Israel’s Clinical Trial Illusion: Testing Drugs Is Not the Same as Capturing Economic Value

Israel has built an impressive clinical trial ecosystem. Its hospitals participate in sophisticated international studies, its investigators work with multinational pharmaceutical companies, patients gain access to experimental therapies and Israeli physicians contribute scientific expertise and evidence to the development of new drugs. Pharma Israel states explicitly that “Most of the clinical trials are conducted by multinational pharmaceutical companies” and says that this extensive clinical research activity positions Israel at the forefront of medical innovation worldwide.

That success deserves to be protected and expanded. But it can also create a strategic illusion in which the volume of clinical trials conducted in Israel is interpreted as evidence of the amount of drug development and economic value being created for Israel. Those are not the same thing.

A multinational pharmaceutical company can sponsor a global clinical trial that includes Israeli hospitals. Israeli investigators may recruit patients, generate important data and contribute scientific expertise. The sponsor can combine those data with results from other countries and use the evidence to seek regulatory approvals in the United States, Europe and other markets. Yet the investigational drug, the development program, the regulatory submissions and the commercial rights may all belong to companies outside Israel. If the drug succeeds, the economic returns generated by approval and commercialization flow according to ownership and licensing rights, not according to where individual trial sites were located.

Israel still benefits from hosting the trial. Hospitals receive research funding. Physicians and research teams gain experience. Patients may obtain earlier access to experimental therapies. The healthcare system strengthens its research infrastructure and its relationships with global pharmaceutical companies. These are meaningful benefits and should be celebrated. But they are different from the economic value created by owning rights to a successful drug and participating in the returns generated when that drug reaches the market.

That is the distinction national statistics need to make clear. Clinical trial activity tells us where part of the research is performed. It does not tell us who sponsors the development program, who owns the investigational drug or holds the relevant rights, who submits the evidence for regulatory approval or who captures the economic returns.

The distinction can become especially important when an Israeli startup biotechnology company develops an asset and later partners or licenses it to a global pharmaceutical company. Such a transaction may be exactly the right decision and can itself generate substantial economic value for the Israeli company through upfront payments, milestones, royalties or equity value. But if the global pharmaceutical company then takes responsibility for subsequent development and sponsors multinational trials that include Israeli hospitals, those trials remain part of the global company’s development program. Their presence in Israel does not mean that the investigational drug is being developed by an Israeli company or that the resulting economic value will accrue primarily to Israel. The Israeli economic benefit depends on the rights and financial participation retained in the transaction.

This is why the volume of clinical trials can become a misleading proxy for the strength of a national pharmaceutical industry. A country can be an excellent location for multinational clinical research while much of the ownership, regulatory responsibility and economic upside associated with the drugs being tested sits elsewhere.

Israel therefore needs to distinguish clearly between clinical research activity and economic value creation. Clinical trial activity should continue to be measured and celebrated because it reflects genuine clinical research strength. But if the question is whether Israel is building a stronger pharmaceutical industry, different measures are needed. How many investigational drugs are sponsored by Israeli companies? How much ownership and economic participation do Israeli companies retain as those assets advance? How often do successful programs generate regulatory approvals, licensing income, royalties, company growth and reinvestment that accrue to the Israeli economy?

Those measures answer a different question from the number of trials conducted in Israeli hospitals. One measures participation in global clinical research. The other measures how much economic value Israel creates and retains from drug development.

Israel should want more clinical trials. It should want Israeli patients participating in global research, Israeli investigators working with leading pharmaceutical companies and Israeli hospitals competing successfully for international studies. There is nothing wrong with being an exceptional place to conduct clinical research. The mistake is treating that achievement as evidence of something it does not measure.

Clinical trial statistics tell us where investigational drugs are tested. They do not tell us who owns the assets, who uses the evidence to obtain regulatory approvals or who captures the economic value when those drugs succeed. If Israel wants to know whether it is building not only a world-class clinical research ecosystem but a powerful pharmaceutical industry, that is the distinction it needs to measure.

Professor David Adler is Chief Scientific & Medical Officer of the PATHORA Institute of Pathology & Tissue Medicine. He is a senior pharmaceutical leader in oncology drug development and translational medicine with over 15 years of experience, including a decade in senior leadership at Bayer AG’s Global Oncology Clinical Development organization. He holds academic appointments at the Hebrew University of Jerusalem, Ben-Gurion University of the Negev, and the University of Bonn.