From The Editor | December 10, 2024

Let's Fix The Tax Burden On Clinical Trial Participants

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By Dan Schell, Chief Editor, Clinical Leader

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“You’ll get used to feeling like everything is on fire all the time.”

That’s a comment I saw recently on Reddit directed at a new CRA who was feeling overwhelmed about being assigned nine days on site (DOS) for the month.

But this article is not about the challenges of being a CRA — or any position, for that matter. I'm simply using this as an example of how the odds are stacked against you in this industry. Yeah, yeah, I get it; every job is hard and has its challenges. But in clinical research it seems the advancement of those challenges comes at a snail’s pace, despite the fact everyone recognizes that the output of this industry is intended to improve people's lives, and in some instances, even save them!

Let's just look at patient-centricity and diversity for a moment. Often these two terms are treated as separate challenges, and they are, but they are also connected. Sure, there are hundreds of clinical technology solutions out there intended to ease the burden of a patient participating in a clinical trial. That's patient-centricity, right? And when we talk about progress in clinical research, we can't ignore the rise of DCTs since COVID. Whether you're talking about DCT in terms of trial design or just as a component (e.g., remote monitoring, home nurse visits) of a trial, these changes have all improved patient-centricity in some way. And now with the requirement for diversity action plans (DAPs), more underserved populations will be prioritized when designing clinical trials going forward.

But despite all the whizbang technology, improved trial design, and new regulations, there's one obstacle that still plagues trial participants, especially those in underserved communities.

Taxes.

KEY TAX-RELATED TERMS IN CLINICAL TRIALS

We all know that a lot of patients (I'll let you choose your favorite statistic here) drop out of trials or don’t enroll once they realize the payments they've been receiving to participate are going to be taxable. And no matter where you stand on the “Is clinical research patient care?” debate, it’s hard to argue with someone’s decision to leave a trial — even if they are receiving the IP — if it’s going to cost them money to keep participating. These are volunteers, after all.  

So, in case you don’t know, here’s a recap of the current tax implications for trial participants.

With this issue, it gets confusing when patients hear terms like stipend, reimbursement, lump sum, and taxable payment. The latter is super important because in the U.S., if a patient incurs taxable payments of $600 or more, they need to be issued or submit tax form 1099-MISC. Essentially, a reimbursement is an expense directly connected to the trial that is documented with receipts and has an audit trail (e.g., travel, lodging, meals). These do not count toward the $600 threshold and would not result in taxable income. What do count are stipends, often referred to as lump sums or incentives. These are fixed amounts that are meant to compensate for the time or burden of participating in a trial.

Again, all of this can be confusing to a patient who is suffering from some type of debilitating disease and who is simply looking for a way to get access to a potential treatment. But it doesn’t get any simpler. For instance:

  • If participation in clinical trials becomes a regular activity or is part of a broader business effort, the IRS might consider the income as self-employment income, subject to self-employment taxes.
  • If a patient is reimbursed for expenses that exceed actual costs, the excess may be taxable.
  • State and local tax implications vary based on where you live and where the trial is conducted.
  • Non-cash items or services provided as part of trial participation (e.g., medical tests, treatments, or products) are typically not taxable unless they are equivalent to cash or are convertible to cash.

WHAT CHANGES ARE BEING PROPOSED?

Critics of the $600 threshold argue this limit disincentivizes participation in trials, particularly among lower-income individuals who risk losing government benefits or face increased tax burdens. Legislation like the Clinical Trial Modernization Act of 2024 has been introduced to address these issues. The bill aims to exempt certain clinical trial payments from taxation and ensure that they do not affect eligibility for government safety net programs. For example, it states, “Gross income shall not include the value of any payment received by an individual from participation in an approved clinical trial,” and “The amount excluded from gross income under subsection (a) for any taxable year shall not exceed $2,000.”

SCRS has an entire payments initiative directed at this problem and also offers a webpage dedicated to the burden of taxes on clinical trial participation. Some other initiatives addressing the problem include:

Like I said earlier, clinical research is already rife with obstacles, challenges, and whatever else you want to call all of the “stuff” that slows down and complicates the process of developing new drugs. And yes, I get it — in many instances, we need to go slow to ensure we are not putting patients at risk. But isn’t penalizing patients via our current tax structure also putting them at financial risk? And if fewer patients enroll or stay in trials due to tax-related concerns, that will lengthen the entire clinical trials process, which, again, is risky to patients who need those new medicines.