Mirror, Mirror

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  • 11/14/2012

Mirror, mirror on the wall – whose delaying innovation most of all?

Should the new third leg of the FDA review process be … investment considerations?

Jonathan Leff, managing director of Warburg Pincus LLC, believes that the FDA should consider the cost of drug development when making its regulatory decisions.

At a conference on rare diseases conference sponsored by the Drug Information Association and National Organization for Rare Disorders, Leff said FDA should think about the effects of its demands on sponsors, such as the additional cost another efficacy trial would create should the agency demand it.

That’s a bad idea. While there are many things the FDA can and should do that would result in lower drug development costs – the issue has no place in the regulatory review process. It is as inappropriate a third leg as comparative effectiveness. The regulatory process must rest on the twin pillars of safety and efficacy.

Leff does not agree. “We must recognize that if a system is set up to ensure safety and efficacy and no mechanisms are designed into it to take the economic burden into account, we should expect to see as an unintended consequence, exactly what we have seen, which is relentlessly increasing time and cost.”

"Because of that time and cost, venture investors and pharma companies are now unable to make new investments to initiate development of many promising new therapies and as a result the next generation of potential breakthrough treatments … may never have a chance.”

Indeed, we are seeing an increase in time and cost – and these are serious roadblocks to continued investment in innovation. But whether this is entirely the fault of the FDA is not as simple as Leff makes it seem. He’s parroting the party line of those who choose to blame their developmental failures on the FDA. There is a medical device to address this myopia – it’s called a mirror.

Mr. Leff is only repeating the broader opinion of the investor community. The National Venture Capital Association's (NVCA) Medical Innovation & Competitiveness Coalition found that 39% of firms reduced investment in life sciences companies over the last three years. The same percentage expects to further decrease investment over the next three years. The venture capitalists surveyed largely blamed the Food and Drug Administration's restrictions and regulatory challenges for this trend.

Pharmaceutical companies must evaluate their level of responsibility for shrinking investment expenditures. If they want venture capitalists to continue investing in medical research and development, they must produce high-quality drugs worthy of FDA approval – and stop whining when their “miracle drugs” require more clinical evidence.

The solution isn’t for the FDA to weigh the financial investments of biopharmaceutical companies in its regulatory decision process. The solution is to make the regulatory process more predictable.

A quarter-century ago, the success rate for a new drug used was about 14 percent. Today, a new medicinal compound entering Phase 1 testing — often after more than a decade of preclinical screening and evaluation — is estimated to have only an 8 percent chance of reaching the market. For very innovative and unproven technologies, the probability of a product’s ability to make it to the market is even lower. We must work together to turn that around.

When Thomas Edison was asked why he was so successful, he responded, “Because I fail so much faster than everyone else.” Consider the implications if the FDA could help companies fail faster. Using the lower end of the Tufts University estimate of the average pre-tax cost of new drug development, $802 million:

  • A 10 percent improvement in predicting failure before clinical trials could save $100 million in development costs.
  • Shifting 5 percent of clinical failures to Phase 1, the earliest stage, from Phase 3, the latest stage, reduces out of pocket costs for developers by $15-$20 million.
  • Shifting of failures to Phase 1 from Phase 2, the middle stage, would reduce their out of pocket costs by $12-$21 million.

All of these dollars could then be reinvested in other innovative development programs for new life-saving medicines.

For all that modern science has to offer, developing new treatments is still very much an art, in which hunches, intuition, and luck play a critical role. The odds are long. But for more medicine that is affordable and innovative, we need up-to-date regulations that compliment the drug trial process in order to take these chances, which is precisely the mission of the FDA’s Reagan-Udall Foundation.

 “I’ll tell you as a venture capitalist, I have been forced to not make investments in rare disease opportunities that we might have or almost certainly would have invested in 10 years ago because of a perception that if we do a clinical trial, and given all the unknowns in this area, miss slightly on the statistical goals, that would be game over for that development program,” he said during the conference.

That may be so. But drug reviews are not and should not be predicated on the calculations of venture capitalists.

But that doesn’t mean maintaining the status quo is acceptable.


Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

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