Drug Truths

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When It Comes to NDA Approvals, Is 30 the New 50?

with 7 comments

In 2011, the FDA approved 30 New Medical Entities (NMEs) filed either as New Drug Applications (NDAs – small molecules) or Original Biologic License Applications (BLAs – therapeutic biologics).  This is the largest number of approvals since 36 new drugs were approved in 2004.  Furthermore, on average only 23 new drugs were approved in the previous decade, so the 2011 total is pretty impressive.  People are debating whether this represents a turnaround for the biopharmaceutical industry or a one year aberration.  Regardless, as good as 2011 was, there is no doubt that the number of new drugs produced by the industry is significantly lower than what it produced in the 1990s.

When people talk about this issue, they always use 1996 as their starting point.  In that year, the FDA approved 53 NMEs, an all-time high.  However, using the 1996 data as a starting point for a productivity discussion is totally inappropriate as THAT was a one year aberration.  In the early 1990s, the U.S. was undergoing a “drug lag,” that is, drugs were being approved more rapidly abroad than in the U.S.  As a result, a number of drugs were languishing at the FDA for years before approval.  Needless to say, Congress got involved and they realized that the FDA was under-resourced to approve drugs in a timely fashion.  To solve this problem, Congress enacted the Prescription Drug User Fee Act (PDUFA), a mechanism whereby charges were levied on pharmaceutical companies for each new drug application filed.  The revenues from these “user fees” were used to hire 600 new drug reviewers and support staff.  This personnel increase enabled the FDA to work through the backlog of NDAs.  The record number of NDA approvals in 1996 is a result of this.

(As an aside, the user fee in 1995 for a full NDA was $208,000.  In 2012, the fee is $1,841,500.  Considering that fewer NDAs are being filed, given the nine-fold increase in PDUFA user fees, one might wonder why all drugs can’t be approved with a six months review time.)

Nevertheless, the FDA approved 315 new drugs from 1991 – 2000.  Thus, despite the progress in technologies for drug discovery and development, as well as the wealth of information that has emanated from the Human Genome Project, the number of new drugs emerging annually has dropped significantly.  What may account for this?  For one thing, due to industry consolidation, there are fewer companies producing new drug candidates.  In 1988, the Pharmaceutical Research and Manufacturing Association (PhRMA) had 42 members.  Only 11 of those companies exist today.  While there are biotech companies like Amgen that have arisen over this timeframe, there haven’t been nearly enough new companies formed that could make up for this decrease in NDA-producing organizations.  Back in 1990, if a new idea for treating cancer arose, 25 different companies would have jumped on it.  Given the challenges inherent in R&D, one might assume that 4 or 5 of these companies would have been successful in getting such a drug approved.  Things are quite different now.  With fewer companies competing, the chances for success drop precipitously.  Not only are there then fewer NDAs produced, you also wind up getting fewer entrants in a new class of drugs, which provides fewer choices to patients, physicians and payers.

Another reason for the decrease in NDA output is the result of the higher safety and differentiation hurdles experimental medicines face.  For a new drug to be a commercial success these days, it needs to be differentiated from existing therapies.  In addition, the FDA is requiring that new compounds are effective in treating the disease itself and not just impact markers of the disease.  For example, a new compound that lowers LDL (“bad”) cholesterol might be of value, but the FDA now requires data actually showing that such an agent actually reduces heart attacks in a patient population with cardiovascular disease.  In the 1990s, simply lowering LDL was enough to get FDA approval.  Outcomes studies, if they were done at all, would be done after the drug was approved and marketed.  Now, extensive clinical trials are needed and the new agent not only has to reduce heart attacks and strokes, it also needs to do so better than the generic statins.

The impact on industry productivity as a result of higher differentiation and efficacy hurdles can be seen in the decrease in compounds clearing late stage (Phase 3) clinical studies.  In the 1990s, >90% of compounds entering Phase 3 received FDA approval.  Data from Arrowsmith (Nature Reviews Drug Discovery Vol. 10, 87, February 2011) suggests that only 50% of compounds entering Phase 3 get FDA approval. Phase 3, which prior to 2000 served to confirm results from early smaller scale clinical trials, now is a major hurdle in determining a drug’s ultimate medical and commercial value.  The drugs that emerge from such vigorous trials are likely to be major advances.  However, fewer of these occurrences happen now than a decade ago.

For  NDA approvals, the 1990s can be viewed as an era when there were many large organizations producing multiple compounds that didn’t need to be differentiated from existing therapy nor show multiple year safety and disease reduction in patients.  The rules, however, have changed.  The hurdles and costs for new drug development are higher than ever before.  As a result, to expect the industry to produce 50 new drugs per year is unrealistic, regardless of technology advances.  Thirty is the new 50.

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Written by johnlamattina

January 17, 2012 at 9:12 am

7 Responses

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  1. Very good candid assessment. It brings two interesting questions.

    Firstly, public pharma companies are currently spending $125 billion annually on R&D. Is society willing to support that investment in exchange for 30 new drugs a year? It it is 30 breakthroughs, probably. If it is mostly me-toos, probably not. The last 10 years have produced a lot of the latter, and we’re seeing increasing pushback by NICE, the German government, payers and regulators. They are just unwilling to go along with never-ending R&D cost increases that only deliver tepid innovation. CEOs must come to grips with that, and become as demanding as their customers when it comes to the clinical value of the new drugs in their pipelines. Pointing the finger at NICE or FDA, as some do, is not helpful. The problem is within. It has to do with the quality of innovation, and what it takes to produce it.

    The second question is that, if 30 drugs is the upper limit, what will happen to the big pharma that have staked their viability on producing 2 or 3 NMEs per year on a consistent basis? Let’s remember that since 2004, big pharma have only accounted for 25% to 40% of the annual NME output. That’s 8 to 12 NMEs per year, which is clearly not enough to support the top 12 big pharma. Their answer has been to rev up the R&D engine and administer repeated courses of six sigma therapy. Looks pretty inadequate, and in fact, has not worked. What they need is a better way to innovate. Some companies do understand that, and are boldly retooling themselves, but others do not.

    bernardmunos

    January 18, 2012 at 4:06 am

    • Bernard,
      Thanks for your comments. I have a bit of a different view on your first point. I believe that regulators and payers appreciate the need for multiple entries in a new therapeutic class. There are a couple of reasons for this. First, when more than one entry exists, there is price competition. Thus, I think that organizations like NICE want more than one entry in a class, provided that the new compound is as least as safe and efficacious as the first compound. Second, data also suggests that the first entrant in a class is rarely the best. Finally, patients sometimes have toleraation issues with one member of a class but not others. (I know someone who gets constipated on Lipitor but has no problem with simvastatin).
      However, the second and later entrants MUST Be able to compete with the first. I think that one of the reasons for Phase 3 “failures” has been that comparativve studies with the new agent with the established agents have fallen short and the sponsoring company has decided that further investment wasn’t warrented.
      As for your second point, I think it depends on the company. A big pharma with a top line of $60 billion will not be able to grow its sales with only 1 new drug per year. However, a company with $15 billion in sales might do fine with that. I would hope that the leadersship of these organizations have plans to address. If it is any concolation, in looking at the Phase 3 pipelines of the major companies, they seem fuller than if the recent past, so perhaps we will see 30 or more approvals per year for the next few years.
      – John

      johnlamattina

      January 18, 2012 at 11:30 am

    • That $125B seems huge, but is only about 2% of the projected global healthcare spending for 2012 (projected to be around US$6.3 trillion – Economist Intelligence Unit forecasts.) While I share Bernards’ cynicism of the utility of many of the 30 NME’s per year, it only takes a few to have a significant impact on healthcare spending.

      I have also run the numbers on Pharma R&D and their returns in terms of ROI for the industry and individual company pipelines. Many times. However when defending the industry decades ago, I found it also useful to try and express value to society in terms of person-years added (or enhanced.) Fiscally, we may be going… in a handbasket, but society needs these innovations until the point where we devalue those citizen lives. In that context, if that 2% of spending results in lower overall HC costs, or in extending the life of productive citizens, it may not be a bad bet for society.

      I noted a year ago here: http://bit.ly/krnAYO, that “smarter R&D” may be enriching the innovative results and value of NME’s coming to market (since 2006!), to a point where R&D returns might improve. Even if that proves untrue, the value is still there if we merely expand out thinking about where those returns appear.

      TJMC

      January 25, 2012 at 10:31 pm

      • Terry,
        Great point about trying to express value in terms of person-years added or enanced. This is especially true for the NDAs for the class of ’11 which, per Janet Woodcock, are major advances over existing therapies.
        – John

        John

        January 26, 2012 at 8:27 am

  2. I’m wondering what you think these stats on R&D productivity would look like if instead of analyzing the industry in aggregate, we broke down the numbers broadly based on indication categories (ie. heart disease, diabetes, oncology, inflammatory, rare disease,…) Perhaps the R&D data for heart disease/diabetes negatively skews the recent data since the trials are generally much larger, more expensive and only recently, as you mention, the space is crowded with competition and concerns about safety and market access are more pronounced—hence more failures in this area. On the contrary, oncology R&D might be more on the ‘up-tick’, where next-gen sequencing is providing immediate actionable insights on disease biology, and as a whole is not as crowded as heart disease, safety is manageable, and payer concerns are only starting to become an issue. I think it might be more informative to gauge the health of different components of our industry based on indication, where there exists non-trivial differences in biology and realities in the marketplace. It might be an oversimplification to call us ‘one’ industry.

    biotechbaumer

    January 27, 2012 at 9:02 pm

    • Jonathan,
      You raise an interesting point. My guess is that, in areas where there are acute needs like oncology and rare diseases, ROIs are going to be pretty good since clinical trials tend to be relatively small and the pricing for drugs tends to be high. I think that tis is part of the reason why the biopharmaceutical industry has embraced these disease areas over the last decade. However, given the medical need that remains in metabolic diseases, it is pretty hard for big pharma to ignore these. The latter is certainly a prime example of high risks, but high rewards if successful. Thanks for sharing your thoughts.
      – John

      johnlamattina

      January 28, 2012 at 10:36 am

  3. You say that “In 2012, the fee is $1,841,500″. Where did you find that number? I am not questioning the number but I need to give a reference in a publication.

    Andreas Svennebring

    November 25, 2012 at 7:28 am


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