How much does it cost to develop a new drug? According to Joseph Dimasi of the Tufts Center for the Study of Drug Development, on average, the capitalized cost comes out to about $1.3 billion (adjusted to 2009 dollars). And a not-insignificant portion of these costs comes from regulatory burdens – specifically, the FDA’s standard Phase I/II/III trial design. Indeed, as my Manhattan Institute colleague, Avik Roy, has documented, pretty much everything involved in a clinical trial has become more expensive.
Yet, this might seem counterintuitive in light of a study published in the Journal of the American Medical Association, which some commentators are claiming exposes “gaps” in the FDA’s burgeoning flexibility on clinical trial protocols.
Various pills (Photo credit: Wikipedia)
The study, conducted by Yale University researchers finds that about 49 percent of drugs approved by the FDA from 2005 to 2012 were approved based on “surrogate endpoints” (more on that later) rather than clinical outcomes. In essence, this means that half of these drugs were approved with very convincing evidence showing improvements in clinical outcomes (randomized, double-blind studies), while the rest were based on biochemical changes that may or may not lead to clinical improvements.
So does this mean that trials with clinical outcomes are inherently superior to those using biomarkers? Not really.
Confidence levels versus science
We have to remember that randomized control trials (RCTs) are their own surrogate markers – a “short hand” for developing a single descriptive outcome by comparing two (largely) identical populations, where one group receives the drug, and the other, a placebo or a comparator. This is incredibly useful when we can’t identify, or completely understand, the underlying mechanism of action of a drug in a mind-bogglingly complex environment, i.e., the human body. In this case, RCTs establish causality (or come very close to it). However, if you can predict precisely the effect that a drug will have on a given patient or group of patients, and track that effect in real time, you don’t need RCTs to establish causality – the underlying science does it for you.
The costs of drug development are more or less indisputable (indeed, studies attempting to replicate Dimasi’s results have hit a range of $500 million to over $2 billion). Much of the low-hanging fruit for pharmaceuticals has already been picked. “Crowd-based” medicine – tuberculosis and polio vaccinations, the eradication of smallpox, and other population-health based interventions have already made their mark. As people live longer, new diseases – cancer, heart disease, and COPD – have become much bigger concerns. These diseases and a growing number of “orphan diseases” – those which affect a relatively small portion of the population – are some of the new targets for drug development.
Moore’s Law in reverse
But industry has hit a slump. Although the past few years have been better in terms of new drug approvals, a trend known as “Eroom’s Law” (the reverse of Moore’s Law) has come to dominate the understanding of pharmaceutical R&D. Basically, the industry has been pumping more and more money into R&D, but has seen fewer new drugs approved.
The reality is that new drugs that treat emerging diseases cannot rely on the crowd-medicine standards that pushed through medicines half a century ago. The total populations are smaller and the clinical outcomes are often hard to measure, especially when they may only be seen years later. This new reality is precisely why the FDA has embraced some measure of flexibility in its clinical trial protocols. As the President’s Council of Advisors on Science and Technology (PCAST) has noted, this flexibility was critical to approving the first cancer and HIV/AIDS drugs quickly (these drugs were approved under the “Accelerated Approval” pathway, which explicitly allows the use of surrogate biomarkers).
Outcomes or biomarkers
Nevertheless, the Yale researchers have struck on an important point. There is an important difference between drugs approved with clinical outcome evidence and those approved with surrogate biomarkers. Some biomarkers – like viral load of HIV – have better evidence supporting their use than others. This means that a drug approved using very well-vetted biomarkers or through an RCT, has better evidence supporting its use than drugs approved with unverified biomarkers. And when the biomarker is well-vetted, the strength of the evidence is comparable to the strength of results from an RCT.
But the FDA does have a mechanism for dealing with this – all drugs approved under the Accelerated Approval pathway are subject to post-market surveillance, which includes reporting on the safety and efficacy of the drug once it goes to market. And the Yale authors (along with others like the Institute of Medicine) argue that the FDA should have more authority to enforce post-market surveillance. That’s hard to argue with.
Except that simply increasing the regulatory burden of post-market surveillance will only make getting drugs to market (and keeping them there) more difficult. More strict post-market surveillance should be complemented with a significant expansion of the Accelerated Approval pathway – or perhaps even the removal of Phase III trials (these are the so-called “pivotal” trials that are the most expensive). Indeed, the Yale study shows that study populations are still large, and most drugs require more than one pivotal trial prior to approval.
Safety is vital, but no one would accuse the FDA of being overly risk-tolerant. Speedy approval worked for HIV/AIDS drugs and continues to work for cancer treatments – why isn’t it good enough for all drugs?
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INVESTORS’ NOTE: Chelsea Therapeutics’ (NASDAQ: CHTP) Northera is undergoing what is likely its final trial. An FDA committee voted in favor of approval, despite disappointing results from previous trials regarding long-term efficacy. Abbott Laboratories’ (NYSE: ABT) spinoff, AbbVie (NYSE: ABBV) was recently added to Goldman Sachs’ (NYSE: GS) Conviction Buy list, thanks to its strong, and according to Goldman, largely “unvetted” pipeline (and don’t forget, AbbVie’s blockbuster drug, Humira, brought in $1.4 billion in Q3 2013; the patent is good through 2016).