New Drug Development
Science, Business, Regulatory, and Intellectual Property Issues Cited as Hampering Drug Development Efforts
Gao ID: GAO-07-49 November 17, 2006
Drug development is complex and costly, requiring the testing of numerous chemical compounds for their potential to treat disease. Before a new drug can be marketed in the United States, a new drug application (NDA), which includes scientific and clinical data, must be approved by the Food and Drug Administration (FDA). Recent scientific advances have raised expectations that an increasing number of new and innovative drugs would soon be developed to more effectively prevent, treat, and cure serious illnesses. However, industry analysts and the FDA have reported that new drug development, and in particular, development of new molecular entities (NMEs)--potentially innovative drugs containing ingredients that have never been marketed in the United States--has become stagnant. GAO was asked to provide information on (1) trends in the pharmaceutical industry's reported research and development expenses as well as trends in the number of NDAs submitted to, and approved by, FDA; and (2) experts' views on factors accounting for these trends and their suggestions for expediting and enhancing drug development. GAO analyzed data from FDA on all 1,264 NDAs submitted to the agency from 1993 through 2004. GAO also convened a panel of experts and interviewed other drug development experts and analysts to identify factors affecting, and suggestions for enhancing, drug development.
Although the pharmaceutical industry reported substantial increases in annual research and development costs, the number of NDAs submitted to, and approved by, FDA has not been commensurate with these investments. From 1993 through 2004, industry reported annual inflation-adjusted research and development expenses steadily increased from nearly $16 billion to nearly $40 billion--a 147 percent increase. In contrast, the number of NDAs submitted annually to FDA increased at a slower rate--38 percent over this period. Similarly, the number of NDAs submitted to FDA for NMEs increased by only 7 percent over this period. FDA approved most NDA applications--76 percent overall, but the numbers of NDAs and NDAs for NMEs it approved annually have generally been declining since 1996. According to experts, several factors have hampered drug development. These include limitations on the scientific understanding of how to translate research discoveries into safe and effective drugs, business decisions by the pharmaceutical industry, uncertainty regarding regulatory standards for determining whether a drug should be approved, and certain intellectual property protections. These factors have been cited as affecting the number of drugs developed, the cost and length of the drug development process, as well as the types of drugs being produced. To address these issues, experts offered suggestions including increasing the number of scientists who can translate drug discoveries into effective new medicines and allowing conditional approval of certain drugs based on shorter clinical trials using fewer numbers of patients. In its comments on a draft of this report, the Department of Health and Human Services provided clarifications, which GAO incorporated as appropriate.
GAO-07-49, New Drug Development: Science, Business, Regulatory, and Intellectual Property Issues Cited as Hampering Drug Development Efforts
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Intellectual Property Issues Cited as hampering Drug Development
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Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
November 2006:
New Drug Development:
Science, Business, Regulatory, and Intellectual Property Issues Cited
as Hampering Drug Development Efforts:
New Drug Development:
GAO-07-49:
GAO Highlights:
Highlights of GAO-07-49, a report to congressional requesters
Why GAO Did This Study:
Drug development is complex and costly, requiring the testing of
numerous chemical compounds for their potential to treat disease.
Before a new drug can be marketed in the United States, a new drug
application (NDA), which includes scientific and clinical data, must be
approved by the Food and Drug Administration (FDA). Recent scientific
advances have raised expectations that an increasing number of new and
innovative drugs would soon be developed to more effectively prevent,
treat, and cure serious illnesses. However, industry analysts and the
FDA have reported that new drug development, and in particular,
development of new molecular entities (NMEs)”potentially innovative
drugs containing ingredients that have never been marketed in the
United States”has become stagnant.
GAO was asked to provide information on (1) trends in the
pharmaceutical industry‘s reported research and development expenses as
well as trends in the number of NDAs submitted to, and approved by,
FDA; and (2) experts‘ views on factors accounting for these trends and
their suggestions for expediting and enhancing drug development. GAO
analyzed data from FDA on all 1,264 NDAs submitted to the agency from
1993 through 2004. GAO also convened a panel of experts and interviewed
other drug development experts and analysts to identify factors
affecting, and suggestions for enhancing, drug development.
What GAO Found:
Although the pharmaceutical industry reported substantial increases in
annual research and development costs, the number of NDAs submitted to,
and approved by, FDA has not been commensurate with these investments.
From 1993 through 2004, industry reported annual inflation-adjusted
research and development expenses steadily increased from nearly $16
billion to nearly $40 billion”a 147 percent increase. In contrast, the
number of NDAs submitted annually to FDA increased at a slower rate” 38
percent over this period. Similarly, the number of NDAs submitted to
FDA for NMEs increased by only 7 percent over this period. FDA approved
most NDA applications”76 percent overall, but the numbers of NDAs and
NDAs for NMEs it approved annually have generally been declining since
1996.
Figure: Research and Development Expenses, Total NDA, and NDA for NME
Submissions, 1993-2004:
[See PDF for Image]
Source: HAO analysis of PhRMA and FDA data.
[End of Figure]
According to experts, several factors have hampered drug development.
These include limitations on the scientific understanding of how to
translate research discoveries into safe and effective drugs, business
decisions by the pharmaceutical industry, uncertainty regarding
regulatory standards for determining whether a drug should be approved,
and certain intellectual property protections. These factors have been
cited as affecting the number of drugs developed, the cost and length
of the drug development process, as well as the types of drugs being
produced. To address these issues, experts offered suggestions
including increasing the number of scientists who can translate drug
discoveries into effective new medicines and allowing conditional
approval of certain drugs based on shorter clinical trials using fewer
numbers of patients. In its comments on a draft of this report, the
Department of Health and Human Services provided clarifications, which
GAO incorporated as appropriate.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-49].
To view the full product, including the scope and methodology, click on
the link above. For more information, contact
Leslie G. Aronovitz at aronovitzl@gao.gov or (312) 220-7600.
[End of Section]
Contents:
Letter:
Results in Brief:
Background:
Drug Development Trends Are Not Commensurate with Research and
Development Expenditures:
Experts Identified Factors Contributing to Declining Productivity in
Drug Development and Offered Suggestions for Improvement:
Concluding Observations:
Agency Comments:
Appendix I: Scope and Methodology 75:
Appendix II: National Academy of Sciences Expert Panel Participants 82:
Appendix III: Comments from the Department of Health and Human Services
85:
Appendix IV: GAO Contacts and Staff Acknowledgments 86:
Tables:
Table 1: Ranking of Innovative Potential of NDAs Using Chemical Type
and Therapeutic Potential Classifications 34:
Figures:
Figure 1: The Drug Discovery, Development, and Review Process 20:
Figure 2: FDA Classification of NDAs by Chemical Type and Therapeutic
Potential 22:
Figure 3: IND Submissions, 1986-2005 29:
Figure 4: Research and Development Expenses (Constant 2004 Dollars),
Total NDA, and NDA for NME Submission Trends, 1993-2004 31:
Figure 5: Proportion of 1,264 NDAs Submitted by Innovation Potential,
1993-2004 35:
Figure 6: Percent of NDAs Submitted that were NMEs, 1993-2004 35:
Figure 7: Percent of NDAs Submitted that were Priority NMEs, 1993-2004
36:
Figure 8: Status as of September 2005 for the 1,264 NDAs Submitted,
1993-2004 38:
Figure 9: Average Approval Times as of September 2005 for 961 Priority
and Standard NDAs Submitted and Approved, 1993-2004 40:
Figure 10: Proportion of 961 NDAs Submitted and Approved by Innovation
Potential 42:
Figure 11: Total NDA and NDA for NME Approvals, 1993-2005 43:
Abbreviations:
AAMC: Association of American Medical Colleges:
FDA: Food and Drug Administration:
HHS: Department of Health and Human Services:
IND: investigational new drug application:
NAS: National Academy of Sciences:
NDA: new drug application:
NME: new molecular entity:
PDUFA: Prescription Drug User Fee Act:
PhRMA: Pharmaceutical Research and Manufacturers of America:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
November 17, 2006:
The Honorable Edward M. Kennedy:
Ranking Minority Member:
Committee on Health, Education, Labor and Pensions:
United States Senate:
The Honorable Henry A. Waxman:
Ranking Minority Member:
Committee on Government Reform:
House of Representatives:
The Honorable Richard J. Durbin:
United States Senate:
Before a new drug can be marketed in the United States, it must be
approved by the Food and Drug Administration (FDA), an agency within
the Department of Health and Human Services (HHS). To gain approval,
drug sponsors[Footnote 1] must submit a new drug application (NDA) to
FDA containing scientific and clinical data. FDA reviews the NDA to
determine whether the new drug is safe and effective for its intended
use. The submission of an NDA typically follows a long period of
research and development. To develop a new drug, researchers and
scientists identify and test numerous chemical compounds for their
potential to treat disease. On average, drug sponsors can spend over 13
years studying the benefits and risks of a new compound, and several
hundred millions of dollars completing these studies before seeking
FDA's approval. About 1 out of every 10,000 chemical compounds
initially tested for their potential as new medicines is found safe and
effective, and eventually approved by FDA, making the drug discovery
and development process complex, time consuming, and costly. Although
high costs and failure rates make drug discovery and development risky,
creating a safe and effective new drug can be rewarding for both the
sponsor and the public. A highly successful new drug can generate
significant annual sales, and can provide cures or help treat the
symptoms of diseases and illnesses affecting millions of people.
Significant scientific advances have raised new hope for the
prevention, treatment, and cure of serious illnesses. For example, the
decoding, or sequencing of the human genome, advances in medical
imaging, and new technologies that enable drug researchers to rapidly
synthesize numerous compounds, created expectations that the
pharmaceutical industry would soon be producing an increasing number of
new and innovative drugs to more effectively treat disease. However,
over the past several years it has become widely recognized throughout
the industry that the productivity of its research and development
expenditures has been declining; that is, the number of new drugs being
produced has generally declined while research and development expenses
have been steadily increasing. Similarly, FDA and analysts reported
that pharmaceutical research and development investments were not
producing the expected results and that innovation in the
pharmaceutical industry had become stagnant.[Footnote 2] In addition,
FDA reported that the industry was predominantly submitting NDAs for
variations of existing drugs, rather than for new and innovative drugs,
such as new molecular entities (NMEs)--potentially innovative drugs
containing active chemical substances that have never been approved for
marketing in the United States in any form. In response to the
declining productivity of drug development, FDA launched two separate
initiatives--one in 2003 and another in 2004--to help facilitate drug
development.[Footnote 3] In its 2004 initiative, it specifically cited
an urgent need to improve the drug development process and to enhance
collaboration among the government, industry, and academia.
You raised questions regarding the numbers of new drugs being produced,
and in particular, those drugs representing important therapeutic
advances in effectively treating disease--such as NMEs. This report
provides (1) data regarding trends in the pharmaceutical industry's
reported research and development expenses as well as trends in the
number of NDAs and NDAs for NMEs submitted to, and approved by, FDA;
and (2) experts' views on factors accounting for these trends, and
their suggestions for expediting the drug development process and
increasing the productivity of research and development efforts.
To determine trends in the pharmaceutical industry's reported research
and development expenditures, we obtained information from the
Pharmaceutical Research and Manufacturers of America (PhRMA)[Footnote
4] for the period 1993 through 2004, and adjusted it for inflation to
2004 dollars.[Footnote 5] We did not independently verify these
amounts; however, many researchers have cited these data as the best
available information. To identify trends in the number of submissions
and approvals of NDAs, we obtained and analyzed data from FDA on all
1,264 NDAs submitted to the agency for review from January 1, 1993,
through December 31, 2004. The information we reviewed on these 1,264
NDAs included their status--whether the applications had been approved,
withdrawn, or were still under FDA's review. In addition, we obtained
FDA's initial assessment of the NDAs' review priority, whether the NDAs
were for NMEs, specific dates documenting when an NDA was submitted,
and all of FDA's decisions regarding the applications. We also
discussed the results of our data analyses with FDA officials to obtain
their perspective on drug development trends.
To determine factors underlying new drug development trends, we
interviewed experts from the pharmaceutical industry, academia, and a
public interest group who possess knowledge of issues that have had an
impact on drug development. We also interviewed some pharmaceutical
industry analysts who had previously published reports on drug
development issues. In addition, we organized a panel of experts--with
assistance from the National Academy of Sciences (NAS)--that included
experts from academia, the pharmaceutical industry, and patient
advocates. We held this panel in order to provide a forum where widely
recognized experts could collectively discuss drug development issues.
The panel was not designed to build consensus on any of the issues
discussed. The panelists provided their individual views, which do not
necessarily reflect those of the organizations with which they were
affiliated or the NAS. We asked these experts to identify factors
affecting the development of new drugs, and in particular, innovative
drugs such as NMEs. As part of the panel discussion, we asked them to
identify incentives or actions that could expedite drug development and
enhance the development of drugs that offer therapeutic advances in
effectively treating diseases. Further, we reviewed and analyzed
previously published reports and articles issued by pharmaceutical
industry analysts, academic researchers, and the federal government. We
reviewed these reports and articles to identify factors influencing
drug development, and suggestions for expediting this process. Detailed
information on our methodology is in appendix I and a list of the
panelists is in appendix II. We conducted our work from July 2005
through October 2006 in accordance with generally accepted government
auditing standards.
Results in Brief:
Although the pharmaceutical industry has reported substantial increases
in annual research and development costs, the number of NDAs submitted
to, and approved by, FDA has not been commensurate with these
investments. From 1993 to 2004, the industry reported that annual
research and development expenses steadily increased from nearly $16
billion to nearly $40 billion in real terms--a 147 percent
increase.[Footnote 6] In contrast, the number of NDAs submitted
annually increased at a lower rate--38 percent over this period--and
generally declined over the past several years. The number of NDAs
submitted annually increased from 74 to 129, or by 74 percent, between
1993 and 1999, and generally declined after 1999. In 2004, sponsors
submitted 102 applications to FDA--a 21 percent decrease from the 1999
level. Similarly, the number of NDAs submitted to FDA for NMEs
increased by only 7 percent over this period, and generally declined
since 1995. From 1993 through 1995, the number of NDAs submitted for
NMEs increased, but declined by 40 percent between 1995 and 2004. The
percentage of NDAs submitted that were for NMEs also generally declined
after 1995. These submission trends indicate that the productivity of
research and development investments has declined. Regarding approval
trends, FDA eventually approved most NDAs--961 or 76 percent overall--
and the percentage approved each year has remained relatively constant.
However, the overall number of NDAs--and NMEs in particular--approved
annually has generally been declining since 1996, which corresponds
with the decline in submissions.
Results from the discussion among panel members, our interviews with
drug development experts and analysts, and our review of academic and
industry reports identified several factors affecting the types of
drugs being developed, and the length, costs, and failure rates of drug
development. These factors include limitations on the scientific
understanding of how to translate chemical and biological discoveries
into safe and effective drugs; business decisions by the pharmaceutical
industry that influence the types of drugs developed; uncertainty
regarding regulatory standards for determining whether a drug should be
approved as safe and effective; and certain intellectual property
protections that can discourage innovation. Together, these factors
have been cited as affecting the cost and length of the drug
development process, as well as the types of drugs being produced.
Faced with these issues, some of the panelists, other experts we
contacted, and the literature we reviewed, suggested ways to expedite
drug development and find more innovative drugs. These include
generating greater numbers of scientists who possess the skills needed
to translate drug discoveries into effective new medicines;
restructuring regulation of the drug review process to allow for
conditional approval of drugs for therapeutic areas that currently lack
effective treatments based on shorter clinical trials using fewer
numbers of patients; and altering the length of patent terms to
encourage innovation. Some of the experts have cautioned that adequate
measures to ensure safety need to be implemented along with any changes
to expedite the regulatory review process.
In its comments on a draft of this report, HHS provided clarifications,
which we incorporated as appropriate.
Background:
FDA is responsible for helping to ensure the safety and effectiveness
of drugs marketed in the United States. It oversees the drug
development process, reviews drug sponsors' applications for the
approval of new drugs, and monitors the safety and efficacy of drugs
once they are available for sale. As part of its responsibilities, FDA
assists drug sponsors in designing clinical trials to test drugs on
humans, reviews proposals for conducting such trials, and approves
drugs for sale in the United States based on its determination that a
drug's clinical benefits outweigh its potential health risks, and is
safe and effective. Prior to a manufacturer's marketing of a drug, FDA
reviews drug labels and accompanying materials to ensure they are
consistent with applicable laws and regulations. Among other things,
labels must include information on the drug's usage, for example, the
medical conditions and patient populations for which it has been tested
and approved as safe and effective.
The Drug Discovery, Development, and Review Process:
The process of bringing a new drug to the market consists of four main
stages--drug discovery, preclinical testing, clinical trials which
involve testing on volunteers, and FDA review. During these stages,
scientists from the government, academia, and the private sector
conduct extensive research and testing to identify safe and effective
medicines. The entire drug discovery, development, and review process
takes, on average, 15 years to complete.
During the first stage--commonly referred to as drug discovery--
numerous researchers from pharmaceutical companies, academia, and
government search for and identify promising chemical entities, or
compounds, capable of curing or treating diseases. During the second
stage--preclinical testing--these compounds are tested in laboratories
and in animals to predict whether a drug is likely to be safe and
effective on humans. Most compounds fail during these first two stages;
according to PhRMA, only 5 in every 10,000 compounds, on average,
successfully completes these two stages. In general, these two stages
typically take a total of 6½ years to successfully complete for a
particular compound.
If the compound is found to be promising, a drug sponsor may decide to
test it as a new drug on humans, and proceeds to the third stage--
clinical trials. Before doing so, a sponsor must submit an
investigational new drug application (IND)[Footnote 7] that summarizes
the data that have been collected on the compound and outlines plans
for the clinical trials.[Footnote 8] Generally, clinical trials may
begin 30 days after FDA receives the IND, unless FDA orders a delay.
FDA does not issue a formal approval to the sponsor regarding an IND
submission, but it can prohibit the start of a clinical trial if, for
example, it determines that human volunteers would be exposed to an
unreasonable and significant risk of illness or injury. As described
below, the clinical trial stage consists of three phases, known as
Phase 1, 2, and 3 clinical trials.
In Phase 1 clinical trials, sponsors typically conduct safety studies
on about 20 to 100 healthy volunteers. Potential side effects are
identified and various dosage levels are determined. In Phase 2
clinical trials, the drug is typically tested on approximately 100 to
500 volunteers who have a particular disease to determine the drug's
effectiveness. In Phase 3 clinical trials, the drug is typically tested
on about 1,000 to 5,000 volunteers, to determine the drug's safety and
effectiveness. According to PhRMA, on average, one out of every five
drugs successfully completes all three clinical testing phases--that
is, is found safe and effective by the drug sponsor and submitted as an
NDA to FDA for review and approval. On average, the three phases of the
clinical trial stage take a total of 7 years to successfully complete.
The fourth and final stage is the FDA review stage, which covers FDA's
review and final approval of NDAs. The review process begins when a
sponsor submits an NDA to FDA. The NDA contains scientific and clinical
data submitted by the sponsor intended to demonstrate that the drug is
safe and effective for its proposed use. FDA evaluates data contained
in the NDA to determine whether the drug meets these standards and if
it should be approved.[Footnote 9] For those NDAs that are approved, it
typically takes about 1½ years to complete the review process and
obtain FDA's approval.
Figure 1 shows the amount of time, on average, for a successful new
drug to move through and complete the four stages. It also illustrates
that for every 10,000 compounds initially identified, only one, on
average, will be found safe and effective, and be approved by FDA.
Figure 1: Figure 1: The Drug Discovery, Development, and Review
Process:
[See PDF for image]
Source: Pharmaceutical Research and Manufacturers of America.
[End of figure]
Upon receipt of an NDA, FDA will classify it in two ways--by its
chemical type and its therapeutic potential. First, an NDA is
classified into chemical types, one of which is an NME.[Footnote 10]
Because NMEs contain active chemical substances never before approved
for marketing in the United States, industry analysts and FDA generally
consider them innovative. The other six classifications consist of non-
NMEs, which are typically considered less innovative because they
represent modifications to drugs already on the market. In most cases,
the sponsor submitting an NDA for a non-NME has altered the original
medicine to produce a drug with different features, such as a new
dosage form or route of administration. Second, FDA classifies an NDA
by its therapeutic potential. In doing so, FDA compares the NDA to
existing products already on the market. Those that appear to have
relatively significant therapeutic benefits in the treatment,
diagnosis, or prevention of a disease are classified as
priority.[Footnote 11] Those with little or no additional therapeutic
benefits compared to existing products are classified by FDA as
standard. As figure 2 shows, an NDA can be classified in one of four
ways--priority NME, priority non-NME, standard NME, or standard non-
NME.
Figure 2: Figure 2: FDA Classification of NDAs by Chemical Type and
Therapeutic Potential:
[See PDF for image]
Source: GAO.
[End of figure]
In response to concerns that FDA was taking too long to review and
approve NDAs, the Prescription Drug User Fee Act (PDUFA)[Footnote 12]
was enacted in 1992. It provided FDA with additional resources in the
form of user fees from the pharmaceutical and biotechnology industries
to speed up the process of reviewing applications for new drugs and
biological products, and established performance goals for FDA,
including completing its review of a certain percentage of applications
within certain time frames.[Footnote 13] PDUFA authorized FDA to
collect these fees to supplement its annual appropriation for salaries
and expenses, and use the additional funds to review applications more
quickly.[Footnote 14] PDUFA was amended and reauthorized in 1997 and
2002 for an additional 5 years and established new performance goals
for various aspects of the drug review process. For example, current
goals state that FDA should complete its initial review and act on 90
percent of all priority NDAs within 6 months and 90 percent of all
standard NDAs within 10 months. FDA uses these and other review time
goals to assess its review timeliness, and issues an annual report on
its performance to the President and Congress.[Footnote 15]
The review process may span several review cycles. The first cycle
begins when the NDA is submitted to and filed by FDA, indicating that
the application is sufficiently complete to permit a substantive
review. The first cycle ends when FDA has completed its review and
responds by issuing an action letter to the sponsor. This could mean
that FDA approved the application; told the sponsor it was approvable,
but that more information was needed; or told the sponsor that the NDA
contained significant weaknesses and was not approvable. If the
application is approved in the first cycle, the total approval time is
the length of that cycle. For those NDAs not approved during the first
review--both approvable and not approvable--the second cycle begins
when the sponsor files an amendment and resubmits the application and
it is filed by FDA. The resubmission often contains additional studies,
analyses, data, or clarifying information to address concerns raised by
FDA in the previous review. As with the first cycle, this cycle ends
when FDA has completed its review and issues an action letter to the
sponsor. If the review process takes two or more cycles, the total
approval time includes the time spent during the review cycles, plus
the additional time the sponsor uses to address the issues raised by
FDA.
FDA Response to Concerns Over the Number of Drugs Developed:
Over the past several years, numerous industry analysts and FDA noted a
decline in the submission of applications for NDAs overall, and for
innovative drugs, such as NMEs.[Footnote 16] In light of this, in
January 2003, FDA launched a broad initiative to improve the
development and availability of innovative medical products, including
new drugs.[Footnote 17]As part of this initiative, FDA sought to
reduce: (1) the number of drugs requiring more than one review cycle,
(2) overall approval times, and (3) development costs. To help
accomplish this, FDA sought to improve the development and review
process by educating drug sponsors on the type and extent of scientific
data that must be present in the NDA's initial submission. Noting the
decline in the number of NDAs, in 2004 FDA proposed a second, more
targeted, initiative--known as the critical path initiative--to form a
collaborative effort between government, industry, and
academia.[Footnote 18] In doing so, FDA cited an urgent need for a new
product development "tool kit" to enable researchers to more
effectively translate basic research discoveries into safe and
effective products. Such tools include better techniques of identifying
safety problems as early as possible and better methods for
demonstrating medical effectiveness; tools, which according to FDA,
could help reduce the failure rates of drug development and increase
the number of NDA submissions.
Drug Development Trends Are Not Commensurate with Research and
Development Expenditures:
Overall, our analyses of drug development data revealed that increases
in research and development expenditures from 1993 through 2004 have
not led to a commensurate increase in NDAs submitted to FDA, including
those classified as NMEs. Although the pharmaceutical industry reported
a 147 percent real increase in annual research and development
expenditures from 1993 through 2004, and an increasing number of INDs
are being submitted to FDA, the number of new drugs developed has not
grown in a similar manner. Compared to industry-reported research and
development expenditures, the number of NDAs and NDAs for NMEs
submitted to FDA over the period increased at a lower rate--by 38
percent and 7 percent respectively--which indicates that the
productivity of the research and development investments has been
declining. Furthermore, the majority of NDAs submitted to FDA were for
non-NMEs, and thus represented modifications to existing drugs rather
than newer and potentially more innovative drugs. FDA has consistently
approved most of the NDAs submitted, with approval rates nearing 80
percent overall, and has been approving applications much more quickly
in recent years. However, the actual numbers of drugs approved annually
has been declining, reflecting the trends in NDA submissions.
The Productivity Associated with Research and Development Expenditures
Has Recently Declined:
According to PhRMA and industry analysts, research and development
expenditures are key to the development of new and innovative medical
products, including pharmaceuticals. During the drug discovery and
preclinical stages, research and development expenditures fund efforts
to identify new compounds that could ultimately become INDs. Research
and development expenditures during the clinical trial phases fund the
studies needed to prove a drug is safe and effective, leading to a
potential NDA submission. Our review of annual research and development
expense data reported by PhRMA and IND submission data reported by FDA
indicate that there have been substantial and consistent increases in
these expenses over the past decade, and that the number of INDs
submitted to FDA has been increasing. However, we found that these
investments have not led to a commensurate increase in the number of
NDAs and NMEs, and thus, the productivity of these investments has
declined.
Figure 3, which shows the number of INDs that sponsors submitted to FDA
from 1986 through 2005, indicates that there have been fluctuations in
the number of INDs submitted each year.[Footnote 19] However, in
general, sponsors have been submitting an increasing number of INDs
since 1986. Figure 3 also shows a 45 percent increase in IND
submissions over the last 2 years.
Figure 3: Figure 3: IND Submissions, 1986-2005:
[See PDF for image]
Source: GAO analysis of FDA data.
Note: The data in this figure are for commercial INDs.
[End of figure]
Despite the trends of increasing IND submissions and steady increases
in research and development expenses, we found that the number of NDAs
submitted to FDA has generally been declining over the past several
years. Figure 4 shows the annual research and development expenses
reported by PhRMA for 1993 through 2004 (adjusted for inflation to 2004
dollars), and the total number of NDAs (including those for NMEs) and
NDAs for NMEs submitted to FDA during the same period.[Footnote 20] As
figure 4 shows, annual research and development expenses grew
consistently over the period. In 1993, the inflation-adjusted expenses
were nearly $15.7 billion, and grew to an estimated $38.8 billion in
2004--a 147 percent real increase over the period.[Footnote 21] Our
analysis also revealed that inflation-adjusted annual growth rates of
the research and development expenses ranged from a low of just over 2
percent from 2001 to 2002, to over 11 percent from 1999 to 2000.
Figure 4: Figure 4: Research and Development Expenses (Constant 2004
Dollars), Total NDA, and NDA for NME Submission Trends, 1993-2004:
[See PDF for image]
Source: GAO analysis of PhRMA and FDA data.
[End of figure]
In contrast to the steady and large increase in research and
development expenditures, we found that the number of NDAs submitted
annually increased at a lower rate--38 percent over this period--and
has generally declined over the past several years. As figure 4 shows,
there was initial growth followed by a general decline in submissions
of all NDAs, including NDAs for NMEs, to FDA. For NDAs, figure 4 shows
that the number submitted to FDA, in general, grew from 1993 through
1999. In 1993, sponsors submitted 74 NDAs to FDA. In 1999 this number
grew to 129--a 74 percent increase from 1993. After 1999, however, NDA
submissions generally declined, and in 2004, sponsors submitted 102
NDAs, which represented a 21 percent decrease from 1999 levels. Figure
4 also shows that the number of NDAs submitted to FDA for NMEs
increased slightly over this 12-year period--by 7 percent. In addition,
Figure 4 shows that the number of NMEs submitted to FDA peaked in 1995,
and, for the most part, then began to decline. Although sponsors
submitted 50 NMEs in 1995, this number fell to 30 in 2004, which
represented a 40 percent decline. It should be noted that submissions
of NDAs for NMEs increased during the last 2 years of this time frame-
-rising from 23 in 2002, to 28 in 2003, and 30 in 2004.
Because it may take several years from the time research and
development investments are made until the time a sponsor submits an
NDA to FDA for approval, expenses in any given year are generally not
related to NDA submissions in that year. Additionally, given the
uncertain nature of research and development efforts, it is unlikely
that expenditures and NDA submissions would grow at the same rate.
However, given a 147 percent increase in research and development
expenditures over the 12-year period, many analysts and experts assumed
that the trend in NDA submissions would also generally be one of
consistent increases. The NDA submission trends, combined with IND
submission trends, indicate that the industry faces challenges in
successfully completing the clinical testing stage, leading up to the
submission of an NDA.
Most NDAs Were for Modifications to Existing Drugs:
In addition to determining the overall trends in the number of NDAs and
NMEs submitted to FDA, we used FDA chemical type and therapeutic
potential classifications--NME, non-NME, priority, and standard--to
make a general assessment of the level of innovation of the NDAs
submitted. Any one NDA--regardless of whether it is for an NME or was
granted priority status by FDA--may eventually turn out to be an
innovative and uniquely therapeutic product. However, FDA and industry
analysts use the chemical type and therapeutic potential
classifications to make a general assessment of the innovative
potential of NDAs at the time of submission. We used the four
classifications as outlined in table 1 to rank the innovative potential
of NDAs.[Footnote 22]
Table 1: Ranking of Innovative Potential of NDAs Using Chemical Type
and Therapeutic Potential Classifications:
NDA submission type: Priority NME;
Level of potential innovation: 1.
NDA submission type: Standard NME;
Level of potential innovation: 2.
NDA submission type: Priority non-NME;
Level of potential innovation: 3.
NDA submission type: Standard non-NME;
Level of potential innovation: 4.
Source: GAO analysis of FDA chemical type and therapeutic potential
classifications.
Note: The ranking of 1 represents the highest innovative potential, and
4, the lowest.
[End of table]
Based on how FDA classified the 1,264 NDAs submitted from 1993 through
2004, we determined the proportion of NDAs submitted by each of the
four classifications. As figure 5 shows, 68 percent of the NDAs were
classified as non-NMEs--those representing modifications to existing
drugs, while the remaining 32 percent of the NDAs submitted were NMEs.
The figure also shows that 12 percent of NDA submissions were for drugs
in the priority NME classification--those representing the highest
potential level of innovation.
Figure 5: Figure 5: Proportion of 1,264 NDAs Submitted by Innovation
Potential, 1993-2004:
[See PDF for image]
Source: GAO analysis of FDA data.
[End of figure]
Based on FDA's classification of the 1,264 NDAs, we determined the
percentage submitted each year that were NMEs and priority NMEs.
Regarding NMEs, figure 6 shows that during the period 1993 through
2004, there was variation from year to year in the percentage of NDAs
submitted that were NMEs. Figure 6 shows that this percentage ranged
from a high of 43 in 1995 to a low of 24 in 2002. It also shows that
although this percentage had generally declined since 1995, it
increased from 2002 through 2004.
Figure 6: Figure 6: Percent of NDAs Submitted that were NMEs, 1993-
2004:
[See PDF for image]
Source: GAO analysis of FDA data.
[End of figure]
Regarding priority NMEs, figure 7 shows that in general, the percentage
of NDAs that were priority NMEs ranged from between 10 and 15 percent
during the 12-year period. Figure 7 also shows that this percentage
ranged from a high of 15 in 2003, to a low of 5 in 2001. Finally, it
shows that after a steep reduction in 2001, this percentage increased
the following 3 years to levels similar to those previously
experienced.
Figure 7: Figure 7: Percent of NDAs Submitted that were Priority NMEs,
1993-2004:
[See PDF for image]
Source: GAO analysis of FDA data.
[End of figure]
The results of our analyses indicate that the reported increases in
research and development expenditures during the period have not led to
a commensurate increase in the innovative potential of NDAs submitted
to FDA. These findings are consistent with FDA's conclusions in its
2003 and 2004 reports. In its January 2003 report on improving
innovation in medical technology--including drugs--FDA found that data
regarding application submissions showed a trend toward decreased
numbers of applications for truly innovative products, including
NMEs.[Footnote 23] The report also concluded that the trends were of
concern to FDA because at the same time, it had seen a substantial
increase in the number of applications for new products, including new
drugs in areas where comparable products already existed--such as non-
NME NDAs. Further, these same trends, which suggested stagnation in
innovation, were noted as a basis for FDA's launch of the critical path
initiative in 2004.
FDA Approves Most NDA Submissions, and Approval Times Have Been
Decreasing:
We reviewed the status of all 1,264 NDAs submitted from January 1,
1993, through December 31, 2004, to determine approval trends. Our
review found that as of September 2005, FDA had approved 961, or 76
percent of the NDAs submitted. Further, we found that FDA approval
times have been decreasing and that approval times were consistently
shorter for priority NDAs. We also found that most of the NDAs approved
from 1993 through 2004 were for non-NMEs, or modifications to drugs
already on the market. Finally, reflecting the declining number of NDA
submissions, we found that the numbers of NDAs and NMEs approved each
year have generally been declining.
The status of the 1,264 NDAs as of September 2005, shown in figure 8,
indicates that FDA had approved the majority of them, and the remaining
were either still under FDA review or had been withdrawn by the
sponsors.
Figure 8: Figure 8: Status as of September 2005 for the 1,264 NDAs
Submitted, 1993-2004:
[See PDF for image]
Source: GAO analysis of FDA data.
[End of figure]
In addition to determining the overall approval rate over the period,
we calculated approval rates for each year the NDAs were submitted. We
found that approval rates were consistently above or near 80 percent
for years 1993 through 2000. Approval rates for the later 4 years--and
years 2003 and 2004 in particular--were lower because many of the NDAs
submitted--34 of the 106 submitted in 2003 and 51 of the 102 submitted
in 2004--were still under FDA review at the time of our
analyses.[Footnote 24]
We also calculated the length of time it took FDA to approve each of
the 961 NDAs, and determined the trends in average approval times based
on the year the NDAs were submitted. Our analysis showed that the
average time it has taken FDA to approve NDAs submitted in recent years
is generally lower than for those submitted in earlier years. For
example, we found that it took FDA, on average, 669 days to approve
NDAs submitted in 1993, but only 442 days to approve those submitted in
2002--a 34 percent decrease.[Footnote 25] This decrease is due, in
part, to the fact that FDA has been approving an increasing number of
NDAs in one or two review cycles, which has helped cut overall approval
times.
Additionally, we found that approval times for priority NDAs were
consistently lower than for standard NDAs. This was due, in part, to
the fact that for those priority NDAs approved, FDA approved 63 percent
of them in one review cycle, compared to 46 percent for the standard
NDAs. Figure 9 shows the average approval times for priority and
standard NDAs based on the year they were submitted, from 1993 to 2004.
It should be noted that PDUFA was in effect during the period covered
in figure 9. During that time FDA collected user fees and was subject
to PDUFA performance goals.
Figure 9: Figure 9: Average Approval Times as of September 2005 for 961
Priority and Standard NDAs Submitted and Approved, 1993-2004:
[See PDF for image]
Source: GAO analysis of FDA data.
Note: NDA approval times include the time taken by FDA to review the
application as well as time needed by the sponsor to address FDA's
concerns. In addition, 85 of the 208 the applications submitted in 2003
and 2004 were still under review at the time of our analyses, and thus
average approval times for these years may increase if they are
eventually approved.
[End of figure]
Previous studies have indicated that implementation of PDUFA's user
fees and performance review goals have been a contributing factor to
the quicker review times. For example, in 2002, we reported that fees
collected under PDUFA had provided FDA with additional resources that
have helped the agency expedite the approval of new drugs by reducing
review times.[Footnote 26] In addition, an October 2000 study by the
Tufts Center for the Study of Drug Development concluded that user fees
contributed to a 51 percent drop in average approval times from 1993
through 1998.[Footnote 27]
To categorize the innovative potential of the drugs submitted and
approved during the period, we applied the same four-level ranking
scale discussed earlier to the 961 NDAs that FDA approved. Based on our
analysis, we found that, similar to the submission trends, most of the
NDAs approved were for non-NMEs. Figure 10 shows the proportion of the
NDAs categorized by innovative potential.
Figure 10: Figure 10: Proportion of 961 NDAs Submitted and Approved by
Innovation Potential:
[See PDF for image]
Source: GAO analysis of FDA data.
[End of figure]
We also obtained historical data on the numbers of NDAs overall, as
well as NDAs for NMEs that FDA has approved regardless of when they
were submitted.[Footnote 28] In doing so, we reviewed FDA's published
data on its annual approvals of NDAs, including NDAs for NMEs for the
years 1993 through 2005.[Footnote 29] Figure 11, which is based on
these data, shows that FDA approved an increasing number of NDAs and
NDAs for NMEs from 1993 through 1996. After that time, however,
reflecting the declining number of NDA submissions, annual approvals
declined, and returned to levels not seen since the early 1990s. Also,
there was a spike in the number of approvals in 2004, but approvals
were lower once again in 2005.
Figure 11: Figure 11: Total NDA and NDA for NME Approvals, 1993-2005:
[See PDF for image]
Source: GAO analysis of FDA data,
[End of figure]
Experts Identified Factors Contributing to Declining Productivity in
Drug Development and Offered Suggestions for Improvement:
According to experts, a variety of factors have contributed to the
declining productivity of pharmaceutical research and development
efforts by making it more difficult for the industry to successfully
complete clinical testing and submit NDAs for approval. These factors
include limitations on the scientific understanding of how to translate
chemical and biological discoveries into safe and effective drugs,
business decisions by the pharmaceutical industry, uncertainty
regarding regulatory standards for determining whether a drug should be
approved, and intellectual property issues, such as the length of
patent terms. According to experts, these factors have impacted the
length, costs, and failure rates of drug development, as well as the
innovative potential of NDAs being submitted to FDA. Although experts
agreed that declining productivity may be a cyclical occurrence that
will ultimately be reversed, they also acknowledged that they need to
address the recent increase of clinical trial failure rates--from 82
percent during the period 1996 through 1999, to 91 percent during the
period 2000 through 2003. As a result, they have proposed suggestions
to expedite drug development and improve the overall productivity of
research and development efforts.
Lack of Scientific Understanding in Treating Diseases Contributes to
Increased Failure Rates and Increased Research and Development
Expenditures:
We found a general consensus that difficulties in effectively
translating basic research discoveries into new and effective medicines
have contributed to increased failure rates during clinical testing. In
turn, this has led to increased costs of drug development. Difficulties
in understanding the science of disease have historically challenged
researchers. However, according to experts, these difficulties have
been growing over the past several years as the volume of drugs in
clinical trials and the complexity of the diseases to be addressed have
increased. As a result, the inability of drug sponsors to consistently
predict the efficacy of compounds, including those for complex
diseases, has resulted in an increasing number of clinical failures and
overall development costs. In addition, the inability of drug sponsors
to effectively utilize new technologies and a shortage of highly
trained researchers who possess the ability to effectively translate
basic discoveries into new drugs, were seen as factors that further
contribute to the increased clinical failures and costs.
During the panelists' discussion, it was generally agreed that the
inability to effectively predict which compounds will be successful
when tested in humans, combined with the greater numbers of compounds
in clinical testing, have contributed to the increased number of drugs
failing clinical testing and rising expenditures. Panelists commented
that compounds which were thought to be effective treatments during
preclinical testing in animals can ultimately fail when tested in
humans because available animal models used to estimate a compound's
effectiveness have limited ability to predict whether they will be
effective in treating humans.[Footnote 30] This issue was also
highlighted in a joint report issued by the Association of American
Medical Colleges (AAMC) and FDA, which found that although animal
models can be useful by providing biological insights, there is still a
lack of understanding when it comes to extrapolating results from
animal models to human studies.[Footnote 31]
According to industry analysts, the pharmaceutical industry's
increasing focus on developing drugs for complex and chronic diseases
such as cancer has also contributed to higher failure rates, slower
drug development, and increased costs. Because many of these diseases
have not been fully studied, knowledge of how drugs impact relevant
cells remains incomplete. For example, scientists have rarely been able
to develop cancer therapies that exclusively eliminate cancer cells
without also destroying healthy tissues. As a result, many cancer drugs
have failed in clinical testing because of adverse side effects.
Analysts have noted that in order to document the safety and efficacy
of drugs used to treat complex and chronic diseases, longer studies
with larger patient populations are required, which increases both
development time and costs. Similarly, analysts reported in 2003 that
therapies for complex and chronic conditions are generally more costly
to test, as they typically require more complex patient care and longer
monitoring periods.[Footnote 32]
Over the past decade, new technologies including genomics and high-
throughput screening have provided tools for researchers to discover
and test compounds.[Footnote 33] According to industry analysts, the
use of these technologies has led to increasing expenses without a
commensurate increase in the number of drugs developed. These analysts
have found that although companies have invested substantial resources
in acquiring technologies that have generated vast quantities of newly
discovered biological data, company researchers are still learning
whether the data will lead to potentially valid drug candidates,
resulting in compounds and drugs that have failed in either preclinical
or early clinical testing. While the panelists generally agreed that
the productivity of the pharmaceutical industry is currently declining,
they stressed that this trend may be part of a cycle that will reverse
itself, as researchers improve their ability to exploit these
technologies.
Furthermore, a shortage of physician-scientists, also known as
translational researchers--who possess both medical and research
degrees and thus the expertise needed to translate discovery-stage
research into safe and effective drugs--was seen by panelists and other
experts as a fundamental barrier to increasing the productivity of drug
development. During the panel discussion, it was generally agreed that
a shortage of translational researchers was a key factor contributing
to the declining productivity of pharmaceutical research and
development efforts, particularly with the increasing use of new
technologies and the shift in research focus to more complex diseases.
In addition, analysts have reported on this decline, and cited research
which found that the number of physician-scientists declined by 22
percent from 1983 to 1998.[Footnote 34] Experts attribute this shortage
to a variety of factors, including lengthy training and relatively
lower compensation for physicians who are scientists, compared to those
in clinical practice. In addition, researchers, including those in
academia, have noted that academic institutions have not taken the
initiative to provide financial incentives, such as scholarships, for
medical students to pursue these research interests.
The Business Environment Drives Drug Development Decisions:
Experts generally agreed that business considerations greatly influence
the industry's priorities of what drugs to pursue. The conflicting
pressures of avoiding risk and producing a high return on investment,
in addition to the recent mergers of pharmaceutical companies, have
shaped business decisions and affected productivity.
Over the past 10 years, the trend in the pharmaceutical industry has
been to focus on developing drugs that produce a high return on
investment, which has reduced the numbers and types of drugs produced.
This strategy has led pharmaceutical companies to pursue development of
blockbuster drugs, which are usually for large patient populations and
have the potential to reach $1 billion in annual sales. Blockbuster
drugs may be developed to the exclusion of other drugs for more limited
populations that generate much less revenue. Drug development experts
and several panelists reported that companies frequently choose to stop
developing drugs that do not offer the same revenue-generating
potential as blockbuster drugs, even though they could be highly
innovative and offer therapeutic advances. According to an industry
consultant we contacted, pharmaceutical companies have annual sales
thresholds in place which play a key role in determining which drugs to
continue developing.[Footnote 35] The emphasis on developing
blockbuster drugs has been highlighted by numerous industry analysts,
who have noted that the number of blockbuster drugs being sold has more
than doubled over the past several years. This strategy can also
diminish the amount of resources available to develop therapies to
treat more limited patient populations and less visible
diseases.[Footnote 36] Due to increased competition among companies,
the blockbuster strategy has also been cited as a factor leading to
increased costs from late-stage development failures. According to
researchers we interviewed from the Tufts Center for the Study of Drug
Development, although companies have pursued drugs that they believed
had huge market potential, they later discovered that the potential for
substantial revenue no longer existed for some of these drugs because
competitors had already begun marketing similar drugs. Tufts
researchers stated that such companies subsequently discontinued
production of what they thought would be blockbuster drugs, and that
often times these decisions were made late in Phase 3--the most complex
and costly phase--and thus companies discontinued development after
incurring substantial costs.
Industry analysts have also reported that with increased development
costs and complexity, and with more competition, companies prefer to
produce drugs that require little risk taking but still offer the
potential for high revenues. This strategy has created an emphasis on
producing "me too" drugs--drugs which have a very similar chemical
formulation to drugs already on the market. These drugs are less risky
to develop because the safety and efficacy of the drugs on which they
are based have already been studied. According to one panelist, an
industry representative, because the length, complexity, and expense of
developing a single drug have all increased dramatically over the last
10 to 15 years, companies must choose fewer drugs to develop. As a
result, they will often follow a business model that involves choosing
drugs that are easy to develop, with a large market that will produce a
large return on investment.
Some experts and analysts who are critical of the pharmaceutical
industry often state that the emphasis on "me too" drugs reduces
innovation because such drugs do not offer any significant therapeutic
benefits over products already being sold.[Footnote 37] For example,
they state that companies have produced different drugs all designed to
combat depression or reduce cholesterol, and that such "me too" drugs
have similar therapeutic benefits. As a result, these critics assert
that this strategy diverts resources from developing drugs that offer
greater innovative potential. However, industry analysts report that
"me too" drugs benefit consumers by offering alternative and safer
therapies. For example, they indicate that the side effects and
efficacy of these drugs can vary from person to person, which gives
physicians more options in treating their patients. In addition,
analysts report that "me too" drugs increase competition, which can
lower the price of drugs in the market.
Another major business strategy that has affected the success of drug
development since the early 1990s is mergers and acquisitions in the
pharmaceutical industry.[Footnote 38] According to industry analysts,
the industry pursued mergers and acquisitions because it anticipated it
would increase the productivity of research and development. Instead,
they noted that with the rise in research and development costs, the
newly formed company often reviews its combined inventories of
potential products and selects only the most promising compounds for
further development. For example, after consolidating their research
efforts, the company may choose to discontinue one of the individual
company's previous research areas because the projected financial
benefits of the product lines fail to meet the new company's revenue
expectations. In addition, analysts have found that mergers and
acquisitions may also result in additional pressure to develop a
blockbuster drug because investors expect the combined company to
generate a substantial growth in revenue. According to a summary of a
winter 2002-2003 Tufts survey[Footnote 39] of 35 clinical research
organizations, merger and acquisition activity was cited as a large
barrier to drug development.[Footnote 40] Due to mergers and
acquisitions, nearly 50 percent of these organizations reported that
drug development projects were cancelled during the 2 years prior to
the survey, and that 90 percent experienced project delays.
Factors in the Operating Environment Affect Drug Development Outcomes:
Based on the results of discussion among panel members, our interviews
with drug development experts, and our review of prior studies, we
identified several other factors that affect the numbers, types, and
costs of drugs being developed. These factors affect the operating
environment in which drug sponsors make their decisions, and play a
role in shaping development priorities. They include sponsors'
uncertainty over how they are to implement requirements for the safety
and efficacy of new drugs, and the impact of intellectual property
protections on pharmaceutical innovation.
Regulatory Uncertainty Can Hamper Drug Development:
We found that uncertainties regarding regulatory requirements
concerning both drug safety and effectiveness can impact the success of
drug development efforts. During the panel discussion, there was
general agreement that the lack of precise FDA regulatory standards
that outline what constitutes a safe and effective drug is a factor
when making drug development decisions--weighing the safety of drugs
against their potential therapeutic benefits. Panelists generally
agreed that because there are no precise standards for making these
decisions, sponsors and FDA must address them on a case-by-case basis.
As a result, it was indicated that this uncertainty may lead a drug
sponsor to abandon a drug rather than risk significant development
expenditures. Panelists also indicated that this uncertainty creates
risk-averse behavior that can reduce the prospects for innovative
therapies. During the panel discussion and interviews, FDA officials
acknowledged that the regulatory standards are not precise and that it
needs to have flexibility to address safety and efficacy issues as they
arise. For example, FDA officials stated that they may discover a new
drug-to-drug interaction that could affect the safety risks of an NDA
under review, and in such a case, they would utilize the new
information to address previously unknown safety issues.
We also identified a perception held by some drug development experts
and industry analysts that FDA, in response to several events involving
drug safety, has increased its review requirements during the drug
development process. Some analysts believe that these increased review
requirements have contributed to the increased time and costs of drug
development by requiring more complex and costly studies. Some analysts
have reported that safety concerns during the 1990s--which led FDA to
request that manufacturers withdraw pharmaceuticals including
fenfluramine and dexfenfluramine (known as Fen-Phen) in 1997, Propulsid
and Rezulin in 2000, and Baycol in 2001--impacted FDA's review
requirements.[Footnote 41] For example, a 2004 report completed for the
European Commission--the executive body of the European Union--found
that the withdrawals of these pharmaceuticals from the market affected
FDA's implementation of its regulatory standards.[Footnote 42]
According to this study, FDA began to demand more complex clinical
trials that called for more testing on: (1) how drugs interact with
each other, (2) the effect of drugs on liver toxicity, and (3) the
relationship of drugs to cardiac risk. In addition, according to
several drug development experts and some industry analysts, FDA has
been requiring more lengthy and complex clinical trials, which call for
more patients and increased costs. For example, according to one
analysis, the average number of patients participating in clinical
trials per NDA increased by 19 percent during the period 1995 to 2001,
as compared to the period 1990 to 1994, due, in part, to increasing
federal regulations.[Footnote 43] In its comments on a draft of this
report, HHS acknowledged that FDA may be increasing data requirements
in some instances. However, it stressed that in many cases, the
increase in the amount of data submitted results from a sponsor's
decision to provide support for new claims or to better position its
product relative to existing products.
Our review of studies and interviews with several experts revealed that
there is a lack of consensus among FDA, industry, and academia as to
what can constitute a valid measurement for proving the effectiveness
of drugs for many diseases. As a result, these sources indicate that
drug development can be more complex, lengthy, and costly than
necessary, because drug sponsors are unsure how to demonstrate a drug's
effectiveness. Drug sponsors rely on end points--or objective
measurements--to evaluate effectiveness. Clinical end points
demonstrate the effectiveness of a drug on a human, such as a
medication that can be proven to prevent strokes. However, it can be
easier to prove a drug's efficacy by using valid biomarkers as
surrogate end points (e.g., showing a medicine is effective in reducing
blood pressure instead of proving it will prevent strokes).[Footnote
44] FDA has approved many drugs to treat the HIV/AIDS virus using
surrogate end points. However, due to the uncertainty among FDA,
industry, and academia over when it is appropriate to use surrogate end
points, expanding their use has been difficult, and has been recognized
by FDA as one issue that needs to be addressed. For example, in its
March 2004 paper outlining the critical path initiative, FDA concluded
that adopting new biomarkers and surrogate end points for effectiveness
standards can drive rapid clinical development, and that efforts are
needed to develop them to help guide drug development.[Footnote 45]
This issue was also extensively addressed in the joint report issued in
2005 by FDA and the AAMC in response to FDA's critical path
initiative.[Footnote 46] That report identified a need to clarify
guidance governing the level of evidence required to support the use of
biomarkers and surrogate end points. In March 2006, FDA published a
report outlining six areas to help increase productivity in drug
development.[Footnote 47] One of these areas included developing new
biomarkers which, according to FDA, could increase the safety of new
drugs, reduce the costs of clinical trials, and expedite drug
development. According to FDA's senior manager for its critical path
initiative, the agency is currently working with industry and academia
to develop biomarkers and other tools to enhance the drug development
process.
Intellectual Property Protections Have Affected Drug Development:
During our review, we found a wide variety of views among consumer
advocates, drug development experts and analysts, and industry
representatives regarding how the protection of intellectual property
affects innovation in drug development. Intellectual property
protections are designed to help encourage innovation by providing
financial incentives to engage in research and development efforts.
One form of intellectual property protection is a patent, which
provides its owner with the right to exclude others from making, using,
or selling an invention for 20 years.[Footnote 48] In the United
States, the U.S. Patent and Trademark Office issues patents. Typically,
companies that develop brand-name drugs obtain a patent on the active
ingredient used in the drug. Patents are seen as playing a key role in
drug development, because they allow pharmaceutical companies to charge
prices that allow them to recover their investments made in discovering
and developing a new drug and earn a profit. Drug manufacturers
typically apply for patents for compounds while their medicinal
properties are still being developed and evaluated. Therefore, the
quicker companies are able to develop a new drug and receive market
approval from FDA, the more time they have to sell their drugs without
facing competition. The amount of patent protection remaining after
receiving FDA market approval is known as the effective life of a
patent.
Through both their reports and our interviews with them, consumer
advocates and some pharmaceutical industry analysts expressed concerns
that certain intellectual property protections do not encourage
innovation.[Footnote 49] First, they contended that companies can
easily obtain new patents by making minor changes to existing products
regardless of whether the drugs offer significant therapeutic advances.
Second, they indicated that pharmaceutical companies may develop new
uses for previously approved drugs that have no patent protection and
receive an additional 3 years of "market exclusivity."[Footnote 50]
According to these sources, these intellectual property protections
enable companies to earn significant profits while reducing the
incentive to develop more innovative drugs. These sources pointed to
the relatively high percentage of non-NMEs, and standard NMEs in
particular, that have been approved over the past decade as evidence
that development efforts have focused on making changes to existing
drugs. Some analysts specifically highlighted the practice commonly
known as producing line extensions--deriving new products from existing
compounds by making small changes to existing products, such as
changing a drug's dosage, or changing a drug from a tablet to a
capsule. According to analysts, these changes are typically made to
blockbuster drugs shortly before their patents expire. Some analysts
also concluded that this practice redirects resources that otherwise
could be applied to developing new and innovative drugs.
In contrast, the pharmaceutical industry contended that due to the
rising costs and complexity of developing new drugs, these intellectual
property protections are crucial to maintaining drug development
efforts.[Footnote 51] Drug sponsors and industry analysts also
indicated that new drugs produced by modifying existing compounds are
the result of incremental innovation, and such drugs can result in
important therapies. For example, by changing a medicine to reduce its
dosage schedule requirements, some industry analysts indicated that
patients are more likely to comply with their prescription's
instructions. Finally, some analysts assert that the revenues generated
from incremental innovation are needed to fund the more risky ongoing
research and development efforts, which can lead to new innovations.
Drug Development Experts Offered Suggestions to Improve Productivity
and Innovation:
While panelists indicated that the productivity of drug development is
currently in a downward cycle, and that the cycle would eventually
reverse, they were uncertain when this would occur. Therefore, they
recognized the importance of taking steps to develop and implement
initiatives to increase the number, and innovative potential, of drugs
being produced. To help accomplish this, the panelists and other
experts--including representatives from the pharmaceutical industry,
academia, public interest groups, and FDA--made a variety of
suggestions to reduce the costs, increase the speed, and encourage
innovation in drug development. While not every expert mentioned every
one of the suggestions below, or ranked them in a particular order, we
found that certain suggestions were highlighted in the panel's
discussion, our interviews, and academic and industry reports as having
the potential to improve the productivity of drug development. However,
some of these experts also cautioned that any change that expedites the
drug development process should be tempered with appropriate measures
to ensure that safety is not compromised. These suggestions include:
² Collaborative efforts among the government, industry, and academia
to:
- Design a system to collect and analyze data on why drugs fail during
clinical testing. For example, a team of FDA and pharmaceutical
representatives could review FDA and company databases to obtain
examples of drug failures and then perform a systematic analysis of the
causes of these failures. This effort would need to ensure protection
of each company's proprietary information on specific drugs. Such an
effort may provide new information to prevent multiple companies from
making the same or similar mistakes and may increase efficiency in
clinical trials.
- Develop inventories of validated biomarkers and surrogate end points
to use when testing the safety and efficacy of drugs in development.
According to experts, to increase the utilization of validated
surrogate end points, government, industry, and academia could also
work together to clarify FDA's guidance and the level of scientific
evidence needed to support the use of biomarkers and their validation
as surrogate end points.
- Identify diseases in great need of treatment, and implement an
expedited regulatory process using conditional approval to decrease the
time needed to develop drugs to treat these diseases. According to
experts, a new expedited process would require less detailed study and
information and allow for more limited clinical trials. Therefore,
experts said that an expedited process would help lower the cost of
creating drugs for these diseases, and serve as an incentive to
increase drug development for such diseases. To help ensure safety, the
drugs would have conditional approval--they would initially be
distributed to certain populations whose usage of the drug can be
studied and carefully monitored before wider distribution would be
allowed.[Footnote 52]
² Academia could place a greater emphasis on developing research
scientists with knowledge of translational medicine by providing
financial incentives, such as scholarships, for students to pursue this
discipline. Private and public partnerships could also create these
incentives to develop such scientists. One of the panelists suggested
that academia, industry, and FDA formally develop a paper that
describes the skills most needed by this new type of translational
scientist and develop funding and training mechanisms that would
specifically support these individuals.
² The federal government could consider providing financial incentives
or disincentives to affect the innovative potential of drugs produced
by the industry. The government could achieve this by extending or
reducing the period of patent protection associated with a drug based
on its therapeutic value. One of the panelists suggested that a patent
could be extended to 25 or 30 years for drugs considered innovative, or
offering high therapeutic potential; while patents for drugs offering
less innovative benefits could be only 10 years.
Concluding Observations:
Developing new drugs is complex, risky, and challenging. It is also
important to the health and well-being of society, and can provide
substantial financial rewards to companies. Recent trends reveal the
number of drugs developed has not been commensurate with research and
development investments by the pharmaceutical industry. While experts
believe these trends are part of a cycle that can be reversed, there is
no clear expectation of when the industry will become more productive-
-that is, producing greater numbers of new drugs, and more
specifically, those representing significant therapeutic advances. The
extent to which scientific, business, regulatory, and intellectual
property issues related to drug development can be addressed will
largely determine if and how quickly these trends can be reversed.
Addressing this challenge will require effective collaboration between
government, industry, and academic institutions.
Agency Comments:
HHS provided comments on a draft of this report. HHS's comments appear
in appendix III. Among its general comments, HHS officials stated that
our ranking of the innovative potential of NDAs based on FDA's chemical
type and therapeutic potential classifications was misleading.
Specifically, HHS disagreed with our premise that an NDA classified as
a standard NME should be ranked as more innovative than one classified
as a priority non-NME. It noted classification as an NME is not
necessarily commensurate with innovation and gave an example of a
priority non-NME that could offer more therapeutic potential than a
standard NME. We noted in our draft, that any one NDA--regardless of
whether it is for an NME or was granted priority status by FDA--may
eventually prove to be an innovative and uniquely therapeutic product.
However, our discussions with FDA officials and our review of prior
studies--including those conducted by FDA--revealed a general consensus
that the most important factor in assessing the innovative potential of
an NDA at the time of submission was whether or not it was an NME. For
example, FDA has highlighted the declining number of NDAs for NMEs as
an indicator of the stagnation of innovation. In its 2003 initiative,
it reported a decline in the number of submissions of NDAs for NMEs in
both the priority and standard classifications and noted this was an
indication of decreases in the submission of applications for truly
innovative new products.[Footnote 53]
HHS's general comments also noted that statutory changes may be needed
to implement the experts' suggestion to expedite FDA's regulatory
process by instituting a new system of conditional approval. Although
we noted in the draft report that FDA has authority to issue
conditional approvals for certain drugs to treat serious or life-
threatening conditions under its current accelerated approval program,
we agree that, depending on the specific parameters of any new system,
statutory changes could be necessary.
Further, HHS's general comments included additional clarifications. For
example, HHS expressed concern that our explanation of why FDA could
only provide data on NDAs through 2004 could be misleading and imply
that FDA is not good at tracking its data. In response, we clarified
the report to reflect that FDA provided data on NDAs through 2004
specifically at our request, as this was the most recent year with a
complete set of NDA submission data at the time our request was made.
We also made other clarifications in response to HHS's general
comments. In addition, HHS provided us with technical comments, which
we incorporated throughout the report, as appropriate.
As agreed with your offices, we plan no further distribution of this
report until 30 days after its date. At that time, we will send copies
of this report to the Secretary of HHS, the Acting Commissioner of FDA,
appropriate congressional committees, and other interested parties. We
will also make copies available to others upon request. In addition,
the report will be available at no charge on the GAO Web site at
[Hyperlink, http://www.gao.gov].
If you or your staff has any questions, please contact me at (312) 220-
7600 or at aronovitzl@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this report. GAO staff who made major contributions to this
report are listed in appendix IV.
Signed by:
Leslie G. Aronovitz:
Director, Health Care:
[End of section]
Appendix I: Scope and Methodology:
To determine trends in the pharmaceutical industry's reported research
and development expenditures, we obtained research and development
expenditure information from the Pharmaceutical Research and
Manufacturers of America (PhRMA). We obtained this information for the
period 1993 through 2004, adjusted for inflation to 2004 dollars. We
did not independently verify these expenditure data; however, many
researchers have cited these data as the best available information,
and they represented the best available information at the time of our
study.[Footnote 54]
To determine the trends in the number of submissions and approvals of
NDAs, we requested that the Food and Drug Administration (FDA) provide
information on all 1,264 new drug applications (NDA) submitted to FDA
from January 1, 1993, through December 31, 2004.[Footnote 55] We chose
this time period because it generally corresponds to changes FDA
implemented to its process for reviewing NDAs. Specifically, in 1992,
FDA implemented a new system for categorizing NDAs, using the priority
and standard designations and in 1993, FDA implemented time-frame goals
for reviewing NDAs. At the time we requested these data--July 2005--
information through 2004 was the most current year for which FDA could
provide complete data. We also compared the trends in the numbers of
NDAs and NDAs for new molecular entities (NME) submitted to FDA to the
trends in the research and development expenditures over the same 12-
year time frame.
For each of the NDAs, we requested and obtained descriptive and status
information--such as each NDA's unique number, its review designation
(either priority or standard), whether it was for an NME, and all of
the dates documenting when drug sponsors provided information to FDA
and when FDA made decisions during the review and approval process.
After receiving this information, we performed a series of data
analyses to identify trends in the submission and approval of NDAs, and
calculated approval time frames for the NDAs. In calculating approval
time frames, we included both the time FDA spent reviewing the NDAs and
any additional time needed by the sponsor to address any FDA review
concerns.
In addition to obtaining data on the 1,264 NDAs submitted from January
1, 1993, through December 31, 2004, we obtained information from FDA on
the number of NDAs and NDAs for NMEs the agency approved each year from
1993 through 2005. We used this information to analyze NDA and NDA for
NME approval trends, regardless of the years these NDAs were submitted.
We also obtained information from FDA on the number of investigational
new drug applications (IND) filed with the agency each year from 1986
through 2005.[Footnote 56] We chose this time period for two reasons.
First, because it takes 7 years, on average, to successfully complete
clinical trials, trends emerging from INDs submitted in 1986 could be
reflected in NDA submission trends beginning in 1993. Second, 2005 was
the most recent year with complete data, and these IND data provided an
indication of the productivity of research and development expenditures
for the drug discovery and preclinical testing phases in more recent
years.
We performed various tests of data reliability, including obtaining
information about the data collection and management system and its
controls that FDA uses to ensure the data are reliable, and
corroborating the data by comparing them to other published
information. Based on our work, we believe the data we used were
sufficiently reliable for the purpose of our report.
To determine factors affecting new drug development, and to obtain
experts' suggestions to expedite the process, we took several steps.
First, we interviewed various experts from FDA, the pharmaceutical
industry, health care organizations, a consumer group, and academia,
who possess knowledge of issues that have had an impact on drug
development. Specifically, we interviewed officials from FDA's Center
for Drug Evaluation and Research and the Critical Path Institute--which
was founded by FDA, the University of Arizona, and SRI International,
an independent, nonprofit research institute. In addition, we spoke to
experts from PhRMA and other pharmaceutical industry analysts,
including an independent consultant to the pharmaceutical industry. We
also interviewed representatives from the American Medical Association,
the Association of Clinical Research Organizations, and the National
Institute for Health Care Management. Finally, we interviewed officials
from Public Citizen, a consumer advocacy group, and experts at six
academic institutions--Boston University, the University of California-
Davis, the University of Medicine and Dentistry of New Jersey, the
University of Minnesota, Tufts University, and Vanderbilt University.
Second, we analyzed reports and articles by pharmaceutical industry
financial analysts, academic researchers, consulting firms, and the
federal government to obtain information regarding factors impacting
drug development and potential solutions to address them.
To supplement information from our interviews and review of studies, we
contracted with the National Academy of Sciences (NAS) to convene a
balanced, diverse panel of experts. At our request, these experts
discussed key factors accounting for the drug submission and approval
trends from 1993-2004, factors impacting new drug development, and
potential solutions that either the pharmaceutical industry, academia,
or the government can take to enhance new drug development. We worked
closely with NAS to identify and select potential panelists who
represented industry, government, advocacy groups, and academia who
could adequately respond to our questions about the drug development
process as well as the FDA regulatory review process. In keeping with
NAS policy, the panelists were invited to provide their individual
views, and the panel was not designed to build consensus on any of the
issues discussed. After the expert panel was conducted on January 27,
2006, in Washington, D.C., we analyzed a transcript of the panel's
discussion to identify each expert's views on key questions. The views
expressed by the panelists do not necessarily reflect the views of the
organizations with which they were affiliated or the NAS. A list of the
experts who participated in this panel is contained in appendix II. We
also reviewed applicable laws and regulations as part of our work. We
conducted our work from July 2005 through October 2006 in accordance
with generally accepted government auditing standards.
[End of section]
Appendix II: National Academy of Sciences Expert Panel Participants:
At our request, the National Academy of Sciences arranged an expert
panel discussion of new drug development issues. The panel discussion
was held on January 27, 2006, and the panelists and their affiliations
as of the date of the panel are listed below:
Moderator:
Edward Holmes, M.D., Dean, School of Medicine, University of
California, San Diego:
Panelists:
Jerry Avorn, M.D., Professor of Medicine at the Harvard Medical School
and Chief of the Division of Pharmacoepidemology and Pharmacoeconomics
at Brigham and Women's Hospital:
Peter Corr, Ph.D., Senior-Vice President for Science and Technology at
Pfizer Inc.
William E. Evans, PharmD., Director and Chief Executive Officer at St
Jude Children's Research Hospital:
Garret A. FitzGerald, M.D., Chair of the Department of Pharmacology and
Director of the Institute for Translational Medicine and Therapeutics
at the University of Pennsylvania School of Medicine.
Elaine Gallin, Ph.D., Program Director of the Medical Research Program
at the Doris Duke Charitable Trust:
Peter K. Honig, M.D., Senior Vice-President of Risk Management at Merck
Research Laboratories:
John K. Jenkins, M.D., Director of the Office of New Drugs, Center for
Drug Evaluation and Research at the Food and Drug Administration (FDA):
David Korn, M.D., Senior Vice-President for Biomedical and Health
Sciences Research at the Association of American Medical Colleges:
Jeffrey Leiden, M.D., Ph.D. President & Chief Operating Officer of the
Pharmaceutical Products Group at Abbott Laboratories:
John Marler, M.D., Associate Director for Clinical Trials at the
National Institute of Neurological Diseases and Stroke at the National
Institutes of Health:
Musa Mayer, author, breast cancer survivor, patient advocate, patient
representative to the FDA's Oncologic Drugs Advisory Committee, and
patient consultant to the FDA's Cancer Drug Development Program:
Suzanne Pattee, J.D., Vice-President of Public Policy & Patient Affairs
at the Cystic Fibrosis Foundation:
Cecil Pickett, Ph.D., President of the Schering-Plough Research
Institute:
[End of section]
Appendix III: Comments from the Department of Health and Human
Services:
Office of the Assistant Secretary for Legislation:
Department Of Health & Human Services:
Washington, D.C. 20201:
Oct 20 220206:
Leslie G. Aronovitz:
Director, Health Care:
U.S. Government Accountability Office:
Washington, DC 20548:
Dear Ms. Aronovitz:
The Department of Health and Human Services has reviewed the U.S.
Government Accountability Office's (GAO) draft report entitled, "New
Drug Development: Science, Business, Regulatory and Intellectual
Property Issues Have Hampered Drug Development Efforts"(GAO 07-49) and
is providing general and technical comments. We look forward to working
with GAO on these issues.
The Department appreciates the opportunity to comment on this draft
report before its publication.
Sincerely,
Signed by:
Vincent J. Ventimilgia:
Assistant Secretary for Legislation:
General Comments Of The Department Of Health And Human Services On The
Government Accountability Office's Draft Report Entitled, "New Drug
Development: Science, Business, Regulatory And Intellectual Property
Issues Have Hampered Drug Development Efforts" (GAO 07-49):
HHS Comments:
Under "What GAO Found" on the summary page, the second to last sentence
in the first full paragraph beginning on page 4, and the second
sentence of the first paragraph on page 21, reference is made to FDA
approving about 80% of the NDAs submitted. The concept is true, but it
is not clear enough that that is an "eventual" outcome and not the
"initial" (i.e., first cycle outcome). FDA recommends that it be
clarified that FDA eventually approves about 80% of the NDAs submitted
ed. Additionally, actual data show 76% approval of the NDAs submitted.
On page 3, footnote 4 explains why FDA was only able to give GAO all of
the data for the cohorts through 2004 for the report. The explanation
there could be misleading and lead some to conclude that FDA simply is
not very good at tracking. It should more clearly explain that 2004 was
the most recent submission cohort where all the applications had gone
though at least one review cycle by the time of the data request.
On page 9, the criteria for priority review are paraphrased. Actual
criteria should be cited rather than paraphrased, The first complete
sentence on page 9 should be changed to read as follows: "Because anew
molecular entity is considered an active moiety that has not previously
been approved (either as the parent compound or as a salt, ester or
derivative of the parent compound) in the United States for use in a
drug product either as a single ingredient or as part of a combination,
industry analysts and FDA generally consider them innovative."
On page 9, characterization of standard NDAs as "those with little or
no therapeutic potential" is misleading. For example, a new 'statin'
would probably be a standard unless they had data showing they were
superior on a critical endpoint, even though it likely has the same
therapeutic potential as other statins, which is very large:
On page 11, in the first full paragraph, characterization of what may
be n a resubmission to an NDA should note that the resubmission often
contains new data (studies) to address FDA concerns.
On page 17, Table 1 is misleading. NDA reviews are ranked on the
potential innovation of new products based on our chemical and priority
coding. FDA does not agree that a standard NME should be ranked as more
innovative than a priority non-NME. A standard NME could be the new
statin mentioned previously, while a priority non-NME could be a new
delivery system for an already approved drug that makes the product
much more effective or safe or significantly improve; compliance. Being
an NME in and of itself does not mean innovation. Even with respect to
the chemical nature of an NME, often the NME is simply a minor
modification to an existing product, or it can even be a product of an
already approved product. The order of NDA submission types should be
ranked from most innovative to least innovative in the following order:
Priority NME:
Priority non-NME:
Standard NME:
Standard non-NME:
On pages 32-33, the report suggests that FDA is increasing the data
requirements for approval, and that FDA are also asking for longer more
complex trials. For some disease states, this may be true, but in many
cases the increased amount of data submitted in the NDA is actually
driven by the sponsor in order to support new claims or to better
position their product relative to existing products. Balancing
information should be included to clarify that it is not just FDA
requests and requirements that can increase the size of applications.
On page 5, in the first full paragraph, line 15, GAO references a
suggest on to expedite the drug review process by "restructuring
regulation of the drug review process to allow for conditional approval
of drugs for therapeutic areas that currently lack effective treatments
based on shorter clinical trials using fewer numbers of patients."
Implementing such a suggestion might (would?) require statutory change:
On page 9, first paragraph, lines 9-10, the phrase "Those with little
or no therapeutic potential, compared to existing products,..." should
be changed to read "Those with no substantial therapeutic difference
from existing products..."
On page 10, first paragraph, lines 5-6, the phrase "...completing its
review of applications." should be changed to read "...completing its
review of a certain percentage of applications..."
On page 38, the first full bullet references a suggestion to implement
an `expedited regulatory process using conditional approval to decrease
the time needed to develop" new drugs. FDA would need statutory change
for this proposed expedited process.
[End of section]
Appendix IV: GAO Contacts and Staff Acknowledgments:
GAO Contact:
Leslie G. Aronovitz, (312) 220-7600 or a [Hyperlink,
aronovitzl@gao.gov] ronovitzl@gao.gov:
Acknowledgments:
In addition to the contact named above, Geraldine Redican-Bigott,
Assistant Director; Shirin Hormozi; Julian Klazkin; David Lichtenfeld;
and Stephen Ulrich made major contributions to this report.
(290476):
FOOTNOTES
[1] A drug sponsor is the person or entity who assumes responsibility
for the marketing of a new drug, including responsibility for complying
with applicable provisions of laws, such as the Federal Food, Drug, and
Cosmetic Act and related regulations. The sponsor is usually an
individual, partnership, corporation, government agency, manufacturer,
or scientific institution.
[2] For example, see FDA, Innovation or Stagnation: Challenge and
Opportunity on the Critical Path to New Medical Products (March 2004).
[3] See FDA, Improving Innovation in Medical Technology: Beyond 2002
(Jan. 31, 2003) and FDA, Innovation or Stagnation: Challenge and
Opportunity on the Critical Path to New Medical Products (March 2004).
[4] PhRMA represents pharmaceutical research and biotechnology
companies.
[5] We obtained PhRMA's data for this period to correspond with data we
obtained from FDA. In 1992, FDA implemented a new system for
classifying NDAs, and in 1993, specified time-frame goals for reviewing
NDAs were established. We therefore obtained data beginning with 1993
to generally correspond to these changes, and requested data through
2004, which was the most recent year with a complete set of NDA
submission data at the time of our request.
[6] Real growth reflects growth after the effects of inflation are
removed.
[7] Drugs studied under INDs are compounds that are under development
and essentially provide the pipeline of drugs that ultimately become
the subjects of NDAs that are submitted to FDA for approval.
[8] There are two classes of INDs--commercial and noncommercial.
Commercial INDs are submitted primarily by companies whose ultimate
goal is to submit an NDA to obtain marketing approval for a new
product. Noncommercial INDs are filed for noncommercial research
purposes. For example, a physician might submit a research IND to study
potential medicinal uses for an unapproved drug. In this report, all
references to INDs refer to commercial INDs.
[9] For more information on the FDA review and approval process, see
for example, GAO, Food and Drug Administration: Effect of User Fees on
Drug Approval Times, Withdrawals, and Other Agency Activities, GAO-02-
958 (Washington D.C.: September 17, 2002).
[10] FDA classifies NDAs into seven chemical types. These
classifications are (1) NME, (2) new salt of previously approved drug
(not a new molecular entity), (3) new formulation of previously
approved drug (not a new salt or a new molecular entity), (4) new
combination of two or more drugs, (5) already marketed drug product -
duplication (i.e., new manufacturer), (6) new indication (claim) for
already marketed drug (includes switch in marketing status from
prescription to over the counter), and (7) already marketed drug
product--no previously approved NDA--for example, according to an FDA
official, a drug marketed prior to the creation of FDA, such as
aspirin.
[11] FDA's Manual of Policies and Procedures notes that the priority
designation is intended to direct overall attention and resources to
the evaluation of applications that have the potential for providing
significant therapeutic advances as compared to "standard"
applications. It also states that the priority determination is based
on conditions and information available at the time the application is
filed. It is not intended to predict a drug's ultimate value or its
eventual place in the market.
[12] Pub. L. No. 102-571, 106 Stat. 4491.
[13] Biological products, or biologics, are derived from living
sources--such as humans, animals, and microorganisms--as opposed to
being chemically synthesized, and include vaccines and blood products.
[14] Under PDUFA, companies pay three types of user fees to FDA--
application fees, establishment fees, and product fees. In most cases,
a company seeking to market a new drug in the United States must pay an
application fee to support the agency's review process. Generally,
companies also pay an annual establishment fee for each facility in
which their products subject to PDUFA are manufactured and an annual
product fee for marketed drugs for which no generic versions are
available. For more information on PDUFA user fees see GAO, Food and
Drug Administration: Effect of User Fees on Drug Approval Times,
Withdrawals, and Other Agency Activities, GAO-02-958 (Washington D.C.:
September 17, 2002).
[15] See: FDA, FY 2004 Performance Report to the President and the
Congress for the Prescription Drug User Fee Act.
[16] For example see: American Enterprise Institute-Brookings Joint
Center, Shortening Drug Approval Times via Industry Funding of the FDA:
Did Legislation Help or Hurt? (Feb. 16, 2005).
[17] FDA, Improving Innovation in Medical Technology: Beyond 2002 (Jan.
31, 2003).
[18] FDA, Innovation or Stagnation: Challenge and Opportunity on the
Critical Path to New Medical Products (March 2004).
[19] We chose this time period for two reasons. First, because we
obtained NDA data beginning with 1993 and it takes 7 years, on average,
to successfully complete clinical trials, trends emerging from INDs
submitted in 1986 could be reflected in NDA submission trends beginning
in 1993. Second, 2005 was the most recent year for which we could
obtain complete data from FDA.
[20] Pharmaceutical Research and Manufacturers of America,
Pharmaceutical Industry Profile 2005 (Washington, D.C.: Pharmaceutical
Research and Manufacturers of America, 2005). Each year, PhRMA surveys
its membership and requests information on the amount its members spent
on research and development. According to PhRMA, these expenses include
both domestic expenses and expenses incurred abroad. Domestic expenses
include those incurred within the United States by PhRMA member
companies. Expenses abroad include expenses incurred outside of the
United States by U.S.-owned PhRMA member companies and expenses
incurred outside the United States by the U.S. divisions of foreign-
owned PhRMA member companies. Expenses incurred outside the United
States by the foreign divisions of foreign-owned PhRMA member companies
are not included. We did not independently verify these amounts.
However, these data have been repeatedly cited, and they represent the
best available information. For example, see Kaiser Family Foundation,
Prescription Drug Trends (October 2004).
[21] According to our analysis of PhRMA's data, total research and
development expenditures were 17 percent of total sales in 1993, and
were 16 percent in 2004.
[22] Based on our interviews with FDA officials and our review of prior
studies, we determined there was a general consensus that the most
important factor in assessing the innovative potential of an NDA was
whether or not it was an NME.
[23] FDA, Improving Innovation in Medical Technology: Beyond 2002 (Jan.
31, 2003).
[24] FDA provided us with this information in September 2005.
Therefore, many of the NDAs submitted in 2003 and 2004 were still under
review at the time of our analyses.
[25] Because many of the applications submitted during 2003 and 2004
were still under review at the time we performed our analyses, the
average approval times for these years are artificially lower.
Therefore, we did not use average approval times for these years to
make any comparisons to earlier years.
[26] GAO, Food and Drug Administration: Effect of User Fees on Drug
Approval Times, Withdrawals, and Other Agency Activities, GAO-02-958
(Washington D.C.: September 17, 2002).
[27] Tufts Center for the Study of Drug Development, Impact Report,
Analysis and Insight into Critical Drug Development Issues, Vol. 2
(October 2000).
[28] These data reflect the total number of NDAs and NDAs for NMEs
approved annually from 1993 through 2005, and are used to show trends
in the numbers of NDAs and NDAs for NMEs FDA approved during those
years.
[29] FDA Center for Drug Evaluation and Research, 1997 and 2004 Reports
to the Nation, Improving Public Health Through Human Drugs, and FDA's
2005 new drug approval listings on its Web site [Hyperlink,
(http://www.fda.gov/cder/rdmt/ndaaps05cy.htm] downloaded March 3, 2006
and [Hyperlink, http://www.fda.gov/cder/rdmt/nmecy2005.htm] downloaded
March 3, 2006).
[30] For example, a panelist who was an industry representative
explained that his company had compounds in development that were
intended to affect the central nervous system and which successfully
entered the brains of animals during preclinical testing. However,
after testing the drugs in clinical trials--at a cost of $10 to $12
million a study--researchers found that the drugs did not enter the
brain in humans.
[31] The Association of American Medical Colleges, Food and Drug
Administration, Center for Drug Development Science at the University
of California San Francisco, Drug Development Science: Obstacles and
Opportunities for Collaboration Among Academia, Industry and Government
(January 2005).
[32] Joseph A. DiMasi, Ronald W. Hansen, and Henry G. Grabowski, "The
Price of Innovation: New Estimates of Drug Development Costs", Journal
of Health Economics, Vol. 22 (2003).
[33] Genomics is used to study how various genes interact with drug
compounds, and high-throughput screening allows researchers to conduct
hundreds of tests at once through a combination of modern robotics and
other specialized laboratory hardware.
[34] See, for example, Ajit Varki and Leon E. Rosenberg, "Emerging
Opportunities and Career Paths for the Young Physician-Scientist",
Nature Medicine, Vol. 8, No. 5 (May 2002).
[35] For example, the industry consultant indicated that because
shareholders expect large companies to develop drugs that produce
revenues of at least $200 to $500 million per drug per year, they
frequently stop the development of drugs not expected to meet this
threshold.
[36] Congress provided incentives to expedite the development of drugs
for rare diseases with the enactment of the Orphan Drug Act in 1983,
such as tax credits for clinical testing expenses. 26 U.S.C. § 45C.
Although companies have been producing drugs under these provisions,
the panelists noted that, in certain instances, the industry does not
view these incentives as sufficient to encourage development.
[37] For example, see Marcia Angell, The Truth About the Drug
Companies: How They Deceive Us and What to Do About It (Random House,
2004).
[38] A merger occurs when two firms agree to combine and form a single
new company. An acquisition occurs when one company purchases another
company and establishes itself as the new owner. Examples of some of
the largest mergers and acquisitions include Astra with Zenica (1999),
Glaxo Wellcome with SmithKline Beecham (2000), and Pfizer with
Pharmacia (2003).
[39] Tufts Center for the Study of Drug Development, Impact Report,
Vol. 5, No. 4 (July/August 2003).
[40] Clinical research organizations contract with drug sponsors to
implement aspects of clinical trials, such as the design of a protocol,
selection or monitoring of investigations, evaluation of reports, site
monitoring visits, statistical analysis, and preparation of reports to
FDA.
[41] Propulsid and Fen-Phen were withdrawn due to increased risk of
potentially fatal heart problems; Rezulin was withdrawn due to
increased risk of liver failure; and Baycol was withdrawn due to
increased risks of potentially fatal muscle damage.
[42] Innovation in the Pharmaceutical Sector, a Study Undertaken for
the European Commission (Charles River Associates, London: November
2004).
[43] B. Hirschhorn, Understanding the Development of the Clinical Study
Budget While Avoiding Bumps and Pitfalls (Temple University,
Philadelphia, Pa.: 2004).
[44] A biomarker is a physical characteristic that can be objectively
measured, such as blood pressure. A surrogate end point is a laboratory
measurement or a physical sign that can predict the effect of a
medicine on a disease. In 1992, FDA issued regulations that allow for
the accelerated approval of new drugs for serious or life-threatening
diseases based on surrogate end points that are reasonably likely,
based on scientific evidence, to predict clinical benefit. 21 C.F.R. §
314.510.
[45] FDA, Innovation or Stagnation: Challenge and Opportunity on the
Critical Path to New Medical Products (March 2004).
[46] The Association of American Medical Colleges, Food and Drug
Administration, Center for Drug Development Science at the University
of California San Francisco, Drug Development Science: Obstacles and
Opportunities for Collaboration Among Academia, Industry and Government
(January 2005).
[47] FDA, Innovation or Stagnation, Critical Path Opportunities Report
(March 2006).
[48] Traditionally, the length of patent terms was 17 years. This was
amended to 20 years in 1994 with the enactment of the Uruguay Round
Agreements Act. See 35 U.S.C. § 154 (a)(2).
[49] For example, see National Institute for Health Care Management,
Prescription Drugs and Intellectual Property Protection, Finding the
Right Balance Between Access and Innovation (August 2000).
[50] This protection was added to the Federal, Food, Drug, and Cosmetic
Act with enactment of the Drug Price Competition and Patent Term
Restoration Act of 1984, also known as the Waxman-Hatch Act. Among
other things, it bars FDA from approving an application to market a
generic copy of certain drugs, for a 3-year period, if the clinical
investigations relied upon by the applicant for approval were not
conducted by or for the applicant, and the applicant has not been
authorized to rely upon such studies. 21 U.S.C. § 355(c)(3)(E)(iii).
[51] For example, see PhRMA White Paper, Delivering on the Promise of
Pharmaceutical Innovation: The Need to Maintain Strong and Predictable
Intellectual Property Rights (April 2002).
[52] Although FDA has an accelerated approval process for new drugs to
treat serious or life-threatening conditions, the suggestion of the
panelists was made in the context of broadening this process to
accommodate other illnesses. Under the accelerated approval process,
drugs designed to treat serious or life threatening conditions may be
approved conditionally, that is, the applicant may be required to
conduct further drug studies following approval to market the drug, to
verify and describe the drug's clinical benefits. Applicants are also
required to submit promotional materials to FDA during specific
timeframes. 21 U.S.C. § 356; 21 C.F.R. §§ 314.510, 314.550.
[53] See FDA, Improving Innovation in Medical Technology: Beyond 2002
(Jan. 31, 2003).
[54] For example, see Kaiser Family Foundation, Prescription Drug
Trends, (October 2004) and National Institute for Health Care
Management, Issue Brief, Factors Affecting the Growth of Prescription
Drugs Expenditures (July 1999).
[55] In addition to requesting information on NDAs, we initially
requested information on applications for biological products, which
are derived from living sources (such as humans, animals, and
microorganisms) as opposed to being chemically synthesized. However,
based on the data FDA provided, there were only 60 applications over
the 12-year period. Therefore, we determined that it would not be
meaningful to perform trend analyses on such a small number, and we
limited the study's scope to NDAs.
[56] There are two classes of INDs--commercial and noncommercial.
Commercial INDs are submitted primarily by companies whose ultimate
goal is to submit an NDA to obtain marketing approval for a new
product. Noncommercial INDs are filed for noncommercial research
purposes. In this report, all references to INDs refer to commercial
INDs.
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