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Taxation and Clinical Trial Participation: The Hidden Obstacles
(Thursday, September 5, 2024) Participating in clinical trials is expensive and may be financially untenable, especially for economically challenged participants. Sponsors often offer compensation to trial participants to alleviate this financial burden leading to an unintended negative consequence; the participants owe taxes on the payments received and might lose their eligibility for government financial assistance programs. A bill in Congress aims to address this issue. Various factors contribute to the cost of participating in trials, such as travel, meals, and dependent care. Paying the participants to participate is ethical, and such payments are typically combined with reimbursements to minimize participant costs. However, participants often face financial stress due to how these payments impact their eligibility for government programs like Social Security Disability Insurance (SSDI) and Medicaid. The additional compensation received for participating in trials may increase the income limits for benefits like food stamps or limit Medicaid eligibility. Taxation adds further complications. Participants receiving over $600 must be issued 1099-MISC by the sponsor and reported as “Other Income” by the participants on their tax returns. For the participants, it could mean more complicated tax filings as most of the low income individuals may be filing 1040EZ. For the sponsor and sites, it creates additional administrative work in tracking payments and managing tax obligations. A recent survey of the clinical trial community showed that 75% of research sites and 63% of sponsors believe that stipends should not be taxed, or that the threshold for taxable income should be raised above $1,000. These stakeholders argue that participants volunteer their time, and taxing their stipends disincentivizes participation, especially for those relying on social benefits. Many tax experts and trial coordinators advocate for reforms, suggesting that clinical trial payments below $2,000 should be exempt from income reporting. This threshold, established by the Ensuring Access to Clinical Trials Act of 2015, allows taxpayers earning less than $2,000 annually from clinical trial participation to exclude these earnings from taxable income. Such reforms could improve participant retention, diversify trial participation, and reduce administrative burdens. The introduction of the Clinical Trial Modernization Act (H.R. 8412) in 2024 aims to address these issues. The bill seeks to ensure that financial support for participants, particularly those with life-threatening diseases, is not taxed and does not affect eligibility for government safety net programs. This legislation represents a significant step toward making clinical trials more accessible to underrepresented populations, ultimately benefiting the entire healthcare system. 
AUTHOR
Dr. Mukesh Kumar Founder & CEO, FDAMap Email: [email protected] Linkedin: Mukesh Kumar, PhD, RAC Instagram: mukeshkumarrac Twitter: @FDA_MAP Youtube: MukeshKumarFDAMap |
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