether or not they are taking place in the pharmaceutical industry, there is no denying that R&D spending and activities can be very expensive. Thankfully, for businesses in the United States, the IRS offers a research and development tax credit that can help companies save money on qualified R&D activities.

However, thoroughly documenting your R&D processes and expenses so that they can become qualified by the IRS is no easy task. This is where Tri-Merit comes in. We have helped many businesses achieve their maximum possible tax savings through the utilization of the R&D tax credit. We’ll make sure that the documentation of your activities is able to hold up under the most strict IRS scrutiny.

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We understand what it’s like for CPAs to question whether they have selected the right specialty tax partner. The right partner will have proven expertise and serve to enhance the relationship between client and CPA. This is why Tri-Merit serves as an extension of the CPA’s advisory team to reinforce the CPA’s role as a trusted advisor, while helping taxpayers increase cash flow through specialty tax incentives. Schedule a discovery call at 800.624.1076 to give your clients the best possible experience with a partner you can trust.

R&D tax credit | Cost segregation | 179D | 45L | Employee Retention Credit