September 15, 2011 (Vol. 31, No. 16)

As the Agency’s Demands Escalate, Fewer Drugs and Devices Will Make It to Market

Complaining about the unpredictability of the FDA three years ago, Fred Hassan, then CEO of Schering-Plough, said, “What will it take to get new drugs approved? The point is, we don’t know.” Such an admission from the head of a major drug company was a shocking revelation, but it reflected the arbitrary and capricious nature of FDA oversight and the level of frustration of drug developers.

Since then, things haven’t improved: According to a June 3 Reuters story, “Orexigen Therapeutics, the maker of a weight-loss drug once seen as a potential blockbuster, said it was scrapping its bid for approval in the United States because of ‘unprecedented’ demands by regulators on safety trials. Orexigen said that it would focus on developing the drug, Contrave, and another [obesity] drug candidate, Empatic, in markets outside the United States until there was a clear pathway to approval in the United States.”

Drug development statistics are daunting. Bringing a new drug to market now requires on average 12 to 15 years, and costs more than $1.4 billion—in no small part because the average length of a clinical trial increased 70% between 1999 and 2006. During 1996–1999, FDA approved 176 new medicines; during 2007–2010, the number fell to 88, a decline of 50%. That trend will continue because in 2010 the number of applications for approval of new drugs was the lowest in decades.

Perhaps the most ominous statistic of all is that drug manufacturers recoup their R&D costs for only one in five approved drugs. This fraction is likely to decrease further as FDA demands ever-larger, ever-more expensive clinical trials to accumulate data on the safety of drugs in development, particularly for certain indications such as obesity and type 2 diabetes.

John Freund, who runs a venture capital firm specializing in biopharmaceutical drug and medical device companies, lamented that “the industry is increasingly turning away from developing drugs to treat diseases that millions of Americans have, such as diabetes, obesity, and cardiovascular disease—at a modest cost per patient—because it has become nearly impossible to get them approved in the U.S. The FDA recently tightened the requirements to get new antibiotics approved, and the result will be that fewer drugs to treat deadly resistant bacteria will be developed in the future.”

The primary reasons for these catastrophic trends are excessive demands from FDA, bureaucrats’ escalating risk-aversion and their constantly moving goalposts during clinical testing, and the absence of constructive congressional oversight.

Instead of concentrating on getting more drugs through the pipeline to patients, FDA has focused on the kinds of compliance actions that punish drug companies and their executives but please activists and congressional critics while offering little if any benefit to patients.

A February 28 Wall Street Journal editorial described the FDA’s obstructionism toward potentially important cancer medicines, an apparent example of bureaucrats’ breast-beating at the expense of desperate patients. During a February hearing, the FDA made it plain to drug companies that it considers the “accelerated approval” route to be too lenient.

Introduced almost two decades ago, accelerated approval permits the FDA to issue what amounts to a limited, or conditional, approval of a new drug that is intended for a “serious or life-threatening disease” and for which there is an “unmet medical need.” It has worked well and has saved countless lives.

Henry I. Miller, M.D.

Medical Devices

Medical devices are something of an orphan sister to the glamour of drugs, but they include some of the genuine miracles of modern medicine: pacemakers, artificial joints, cardiac stents, scanners, and radiotherapy machines. For decades many devices have been approved via a fast-track pathway called 510(k), which is designed for products that are similar to earlier products, known as predicate devices.

Although the link between the new product and the predicate device can sometimes be tenuous, about 3,500 devices are approved annually via this mechanism, with very few problems. The FDA has made it clear that qualifying for the 510(k) pathway is about to become more difficult and that more data will need to be obtained and submitted to regulators for the standard pathway.

These new requirements threaten innovation across the industry, especially at a time when financing is hard to obtain. Unlike the drugs sector, many device makers are small and financially fragile.

Echoing the Orexigen example, medical device companies also are voting with their feet. They have begun to move R&D and manufacturing abroad and even to write off the U.S. market for certain products that are so overregulated that financing for their testing is unobtainable. Companies prefer to create jobs in Europe or Asia “for fear of getting lost in an FDA quagmire, a money pit that has driven many small companies to bankruptcy,” according to Kenneth Abramowitz, a managing general partner at NGN Capital.

According to a recent analysis by PricewaterhouseCoopers, the United States’ lead in medical device development (a $120 billion industry) is eroding. In 2010 total venture capital investing across all sectors increased 19%, while investment in medical devices fell 9%.

Its many warts notwithstanding, FDA is quite pleased with itself. According to agency head Margaret Hamburg, “preliminary results of reviews completed during FY 2010 indicate that FDA has the potential to meet or exceed almost all (11 of 12) FY 2010 review performance goals.” Reminds me of the old unfunny quip that the operation was a success but the patient died.

The president and his minions are going to learn some lessons the hard way. First, that policies have consequences. In his study of the 1,000 years of the world’s economic growth, the late British economist Angus Maddison observed that the “golden age” for worldwide growth was from 1950 to 1973, with per-capita GDP increasing 3% per year. In 1973 growth slowed in Western Europe and Japan: “Some slowdown in these countries was warranted, but policy failings made it bigger than it need have been.”

Second, as my mother used to say, actions speak louder than words. Merely saying that you’re not hostile to business doesn’t make it so.

And although redistribution of income might satisfy liberals’ desire for “social justice,” it doesn’t stimulate the economy or create private-sector jobs.

Henry I. Miller, M.D. ([email protected]), is the Robert Wesson Fellow in scientific philosophy and public policy at Stanford University’s Hoover Institution and a fellow at the Competitive Enterprise Institute. A physician, he was the founding director of the Office of Biotechnology at the FDA.

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