Last month, three Democrats from the U.S. Congress sent a
now-famous letter toGilead Sciences (
) questioning the $84,000 price of its new blockbuster hepatitis
C medicine, Sovaldi. Among the reasons raising suspicions that
the price didn't need to be that high: the speed with which
Sovaldi was approved by the Food and Drug Administration.
"Gilead filed for and received a Priority Review and
Breakthrough Therapy designation, which reduces the FDA review
goal date from ten to six months," they wrote. Among the
questions the lawmakers wanted Gilead to answer: What was "the
value to the company of the expedited review"?
Wall Street has pondered that very question as drugmakers
soared to the head of the market in a multiyear rally. Gilead
wasn't alone in getting fast-tracked approval for its drugs.
According to data collected by wealth-management firm Robert
W. Baird, in 2006 the average time it took for a drug to go
through the approval process was 17.5 months. Last year, it was
The rate of regulatory approvals on a new drug's first attempt
has also increased sharply, from 56% to 89%. Many argue that the
effect of turning new drugs into breadwinners more quickly and
shortening an R&D cycle typically estimated at costing above
$1 billion has also driven up the value of many drugmakers.
And it has added another talking point in the great debate
between bulls and bears about the true value of drug stocks. This
point pertains especially to biotechs which, even after the
recent sell-off, are still collectively worth triple their value
at this time in 2011. The issue is: Has a streamlined approval
process permanently increased the pipeline productivity of
"I wouldn't use the word 'permanent,'" said Baird biotech
analyst Christopher Raymond. "But is it fundamentally changed?
Legislate, Then Collaborate
Raymond says that the streamlining began with the Prescription
Drug User Fee Act, or PDUFA, first passed in 1992, under which
drugmakers pay a substantial fee to the FDA every time they
submit a new drug application. In exchange, the FDA agreed to
stick to certain performance benchmarks.
The rule change resulted from complaints made by AIDS
activists about how long it was taking to get new medicines
approved. But it took years for the process to bear fruit, as the
bureaucracy restructured, using funds provided by the PDUFA.
"Not only did they reinvest (the funds) in review staff, but
they reinvested into doing their own research and having better
infrastructure to be able to collaborate with companies," Raymond
The most important collaboration for most companies is in
clinical-trial design. This is especially important for the most
innovative drugs out there, which can potentially be the biggest
"There are unique challenges to approving biologics," said
Amitabh Chandra, director of health-policy research at the
Harvard Kennedy School of Government. "In principle because
they're so new, there's going to be a lot of procedural
uncertainty on the part of approval panels in terms of what to
However, industry insiders say that the ground has shifted
noticeably in the past decade. Jay Luly, CEO ofEnanta
), testified to this shift when IBD interviewed him in December
about the company's biologic drug, called a protease inhibitor,
that is part ofAbbVie 's (
) three-drug cocktail to treat hepatitis C. He said that when his
company started investigating hepatitis C in the early 2000s, he
wouldn't have imagined clinical trials like those that AbbVie
conducted on the cocktail.
"The assumption was that you would get a protease approved as
a single agent, and then you would do combinations with it once
it was approved," Luly said.
A decade ago, Luly said, few in the industry envisioned the
FDA as a constructive partner in exploring such combinations in
the early stages of drug trials and testing.
"The way it's played out is probably much better than any of
us had ever imagined," he said.
Assessing Survival Vs. Cure
Another important task for drugmakers and the FDA is coming up
with meaningful clinical endpoints for the trials. In the case of
hepatitis C, the endpoint has been "cure," but a lot of serious,
chronic diseases can be improved by treatment even if they fall
short of a cure. And in some cases, waiting to see if the patient
can really be cured would take a long time.
Industry watchers say that this problem has led to more use of
the progression-free-survival (
) metric in cancer-drug trials. The most obvious metric to use is
overall survival. The metric gauges how much longer patients on
the drug live compared to those who aren't on it. But cancer
cases can linger for years, making the data costly in terms of
time and funding.
Drugmakers continue to track overall, long-term survival in
their trial subjects. But when patients on the drug survive
significantly longer without their disease getting worse, it can
make a valid substitute for FDA purposes.
"People are realizing that just using overall survival is way
too risk-averse," said Chandra. "Patients die the longer and
longer you wait. And there's value to just living longer with
cancer while waiting for the next therapy."
It's still not totally clear how much weight the FDA affords
to PFS, though. For instance, this month the biotech community
has debated whetherPfizer (
) can file for approval based on phase-two data it reported April
6 on its breast-cancer drug palbociclib.
The drug showed an excellent PFS benefit of 10.2 months when
compared with the control group. However, it did not show an
overall-survival trend, which defenders pointed out would have
been nearly impossible with a small patient group at this stage
of the game.
Some analysts have been claiming that phase-two data is enough
to file on. Others have stated that the FDA will probably need at
least interim phase-three data. Pfizer has not yet decided
whether to file.
Hazards Of Fast Tracking
Nonetheless, observers generally agree that the trend has been
toward earlier approvals of drugs, especially potentially
life-saving ones. In fact, a study published in the Journal of
the American Medical Association in January found that 37% of the
FDA's approvals between 2005 and 2012 -- of both new drugs and
new uses for older drugs -- came after only one large, "pivotal"
clinical trial, which typically means phase two.
That shortening of the process traces to programs created in
the 1990s such as 1992's Accelerated Approval Program and 1998's
Fast Track designation .
But along with its benefits, fast-tracking also carries
hazards. For instance, in 2006 the FDA approvedRoche 's (RHHBY)
blockbuster drug Avastin for breast cancer, based on a single
trial. However, as results rolled out from subsequent trials,
there was no apparent survival benefit, resulting in the FDA
removing breast cancer from Avastin's label in 2011. (It's still
sold for other uses.)
Analysts say that other scandals that erupted in the late
1990s and the early 2000s, around such drugs asGlaxoSmithKline 's
(GSK) Avandia andMerck 's (MRK) Vioxx, led to at least a
temporary backtrack in the trend toward faster approvals.
"By and large, immediately following Vioxx, and to a lesser
degree Avandia, you saw the FDA pull its horns in a little," said
Les Funtleyder, author of "Healthcare Investing." "The danger,
which we kind of saw in the late '90s and the early 2000s, is
(the expectation that) the FDA just rubber-stamps
Raymond agrees that there was a "road bump," particularly
after Mark McClellan, who was commissioner of the FDA from 2002
to 2004, was perceived by many as being too lenient.
"It's possible that if we were to see a similar situation of a
bigger magnitude, the FDA would pull back," he said. "But I think
the science behind what FDA has done is so much more rigorous
now, it's hard to see what that could be."