The rate at which the FDA approved new molecular entities - including NME's filed under New Drug Applications (NDAs) and therapeutic biologics filed under Original Biologic License Applications (BLAs) - declined last year from the previous two years, according to new data released by the FDA.
As the chart indicates, last year, there were 18 NMEs approved and three biologics, or 21 in total, which is down from 26 in 2009 and 24 in 2008. On the other hand, there were only 18 approvals in total in 2007 and 22 back in 2006. Since 2001, the Center for Drug Evaluation and Research has averaged 22.9 approvals a year, although there is a caveat: biologics were not included during 2001 through 2003.
However, new applications are declining. Last year, the FDA received 23, a notable drop from the 37 applications received in 2009, 34 in 2008 and 35 in 2007. There were 26 applications received in 2006. Significantly, except for 2002, the 23 NME applications that were filed with CDER last year was the lowest number filed in more than 15 years (here is the FDA report, by the way).
Just imagine that, back in 1998, there were 43 NME applications filed and 41 in 1997 - and 45 back in 1996 (but again, between 2001 and 2003, NMEs did not include therapeutic biologics). Not surprisingly, the FDA anticipates that, "if the number of applications does not increase, CDER does not expect to see much of a year-to-year increase in approvals." And so, drugmakers and biotechs may complain the FDA is not moving quickly enough, but then, neither are they.
20 Comments
Ed, 23 NDA's received last year. The total FILED is probably lower since there are always a few "refused to file" in any given year.
If I'm looking at the numbers correctly, it looks like FDA approved virtually every NDA it recived/filed, almost 100%, and a significantly higher percentage than in recent years.
Hard to see any basis at all for "FDA is not moving quickly enough," even relative to the usual lack of basis since about '92.
Two comments: 1) Justice, have a look at the link in Ed's story. The CDER applications have been running about 35 per year for the past few years, while approvals have been running at around 20-25. That corresponds to (more or less) a 30% failure (rejection) rate. Remember that is on top of the 90% of compounds that were already killed after failure of PhaseI,II,orIII clinical trials. The chances of a clinical compound reaching the market these days are abysmal. 2) The long-term graph about the number of CDER applications speaks volumes about what PhRMA has been arguing for years. NME applications have dropped from about 45 per year in 1996 to about 20 per year now. The public can't have it both ways. Drugs are expensive precisely because they support all the underlying clinical and preclinical work that goes into developing the next generation of therapies. The pharma industry has taken a tremendous beating over the last decade in terms of generic infringements, lawsuits, bad luck, bad behavior, poor reimbursement rates and increase regulatory scrutiny. This has resulted in major reductions in pharma R&D over the past 5-8 years. Of course there is going to be a drop in CDER applications. How could you expect otherwise? This trend is likely to get worse before it gets better.
I would say the lowering of approvals is a direct result of raising the bar and hurdles every year.....
@JiM--Further to Nathan's first point, the review process takes a while; a lot of those 2010 approvals will have been 2009 submissions, or even 2008 submissions. So the fraction isn't 2010 approved divided by 2010 submitted.
To paraphrase the former mindset of ond FDA reviewer, "we're not in the business of reviewing drugs; we're in the business of approving drugs". Quite simply, the mindset has changed, standards are tougher, hence one of probably many reasons submissions have gone down. My comment also is that the number of failures in Phase III is way up due to many factors, not the least of which are misleading "proof of concept" studies, and way too little time spent in Phase II in order to satisfy the greedy appetites of shareholders, CEO's and VC guys.
You know we are in bad shape when Jim Cramer dedicates a whole segment of a recent show, props and all, declaring big pharma dead to investors, RIP, relegated to the heap of "value stocks". R&D hyerarchies that are highly politicized, siloed operations, compliance driven fire walls that are excellent excuses for not not keeping in touch with the customer, the fact that the word ROI is now screened out of brand plans by some compliance officers on the basis that profit motives could be iferred should there be a law suit related to that particular brand. I could go on and on. The industry has been dysfunctional for a while. The public is finally learning about it.
I love how people always look at the change in number of NME approvals from around the mid-1996 and 1997. These years were statistical abberations with 1996 the all time high. If you look at all the historical data available from 1940 to 1995 The average number of NMEs approved yearly was 19 with a range of 5 to 38 with a standard deviation of 6.63. The number of NMEs approved in 1996 was 5.12 standard deviations above the mean. Plus if you look at the approval rates as a percentage of NMEs submitted they have been going up consistently since 1960 after the thalidomide tragedy and the requirement for adequate and well controlled studies. The current numbers of approvals are consistent with history.
ex-FDAer writes: "The current numbers of approvals are consistent with history."
That's rather funny considering we are spending far more money than any other time in history on pharma R&D.... This goes exactly to Pharma gal's point: There is no ROI for pharma R&D. For good or bad, the barriers to entry for new drugs have been going higher and higher. They are finally so high that investment in drug discovery just doesn't make financial sense anymore.
Actually the barriers for entry have been getting lower. FDA has lowered statistical criteria for approving drugs as well as safety measures and taken the attitude we can't call drugs toxic so we'll simply start telling people about toxicities and desensitize them.
The real problem is that you can't grow indefinitely no matter how much money you throw at something.
At some point you reach a plateau and then a decline because big market targets have largely been taken care of with things that target mechanisms that work for large percentages of people.
It's a mature business that has been trying to work as if it's an emerging business. Some people instead of facing reality simply want to blame someone.
Whatever Jim Cramer recommends, myself and others I know generally do the opposite. Pharma stocks should now be considered undervalued because they meet most of the following criteria, which will cause me toup my pick-up truck to the NYSE loading dock and purchase several metric tons of them:
1)The company's earning history is stable. 2) The company does not specialize in high-technology that can become obsolete overnight. The company is not in the middle of some financial scandal. The company's low PE ratio is not due to profits realized from capital gains. The company's low PE ratio is not due to a major decline in profitability. The company's PE ratio is below its average PE ratio for the last 10 years. The company is selling at a price below its tangible asset value. The company's trailing 3-years earnings has risen over the past 10 years. The company's credit rating is AAA, AA, or A, or even better, there is no rating because there is no debt at all. The company did not have a loss during the last recession.
Sorry I couldn't finish numbering the above. The pharmalot gremlins hit the send button, but you get my point. There is no better time than NOW to buy pharma stocks if you are a value investor. There are plenty of other growth and income stocks to choose from to satisfy your appetitte for capital gains and dividends.
One last comment re pharma CEO's. In "Wall Street II, Money Never Sleeps", Gordon Gekko is making a speech to MBA students after he's released from Federal prison, speaking to future Masters of the Universe. To quote:
"Someone reminded me I once said "Greed is good". Now it seems it's legal. Because everyone is drinking the same Kool Aid."
Make mine strawberry flavored.
p.s. Podcasts of Cramer's "Mad Money" can be downloaded on iTunes.
http://itunes.apple.com/podcast/mad-money-w-jim-cramer-full/id147247199
Good discussion Ex-FDAer. A couple points: 1) Barrier to entry is far more than just what occurs that the FDA. By "barrier" I am lumping together many issues as mentioned before: More aggressive generics (see Protonix for an example - that single-handedly brough Wyeth to it's knees), lawsuits and threat of lawsuits, limited reimbursement from payers (insurance), and shorter product lifetime as clinical trials take longer and longer. The net result is that pharma R&D just isn't profitable anymore 2) I like your point that pharma is a "mature buisness trying to act as if it is an emerging buisness". Pharma is a technology industry. It tries to behave just like a technology industry (Apple, IBM, etc). How else are we supposed to act? Our job is to discover drugs. When it isn't profitable to do so, then our buisness will slowly (or quickly) shrivel up. "Mature buisness's" generally don't die. There is no such thing as a stable profit source within pharma. We either innovate or we die. In that sence we are a continualy emerging industry. Unfortunately we are doing much more of dying and less of the innovating of late.
The industry has gone beyond maturity to being spoiled in every sense of the word - including rotting on the vine before becoming a fruitful industry. This rotting was caused by a disease associated with worms in the industry. In fact it is time Big Pharma companies and the FDA grew up and started acting like ethical and honest mature adults. Whining and behaving like victims by complaining about costs, economics, stockholder pressures, disgruntled consumers and employees, is outward thinking like that of a child. They want what they want when they want it. Innovation takes inward thinking. Mature people know this.
Economics will not keep them from dying - producing products that are honestly researched and labeled to accurately reflect the risks and benefits for consumers is the key. There is nothing wrong with making money but placing profit over the welfare of people including both patients and employees is nothing but greed. Again this not a sign of maturity from the sense of correct or moral business conduct.
Both Big Pharma and the FDA are now having to spend considerable time and money resources paying for the costs of unmoral business, dishonest research, harm to consumers, and abuse to honest hardworking employees which they have gotten away with for over 30 years. Stuff has just caught up to them and harmed patients and harmed employees are fighting back against the giant known as the Pharmaceutical Industry. This giant is increasingly acting like a spoiled rotten blubbering toddler. The industry needs to take a hard look at themselves instead of spending all their time blaming and trying to cover up all the worm holes. Self-analysis of the industry's wrongdoings is the sign of maturity. Once Big Pharma and the FDA recognize and admit their bad business and shortcomings, like placing profit interests over people, these immature behaviors can be stopped. It will be then Big Pharma can mature and focus on being innovative.
Doubtful this will ever happen because Big Pharma needs to grow up and get rid of the worms and rottenness. Perhaps I am not a learned business person with knowledge about financial investing, but I am smart enough to know that Big Pharma and the FDA are just now starting to payback for it’s bad behavior. It will most certainly get worse because the justifiable paybacks in the form of monetary fines and bad reputations are just starting.
And just out of curiosity, I wonder how many people will be harmed or die from the products approved this year? I wonder how many years it will take to get these poorly researched and hastily approved products off the market when the risks prove to be greater than the benefits. Yet, the industry will only focus on their god-like personalities by looking at the few patients they lay claim to saving and use as testimonies in the marketing of these products.
Ignoring the harm done to many patients and abusing hardworking employees in exchange for financial enrichments in the lives of those who are the decision makers for Big Pharma companies and the FDA is just plain wrong and displays greed. PhRMA in addition to clever business experts within the industry has done much harm by supporting this type of unethical thinking. This is what has killed the innovation – it is not the lack of potential for innovations.
You're correct about barriers and I hadn't forgotten the others. I was just limiting my comments to FDA without explicitly stating so. Barriers also protect established players. I agree with your other comments.
What I disagree is that FDA is too tough. The law is what the law is and that's what FDA has to follow. Two adequate and well controlled studies and reasonable efforts to determine safety. What is reasonable of course changes over time. Look at phen-fen. Nowadays it would be inconceivable not to properly evaluate drugs that may have metabolites that stimulate the receptors that cause the valuopathies. That does not mean that we also can't look deeper and say well how potent are those metabolites at that receptor, what is the exposure to them. Can look at these factors and take a more nuanced evaluation and if necessary find a way to minimize the risk so we can still make it available.
I agree with what ethical monitor says. It's easy to blame FDA. Having been at FDA the nuanced approach is not accepted instead we're ordered not to look at studies. When we raise questions companies call FDA senior management and have the reviewer pulled off the drug. Insider trading is common. There are slide shows given where reviewers are openly threatened with retaliation if they should whistleblow. FDA management won't ask things of big companies but they don't care if they cause small companies to burn through their bank accounts.
I agree with ethical monitor. I just don't think that much will ever come of anything. Multibillion dollar fines are simply the cost of doing business and they're caught so seldom.
Thanks ex-FDAer for confirming something I have noticed empirically over my years in the industry but have no tangible proof. How do the big boys exert pressure or curry favor to the point of having the reviewer removed? The regulatory folks I worked with told me they could barely get sufficient access to get the critical NDA filing questions answered. I have noticed what seems to be a pattern that if a drug belongs to big pharma and troubles show up on the horizion the FDA response is much more "measured" than with some smaller company drugs. Case in point the Avandia situation. It took forever for the FDA to take action. This allowed the company time to harvest towards loss of exclusivity. The EU has removed Avandia but the US just put prescribing limitations. At a recent conference Dr. Nissen who studied the company data expressed his surprised when he discovered that the FDA acutally had been aware that there were safety issues with Avandia upon his reprotintg the results of his own research. I wonder whether some small research company would have had the same leeway granted.
Interesing discussion. Thanks for clarifications re: submissions/approvals ratios.
Re: the relative power of larger companies within FDA, Dan Carpenter tried to study this some years ago. As I recall, he didn't find anything very clear by his measures (about time of review, etc.) But I suspect that the operative process is considerably more subtle than what is relatively easily measured.
Of course it would not show up in measures like time of review. That would be amateurish and dangerous. It's much more subtle than that, one synonym vs another in the wording of a PI, more or less clarity in guidance for a study design, nature and intensity of post marketing monitoring, ability to get your phones answered, time to DDMAC feedback, ability to get a pass or not receive major admonitions on manufacturing problems. How else can one explain the cascade of QC problems of J&J? System failure of such proportions does not happen over night. By now however the bloom may be somewhat off the rose with big pharma because of billion $$ compliance fines and legal matters that have marred the PR of large pharma.