Draft R&D Tax Incentive Determination on clinical trials (Phase 0-III) for an unapproved therapeutic good.

Department of Industry, Science, Energy and Resources
Australian Government
rdti.engagement@industry.gov.au

17 February 2022

Dear Sir/Madam

CLINICAL TRIAL DETERMINATION – REQUEST FOR FEEDBACK AND COMMENTS

We are pleased to provide you with BDO’s feedback and comments in response to the draft R&D Tax
Incentive determination on clinical trials, Phase 0-III, for an unapproved therapeutic good.
In summary, BDO believes that the determination will reduce the regulatory burden for claimants
engaging in phase 0-III clinical trials and, will also provide additional comfort to claimants that are
engaging in clinical trials.

With this in mind, BDO’s principal feedback pertains to the proposed definitions and how they should
be broader to improve clarity around clinical trials that are undertaken for medical devices.

Should you wish to discuss any of the items raised within the response further, please don’t hesitate to
contact me on +617 3237 5648 or via email on Nicola.Purser@bdo.com.au.

Yours Sincerely

BDO Services Pty Ltd

Nicola Purser

Partner

BDO Services Pty Ltd ABN 45 134 242 434 is a member of a national association of independent entities which are all members of BDO
Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Services Pty Ltd and BDO Australia Ltd are members
of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member
firms. Liability limited by a scheme approved under Professional Standards Legislation.
Contents
Question 1 3

BDO’s Response 3

Question 2 4

BDO’s Response 4

Question 3 4

BDO’s Response 4

Question 4 5

BDO’s Response 5

Question 5 5

BDO’s Response 5

Question 6 5

BDO’s Response 6

Question 7 6

BDO’s Response 6

Question 8 6

BDO’s Response 7

Question 9 7

BDO’s Response 7

Appendices 8

2
Question 1
Is the draft determination appropriate for providing more certainty of access to the R&D Tax Incentive
for clinical trials in Australia? How effective would the draft determination be if it were finalised in
its current state in providing certainty to your business? Why?

BDO’s Response
BDO is of the view that the draft determination would provide more certainty regarding access to the
R&D Tax Incentive for applicants engaged in clinical trial activities that are obtaining the required
notifications/approvals with the Therapeutic Goods Administration (TGA). However, we note that the
draft determination has set out a more narrow set of definitions of the different clinical trial phases to
that used by the TGA’s, The National Health and Medical Research Council’s and the World Health
Organisation’s (refer appendix 1 for a comparison). This difference may therefore not be effective for
companies that conduct activities that would meet the TGA definition of ‘clinical trial’ but not
AusIndustry’s definition of ‘clinical trial’.

Whilst the current definitions of phase 0-III clinical trials in the draft determination might be
sufficiently broad to capture activities that would meet the eligibility criteria for a core R&D activity
involving medicines and biologicals, this might not be as clear for medical devices. This results from
the differences between the definitions of clinical trials for medicines and biologicals compared to
medical devices as understood in the TGA’s Australian clinical trial handbook; for example:

• Clinical trials of medicines and biologicals typically proceed through ‘phases’ of development,
whereas, clinical trials of medical devices are better represented by ‘stages’1

• There are three stages for clinical trials for medical devices, those being the ‘pre-market
pilot’, ‘pre-market pivotal’ and ‘post-market’ stages.

As a result of these differences, an applicant that is undertaking clinical trials of its medical devices
might have greater difficulty in assessing whether their clinical trial stages would meet the draft
determination’s definitions of phase 0,I, II, and III clinical trials .

Further, confusion can also exist regarding the definitions of the clinical trial phases as set out in
Section 4. For example:
• Phase 0 clinical trials - the definition states that the trial is used to ‘test how the body
responds to an unapproved therapeutic good before phase I clinical trials.’ How the term ‘how
the body responds’ is defined is not clear in the draft determination or further explained in the
explanatory statement and could cause confusion as to whether trials that are not conducted in
vivo are excluded.

• Phase II clinical trials – the definition states ‘the first trials of the unapproved therapeutic good
in patients suffering from the condition for which the good is intended’. The use of the word
‘suffering’ may be vague and overly narrow when read in its ordinary meaning. It is also
unclear from the use of ‘suffering, if it must relate to a physical or mental pain or a type of

1 Australian clinical trial handbook, page 43.

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subjective or objective experience; with some medical conditions (such as aging) not ordinarily
associated with ‘suffering’.
In summary, BDO recommends updating the definitions to be more aligned with those used by the TGA
to exclude terms such as ‘patients suffering from the condition’ and ‘how the body responds’. BDO also
recommends including additional definitions that align with clinical trial definitions of medical devices,
particularly as some TGA approved clinical trials such as those involving rapid antigen tests, involve
little or no direct interaction with human patients.

Question 2
Should the draft determination be expanded? Specifically do you agree with the scope of the draft
determination including definitions? Do you consider it should include additional clinical trials? Could
it support you more with overseas and advance findings? How?

BDO’s Response
The draft determination should be expanded to include clear definitions for clinical trial stages
undertaken for medical devices. In particular, clear definitions that align with those used by the TGA
for each stage of a clinical trial for medical devices.

BDO is also of the view that the draft determination could support Overseas Findings, particularly in
reducing the burden of the Board in making a finding on clinical trial activities as well as reducing the
applicant’s burden in their requirement to demonstrate that the clinical trial(s) meet the legislative
eligibility of a core R&D activity. BDO recommends that AusIndustry provides options for applicants to
input details of the unapproved therapeutic good, which could include:

• The trial’s name, licence details and/or the ARTG identifier number

• The trial’s registration number, public title or scientific title as listed on the Australian New
Zealand Clinical Trials Registry.

Nonetheless, given the R&D Tax Incentive is an Australian incentive program, the definitions should
align with the definitions used by the TGA more so than the definitions used in any other jurisdiction.

Question 3
Do you see the potential for the draft determination to be abused, undermining the integrity of the
R&D Tax Incentive? Do you consider people may try and apply to register activities that are not core
R&D activities? How?

BDO’s Response
It is of BDO’s view that there will be no potential for the draft determination to be abused such that
the R&D Tax Incentive’s integrity will be undermined. BDO also does not believe that applicants will try
and apply to register activities that are not core activities. This is because applicants are still bound by
obligations and any applicable penalties under the relevant legislation, including the Income Tax
Assessment Act 1997 (Cth). These existing penalties adequately protect the integrity of the R&D Tax
Incentive program.

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Further to this, companies undertaking clinical trials are upheld to strict regulations set out by the
TGA, which requires detailed documentation to be retained. This further limits the likelihood of the
draft determination to be abused.

Question 4
Do you consider the finalised determination should identify and require compliance with any specific
framework, guideline or standard, such as the Australian Guideline for Good Clinical Practice?
Why/why not? If yes, what should be specified?

BDO’s Response
Companies conducting clinical trials are upheld to strict ethical and compliance standards that are set
out by the Human Research Ethics Committee as part of the TGA’s Clinical Trial Notification (CTN)
scheme and Clinical Trial Application (CTA) scheme. Addition of compliance requirements within the
finalised determination may cause unnecessary confusion and administration burden for applicants.
Confusion can also be created with regards to section 355-25(2)(f) of the IR&D Act which states that
“activities associated with complying with statutory requirements or standards” are not deemed as
eligible core activities.

Further to this, requiring compliance with a specific framework, guideline or standard as a criteria will
place a heavy burden on the Board to assess whether the applicant is adhering to those materials.
Applicants would also be burdened in having to demonstrate that they are adhering to the applicable
or relevant framework, guideline or standard. This would be arguably inconsistent with the purpose of
the determination, which is to provide clarity and reduce regulatory burdens for applicants and the
Board.

BDO recommends that the finalised determination should not identify and require compliance with any
framework, guideline or standard. Rather, AusIndustry could provide, within the explanatory materials,
examples of the types of frameworks, guidelines or standards that exist. However, the Board should
not be bound to consider these material in exercising its power to make a finding.

Question 5
Is there anything that confuses you about the draft determination? Please offer details.

BDO’s Response
BDO has no additional comments and recommendations in relation to this question.

Question 6
Is it clear from the draft determination that it does not apply to the all phases of clinical trials sector
but it is limited to specific phase in clinical trials? Is it clear how phases 0, I, II and III are core R&D
activities? Why?

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BDO’s Response
Based on the information provided, it is clear that Section 5 of the draft determination does not apply
to all phases of clinical trials, but is rather limited to phase 0-III clinical trials. This is further clarified
through Section 6 of the draft determination, whereby, activities associated with phase IV clinical
trials and generic products are expressly excluded. Furthermore the definition of Phase IV clinical trials
in the draft determination clearly states that phase IV clinical trials are ‘undertaken in Australia after
previously unapproved therapeutic good has been approved’ as well as stating ‘the rationale is that the
data from the trial is being used to support a post marketing study’. It is also clear from Section 6 that
these are only not core activities for the purposes of section 5, and as explained in the Explanatory
Memorandum, are still capable of meeting the definition of core R&D activities in particular
circumstances.

It is clear how phase 0-III clinical trials would and should be deemed as core R&D activities, given that
results and information from these clinical trials could not be known or determined in advance by a
competent professional in the field. The draft determination specifies that it will apply to unapproved
therapeutic goods that are used for experimental purposes in humans.

Question 7
Is the explanatory statement helpful in understanding and applying the draft determination? Is it clear
what evidence you would maintain to apply to the R&D Tax Incentive and that you are still required to
maintain evidence of eligible expenditure? Is there anything that confuses you about the explanatory
statement? How could it be improved?

BDO’s Response
The explanatory statement is helpful in further explaining what clinical trials will be eligible under this
determination. However, no information is provided on the type of evidence that is expected to be
maintained by applicants.
While the explanatory statement does not provide any additional information pertaining to the type of
evidence that should be maintained by an applicant, companies undertaking clinical trials are required
to follow Good Clinical Practice guidelines including record keeping (e.g. trial management, data
handling records), which must be retained for a number of years following trial completion.

BDO recommends that the explanatory statement be updated to include examples of the types of
evidence AusIndustry would ideally like applicants to maintain to substantiate the R&D activities
undertaken as part of the clinical trials.

Question 8
Would you know how to apply the draft determination when applying to the R&D Tax Incentive
Program? How? What is clear/unclear?

6
BDO’s Response
Based on the information provided, BDO is of the view that applicants would generally know how to
apply the draft determination when applying to the R&D Tax Incentive program. However, while
applicants are aware that clinical trials are being undertaken based on relevant approvals they have
undergone, confusion will exist in whether their clinical trials meet the definitions within the
determination. The Explanatory Statement should also clarify whether the definitions as contained in
the draft determination are seeking to be applicable to phase 0-III clinical trials as understood by the
TGA. It should also expressly clarify whether the definitions of phase 0, I-IV clinical trials are to be
read in its ordinary meaning or, for instance, in the context of other specific and applicable extrinsic
material.

Further to this, as per our response to question 1, BDO is of the view that there should be more
clarification in the determination and definitions as to what kind of therapeutic goods are expected to
be meet the determination’s definitions of phase 0,I, II, and III clinical trials, including biologicals and
medical devices. Given that medical devices, according to the TGA, are more appropriately
represented by ‘stages’ (e.g. pre-market pilot, pre-market pivotal, post-market) as opposed to phases,
greater clarity should be given to how these definitions apply to medical devices and what, if at all,
will be deemed as excluded activities with regards to medical devices.

Question 9
Any other comments?

BDO’s Response
BDO recommends clarity be provided with regards to how the determination will apply when applicants
are registering the core activities. For example, will it be sufficient for applicants to only state the
clinical trial name and number per the TGA or will the applicants be required to provide technical
details such as the hypotheses and experimental methodology?

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Appendices
Appendix 1
Comparison of TGA’s clinical trial handbook: guidance on conducting clinical trials in Australia using
‘unapproved’ therapeutic goods versus Draft Determination definitions.

Draft Determination definitions Australian Clinical Trial Handbook objectives:
summary of clinical trial phases for medicines
and biologicals2

Phase 0 phase 0 clinical trial means Assess pharmacokinetics
exploratory studies or pilot studies that
Gather preliminary data on pharmacokinetics
are used to test how the body responds
and bioavailability to determine if the drug
to an unapproved therapeutic good
behaves as expected from preclinical studies
before phase I clinical trials.
‘Micro-dosing’ studies.

Phase I phase I clinical trial means clinical Safety and tolerance
trials that involve the first
Define or describe pharmacokinetics and
administration of the unapproved
pharmacodynamics
therapeutic good on humans to
determine the safety of the good, how Determine dosing
it works, how well it is tolerated, to Explore drug metabolism and drug interactions
identify preferred routes of
administration. Identify preferred routes of administration

Phase Ia: Single ascending dose

Phase Ib: Multiple ascending dose

Phase II phase II clinical trials are the first Efficacy and safety
trials of the unapproved therapeutic
Phase IIa:
good in patients suffering from the
condition for which the good is Demonstrate clinical efficacy or
intended. The principal aim of these biological activity through pilot studies
clinical trials is to determine Explore therapeutic dose range
effectiveness and safety of the
unapproved therapeutic good. Phase IIb:
Determine optimum therapeutic dose
and regimen (with efficacy as primary
endpoint)
Resolve uncertainties regarding the
design and conduct of subsequent trials

2 Australian clinical trial handbook, page 43-44.

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Phase III phase III clinical trials involve greater Safety, efficacy or effectiveness
numbers of patients compared to phase
Phase IIIa:
I clinical trials and phase II clinical
trials and are undertaken for the Determine the therapeutic effect in
purpose of determining whether the patient populations for which the drug
unapproved therapeutic good confers is eventually intended
clinical benefit for which effectiveness Provide a definitive assessment of risk-
was demonstrated in phase II clinical benefit balance (to support drug
trials. They also determine the nature registration or change in clinical
and likelihood of any side effects. practice)

Phase IIIb:

Increase patient exposure and support
marketing claims or publication

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