Business | Endpoints

FDA wants to help unproductive drugmakers

America’s pharmaceutical giants may also need to rethink their business model

|Washington, DC
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SCOTT GOTTLIEB, the thoughtful head of America’s Food and Drug Administration (FDA), has had a busy first year. He has launched the process of lowering nicotine levels in cigarettes, approved self-testing kits for breast-cancer genes and waved through the most new medicines in two decades, as well as a record number of copycat drugs (see article). There is one thing he and his regulatory agency are doing less of, however—regulating. New rules were at a 20-year low in 2017, according to analysts at PwC, a consultancy. Instead, the FDA is providing more guidance to industry. This approach, Mr Gottlieb hopes, will help pharmaceutical firms in America develop drugs more efficiently. Since that is where most drug development happens, the FDA’s philosophy matters beyond American borders.

Given the rapid pace of scientific advances in medicine, you might think Big Pharma is in rude health. You would be wrong. Last year consultants at Deloitte estimated that returns on investment among the biggest American drugmakers fell to 3.2%, from 10.1% in 2010 (see chart). Many observers blame the rising cost of bringing new drugs to market.

It now costs an average of $2bn to develop a new drug, up from $1.2bn in 2010. One theory is that the easier discoveries have already been made. As medicines become more personalised, the returns per drug may be squeezed because fixed development costs are spread across a smaller pool of potential patients. Either way, firms may have fewer incentives to innovate.

Mr Gottlieb has several ideas for how to provide them with more. First, he wants the agency to rethink how much information the FDA demands at an early stage. For example, with better models of a drug’s toxicity, it could be tested in animals later in the process rather than at the outset. Lowering upfront costs should encourage investment, especially by smaller biotech firms with bright ideas but fewer resources. Making early failure cheaper should also enable startups to raise capital more easily.

Mr Gottlieb’s second idea is to extend to other areas the innovative trial design that the FDA has pioneered in recent years for cancer drugs. This may involve doing away with the traditional hard boundaries of the drug-testing process (known as phases 1, 2 and 3). Instead, trials constantly adapt by expanding and shrinking cohorts of patients depending on their response to treatment. This makes the process more efficient. The agency is also open to the inclusion of non-trial data (from wearables or patient records, say).

Crucially, some cancer drugs do not now need to show that they extend overall survival, merely that they prolong the time a patient lives without the cancer getting worse. As a benchmark of clinical success, this “endpoint” is quicker, and cheaper, to prove. It may have encouraged investment and innovation in oncology.

The FDA now wants to do something similar for other diseases, in particular Alzheimer’s. This is Mr Gottlieb’s third idea—and potentially the most controversial.

Dementia is an area of growing concern as populations age, but one where drugmakers have a history of costly failures. Since 2003 more than 200 compounds for dementia have entered phase-2 clinical trials, when drugmakers begin testing efficacy. None has yet passed the final phase 3 trial by showing that it actually slows cognitive decline and preserves the ability to perform everyday functions. Over the years the field has proved so costly that AstraZeneca and GSK have cut back research; Pfizer has bowed out entirely.

To counter this trend, the FDA is weighing whether to approve dementia drugs based on their effect on biomarkers: signatures of genes or proteins that imply the presence and severity of a disease. For Alzheimer’s, this is a lower hurdle than the current cognitive-function endpoints. But biomarkers are not the same as symptoms, so the risk is that costly new drugs will be approved that do not actually work. Avastin (bevacizumab), which was approved for breast cancer using alternative endpoints, turned out to be ineffective.

A few duds may be worth the risk if overall more good medicines reach patients. Pharma firms certainly think so. They have welcomed Mr Gottlieb and his ideas with “almost uniform pleasure and happiness”, says John Maraganore, the boss of a biotech company called Alnylam who also chairs BIO, an industry group.

That is unsurprising—lower development costs should mean higher returns. What is less clear how much these savings will help the industry’s giants, whose research-and-development efforts are spread thinly across many fields, without deeper changes to their business models.

Even today inexpensive drug development is perfectly possible. If you understand the biology and can identify the patients who will benefit from your drug, Mr Gottlieb says, trials can already be shorter and cheaper. Midsized and biggish bio-pharma firms, for instance, have done far better than the very largest ones. According to Deloitte, biotech companies such as Celgene, Gilead, AbbVie and Biogen enjoyed returns of around 12% last year. Many of them have already benefited from past efforts by the FDA to lubricate the approval of potential breakthrough drugs for cancer and some other diseases. But they are also much less diversified than the likes of Pfizer or GSK. It may be that this narrower focus makes them more efficient.

It therefore remains to be seen if Mr Gottlieb’s approach can improve efficiency and innovation across the industry. His tenure may be judged a success if he manages to slow their decline. The rest is up to the industry itself.

This article appeared in the Business section of the print edition under the headline "Endpoints"

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