The R&D Tax Credit Aspects of Blood
A key diagnostic element, blood draws are
at the basis of seventy to eighty percent of all clinical
decisions made by doctors. In the U.S., 7 billion laboratory
blood tests are performed annually, representing between 2 and
2.5 percent of current health spending.
Innovation in blood
testing can revolutionize healthcare, paving the way for a new
era of preventive medicine and superfast diagnoses. This
article will discuss recent advancements in blood testing and
present the R&D tax credit opportunity available to
support companies engaged in related innovation efforts.
The Research &
Development Tax Credit
Enacted in 1981, the Federal Research and
Development (R&D) Tax Credit allows a credit of up to 13
percent of eligible spending for new and improved products and
processes. Qualified research must meet the following four
- New or improved products,
processes, or software
- Technological in nature
- Elimination of uncertainty
- Process of experimentation
Eligible costs include
employee wages, cost of supplies, cost of testing, contract
research expenses, and costs associated with developing a
patent. On December 18, 2015 President Obama signed the bill
making the R&D Tax Credit permanent. Beginning in 2016,
the R&D credit can be used to offset Alternative Minimum
tax and startup businesses can utilize the credit against
$250,000 per year in payroll taxes.
All in the Blood
Results from blood tests are strategic in
diagnosing and treating diseases. Phlebotomy, or the process
of removing blood from the body for testing, can be used to
measure a range of blood components, such as cells, lipids,
proteins, sugars, hormones, and tumor markers. In addition to
enabling the identification of various diseases, blood tests
can also help doctors monitor the effectiveness of treatments.
According to a recently
published report from BCC Research, the blood testing market
totaled $49.5 billion in 2013 and nearly $50 billion in 2014.
Driven by an increasing demand for rapid and accurate
diagnosis as well as a growing elderly population suffering
from chronic conditions, this market is expected to reach
$56.6 billion in 2019, with a compound annual growth rate
(CAGR) of 2.6 percent.
In the words of BCC
Research analyst Shalini S. Dewan, “The blood testing market
is very lucrative and highly competitive. It is fueled mainly
by innovation and is driven by quality and price.”
A Revolutionary New Method for Blood Testing
For decades, the method used to draw blood samples has
remained virtually unchanged. Performed in a clinic or
laboratory, it involves a tourniquet applied to the patient’s
arm and a needle used to take various vials of blood. The
procedure is followed by days to weeks of waiting, which is
the time it takes for the doctor to get the results back from
a commercial laboratory.
According to Cleveland
Clinic Innovations, the commercialization arm of Cleveland
Clinic, this slow, expensive, and inefficient method is in the
verge of obsolescence. “A new painless, more accurate, faster,
and significantly less expensive blood testing method has
arrived” to change the face of blood collection and diagnosis.
Headquartered in Palo
Alto, California, Theranos, Inc. is the creator of a
revolutionary new technology that promises to simplify blood
collection and processing. It consists of a proprietary
infrastructure capable of performing hundreds of different
tests from one tiny drop of blood pricked from the tip of a
No more needles or vials
needed, Theranos' innovative testing uses 1/1,000 of the
average blood sample currently necessary for most analyses.
Results are made available electronically in a matter of
hours, not days, enabling earlier diagnosis that can improve
the chances of successful treatments.
The novel test, which
can be performed in local pharmacies and clinics alike, costs
as little as ten percent of the Medicare reimbursement for its
traditional counterparts. Its simplicity and inexpensiveness
gives unprecedented access to actionable health information.
In its quest to become a
“healthcare leader” Walgreens is offering Theranos'
groundbreaking blood tests within its premises. As of May,
2015, there were forty Theranos Wellness Centers at Walgreens
across the Phoenix metropolitan area and another one in Palo
Alto. These centers have been seen as a prelude to an
upcoming, much larger roll-out.
The Democratization of
Technological innovation has increased
consumers’ appetite for health information. Wearable devices,
such as FitBit and Apple Watch, offer new ways to monitor the
body, giving birth to what has been called the “quantified
In this context, demand
for at-home diagnostics is on the rise. A growing number of
patients seek to have access to lab tests without having to go
through a doctor. In April 2015, the state of Arizona passed a
law that gives citizens exactly this right.
Arizona joins 27 states
and the District of Columbia, which also allows direct
testing. Thirteen states prohibit all sorts of consumer lab
testing, while nine offer “limited access” to a designated
list of approved tests.
Even though direct
testing is already legal in the majority of states, there are
still barriers to a more widespread adoption, including costs
and sample collection methods.
An increasing number of
companies are starting to tap into the direct-to-consumer
business, mainly by allowing customers to order and pay for
tests online, visit a center to get blood drawn, and then
receive the results electronically. Such is the case of
WellnessFX, Inc. and Direct Laboratories. This expanding
market is attracting major healthcare diagnostics companies,
which must look for new sources of revenue in the face of
lower reimbursement from insurers and Medicare. Examples
include LabCorp and Quest Diagnostics, Inc.
Tasso, Inc. is working to go one step further in the
democratization of blood testing: the creation of a simple,
convenient, and comfortable solution for at-home blood
collection. Run by former students of the University of
Wisconsin-Madison, the company has developed a device the size
of a ping pong ball that extracts small blood samples when
held against the skin for two minutes.
The so-called HemoLink
is a major change from conventional blood-drawing, it moves
the blood in open channels, rather than traditional closed
ones. It relies on the forces that govern the flow of tiny
fluid streams, or microfluidics. A slight vacuum inside the
device enables blood to flow into an attached sample tube,
which can then be mailed to a laboratory.
By eliminating the need
to travel to a clinic in order to get a blood test, the
innovative device promises to save users’ time and money. It
is also supposed to offer a virtually painless experience.
Tasso has recently
received a $3 million grant from the Defense Advanced Research
Projects Agency (DARPA) to work with other companies in the
development of blood preservatives, capable of ensuring that
blood samples remain fit for analyses up to one week after
collection. The company has previously received funding from
the National Institutes of Health to adapt its device for HIV
In addition to
presenting low manufacturing costs, Tasso’s self-collection
device is designed to integrate seamlessly into the existing
workflow of trusted laboratories. The company is in the
process of perfecting its prototype, which is expected to
reach the market in 2016.
Technological advancements are increasing
the number of conditions that can be identified and monitored
via blood tests. The following paragraphs list the three
recent developments in this area.
Traditional biopsies are
unable to keep up with the rapid transformation of tumors,
forcing doctors to base their decisions on limited, outdated
information. By offering a more effective alternative to
surgical and needle biopsies, innovation in blood testing
could revolutionize cancer treatment and open the way for new,
personalized therapies. Instead of analyzing tissue from
the tumor itself, emerging liquid biopsies allow for the
identification and analysis of DNA fragments that tumors shed
into the bloodstreams.
tests are the first noninvasive way to monitor cancer.
They allow doctors to profile genes and effectively target
drugs to mutations. They also provide a rapid and accurate
assessment of a treatment’s effectiveness, enabling more
informed adjustments as the disease evolves.
According to the New
York Times, the use of liquid biopsies is rapidly increasing.
Two years ago, they were restricted to research; “now, several
are sold, more than a dozen are in development, and some
doctors are using them in routine care.”
Based in Redwood City,
California, Guardant Health, Inc. has created the Guardant360
test, which is on the market since June 2014. The process is
quite straightforward: the company sends doctors a kit for
blood drawing; the samples are sent back for targeted DNA
sequencing; results are then made available in less than two
In February 2015,
Guardant had a $50 million funding round to expand its
operations and infrastructure. With more than forty patents on
its testing technology, the company is currently developing a
comprehensive blood test to identify all classes of actionable
tumor genomic alterations.
Even though there is
great potential for blood-based biopsies, the lack of a
large-scale, definitive study to attest its efficacy and
accuracy has undermined a more widespread adoption. Further
research is necessary to demonstrate how liquid biopsies can
improve and extend the lives of cancer patients.
Researchers are hopeful that future developments will enable
the use of blood tests not only as monitoring tools but also
for very early diagnosis. In the words of Antonious Schuh,
from San Diego-based Trovagene, "Why does there have to be a
tumor? The tumor is the symptom. The disease is the DNA.”
Researchers at the
University of California-San Diego School of Medicine have
developed an innovative blood test to track gene-expression
patterns that are distinctive of autism spectrum disorder
(ASD) in infants and toddlers. The study, which involved
children aged one to four, identified blood-based genomic
biomakers that differentiated 83 percent of ASD toddlers.
Eric Courchesne, PhD, professor of neurosciences and director
of the Autism Center of Excellence at UCSD School of Medicine
points to the potential of blood testing in autism research.
“Ideally, biomarkers come from tissue affected, but in ASD
this is the brain, which is obviously an inaccessible tissue.
Peripheral blood of living ASD infants and toddlers is an
important alternative, and obtaining blood samples is routine
and safe and, thus, is a preferable and accessible tissue for
identifying signatures of ASD that could be used in clinical
screening and follow-up evaluations.”
Due to the limitations
of behavioral screenings, the average age of autism diagnosis
in the U.S. is 53 months. The identification of autism-related
molecular signatures present in the blood can advance early
diagnosis and encourage the development of personalized
treatments that target the underlying biology of each patient.
The misdiagnosing or
under-diagnosing of depression is a serious issue that affects
millions of people. It happens because the primary way to
identify the condition is still based on non-specific
symptoms, such as low moods, motivation, changes in sleep, and
appetite. The absence of a screening test for depression has
had major implications for the efficacy of treatments.
Unexpectedly enough, the
answer to an accurate and expedite depression diagnosis might
lie in the blood. Researchers at Northwestern University
Feinberg School of Medicine have created a blood test to
identify depression in adults. The team identified nine RNA
blood markers that, at certain levels, predict the occurrence
of clinical depression.
In addition to
diagnosing major depressive disorders, the test could be used
to determine which kind of treatment would be most beneficial
to each patient. For instance, the study concluded that three
of the nine gene markers could be used to predict which
patients would be more receptive to cognitive behavioral
In going forward,
researchers are interested in knowing how early in one’s life
these biological markers appear. Their hope is to be able to
determine children’s vulnerability to clinical depression.
Smart Technology and
Innovation can potentially transform smart
devices into medical tools and revolutionize blood analysis.
Researchers at the University of California, Berkley developed
a smartphone-run video microscope capable of detecting
parasites in a finger-prick of blood.
The so-called CellScope
Loa targets users in Central Africa who face deadly infections
caused by parasitic warms. Preliminary tests have proven the
device’s ability to provide accurate blood information in a
matter of minutes. It uses custom, image-processing
software to record and analyze movements in blood cells that
signal worm larvae are wriggling. According to the New York
Times, “the instrument acted as a cheap, portable laboratory —
no lab technician required.”
In a similar effort, a
team of researchers from Columbia University created a
groundbreaking smartphone accessory that replicates all
mechanical, optical, and electronic functions of a lab-based
The low-cost dongle in
capable of performing an immunoassay that detects signs of HIV
and syphilis in a finger prick of blood in just 15 minutes.
Small and light enough to fit into one hand, it requires no
stored energy, as it draws all necessary power from the
Following a successful
field testing in Rwanda, Samuel K. Sia, associate professor of
biomedical engineering at Columbia Engineering highlighted
“coupling microfluidics with recent advances in consumer
electronics can make certain lab-based diagnostics
accessible to almost any population with access to
smartphones. This kind of capability can transform how
health care services are delivered around the world.”
Driven by innovation, the blood-testing
market is a highly competitive one. From innovative
methods for blood collection and processing to the blood-based
diagnosing of diseases such as cancer and depression, recent
advancements promise to trigger major transformations in
healthcare. Federal and state R&D tax credits are
available to support healthcare and biotechnology companies
investing in blood-related innovation