NICE INSIGHT OVERVIEW: FDA Approval
Drug approvals and the diversity of active substances upon which these new drugs are based have been consistently increasing over time. These trends are expected to continue over the next decade, as new technologies emerge, regulatory frameworks evolve, and M&A activity drives further consolidation.
What ultimately became the U.S. Food and Drug Administration (FDA) was initially established in the 1906 Pure Food and Drug Act. It took on its present moniker in 1938 with the passage of the Food, Drug, and Cosmetic Act. Very few drugs received any formal approval prior to the 1930s — two well-known examples are morphine (1827) and aspirin (1899).1 By the end of December 2013, the FDA had approved (including drugs that were subsequently withdrawn) slightly more than 1,450 new molecular entities (NMEs).
The rate of new drug approvals has increased drastically over time,1 from an average of less than four per year before 1950, to an average of 10 per year until the 1980s, at which point it increased to greater than 20 per year. In the last few years, it has increased again, approaching and even surpassing 50 approvals annually.
The number of companies receiving drug approvals has also risen over the years, starting at less than 20 through 1945, to less than 60 in 1980, to greater than 90 in 2014.1 The high level of M&A activity has increasingly affected these numbers over the last decade. Merck has the greatest number of NME approvals over time at 63, followed by Roche, Johnson & Johnson, and Eli Lilly. At the end of 2013, Pfizer held the rights to the most NMEs (198), with Merck (106) and Novartis (98) not far behind. It is worth noting, however, that small companies still play an important role in new drug development, with more than 150 NME approvals earned by companies with just one approved product.2
Recent Approval Trends
From 2000 to 2008 and from 2009 to 2017, the FDA approved 209 and 302 new drugs, respectively.2 Antivirals and antibiotics accounted for the fewest (<6%) over both periods, while anticancer drugs and biologics increasingly predominated (11.96% to 17.54% and 7.17% to 15.56%, respectively) and the percentage of cardiovascular and neurological therapies declined (9.09% to 5.29% and 12.91% to 9.93%, respectively).
A notable increase in the number of drug approvals per year was also observed between 2000 and 2018.2 An average of 23 NMEs were approved each year from 2000 to 2010, but that number jumped to 35 in 2011 and has been increasing ever since, reaching 59 in 2018. An increasing fraction of these new drugs are first-in-class products with unique mechanisms of action, and the percentage of NME approvals classified as orphan drugs has also risen dramatically. Similarly, the use of expedited programs, such as Fast Track, accelerated approval, Priority Review, and Breakthrough Therapy, also rose significantly.
A separate investigation found that the average annual number of new drug approvals, including biologics, actually declined from 34 from 1990 to 1999 to 25 from 2000 to 2009, but then rose sharply to 41 between 2010 and 2018.3 The median annual number of generic drug approvals has also been rising. From 1985 to 2012, the FDA approved an average of 284 new generic drugs. From 2013 to 2018, that number nearly doubled (588). With the greater use of accelerated development and approval programs, the FDA review times declined from more than three years in 1983 to less than one year in 2017, and fewer approvals were based on at least two pivotal clinical trials (down from 81% over 1995–1997 to 53% over 2015–2017).
A record number of FDA approvals occurred in 2018 — 59. Many of these therapies (44) are considered to be specialty drugs, and nearly half of those (19) received orphan drug designation.4 There is some concern about the trend toward more specialty drugs owing to their higher costs. It is estimated that nine out of the top 10–selling drugs in 2020 will be specialty products even though they account for <2% of all U.S. outpatient prescriptions.5 In total in 2018, 127 NDAs and biologic license applications (BLAs) were approved for NMEs and generics (new formulations of approved drugs), an 11% increase over 2017.6
Also in 2018, the FDA approved almost as many biosimilars as it had combined previously, raising the total from nine to 16.4 Many of these products have not yet reached the market, however, due to patent issues and litigation. The FDA set another record in 2019 for biologic drugs, granting full (not just supplemental) approval to 35 medicines.7 This number included biosimilars and biobetters, which accounted for nearly two-thirds of the approvals. While the reduced fraction of novel biologics may seem concerning, market research company BioPlan Associates predicts that new cell and gene therapies, live microbial therapeutics, second-generation antibody-based products, and other novel product classes in the pipeline will soon boost the approvals of innovative products.
A comparison of approvals in the United States, Europe, and Japan in 2019 revealed that the FDA approved more drugs than its counterparts in these countries.8 In addition, many of the drugs approved in the United States in 2018 did not receive approval in Europe and/or Japan until 2018. A separate study of FDA and European Medicine Agency (EMA) decisions between 2011 and 2015 found that the FDA approved many more drugs during that period (170 vs. 144) with a median total review time that was on average 60 days shorter.9 A third study of 107 new drug applications during 2014–2016 determined that the two agencies were in agreement more than 90% of the time.10
It is also noteworthy that in 2019 the FDA approved the first NDA (for Piqray (alpelisib) from Novartis) under the Real-Time Oncology (RTOR) pilot program. This program permits the FDA to begin analyzing key efficacy and safety datasets before the official submission of an application, allowing the review team to begin their evaluation and communicate with the applicant earlier.11 Novartis also used the updated Assessment Aid (AAid), a multidisciplinary review template intended to focus the FDA’s written review on critical thinking and consistency and reduce time spent on administrative tasks. With these two pilot programs, Piqray was approved approximately three months ahead of the PDUFA VI deadline.
Another interesting trend, particularly notable in 2018, is the development of new drugs by nonprofit organizations.12 That year, drugs for tropical diseases were developed by the not-for-profit company Medicines Development for Global Health (MDGH) in collaboration with the World Health Organization Special Program for Research and Training in Tropical Diseases and Medicines for Malaria Venture (MMV) and in collaboration with GlaxoSmithKline (GSK). The Population Council, meanwhile, received approval for a vaginal ring contraceptive, and researchers at Boston Children’s Hospital proved that Omegaven, a fat emulsion manufactured by Fresenius Kabi, is effective for preventing liver disease associated with parenteral nutrition in children.
Approvals in 2020 to Date
Through March 31, 2020, the FDA’s CDER had approved 11 new drugs,13 putting the agency on track to approve another 40–50 NMEs over the course of the year, assuming NDA submissions and agency review times and approval rates are not dramatically impacted by the COVID-19 pandemic.
Of the 11 drugs approved, three are intended to treat different forms of cancer, two target migraine, and another two endocrine disorders. The remaining new drugs are designed to treat a gastrointestinal disorder, cardiovascular disease, multiple sclerosis, and nausea after vomiting.
Growing Role for CDMOs
The increasing number of new drug approvals is contributing to growth of the outsourcing market, in part due to the rising percentage of small and emerging pharma companies bringing new drugs to market. In 2018, 57 NDAs were produced by contract manufacturers.6 New contracts for NME products in 2018 totaled 22, with Catalent garnering five and Thermo Fisher Scientific, four.
Overall, 51% of NMEs and 33% of non-NME NDA products were outsourced that year.6 Small, micro-, and nano-sized pharma companies with revenues under $2 billion, however, outsourced dose manufacturing for 74% of NMEs and 70% of non-NME NDAs. In 2018, these small-cap pharma companies sponsored 43% of NDAs.
Of the 34 NMEs approved in 2018 with orphan drug designations, 65% were outsourced. Similarly, 70% of the NMEs approved with Fast Track status were outsourced, up from the average over the previous five years (2013–2017) of 58%.
Increasing Innovation in China
Regulatory reforms in China are having an impact on drug innovation itself and the approval rate for all types of new medicines.14 In the past, Chinese approval of new drugs developed by non-Chinese companies took on average five to eight years, resulting in a significant drug lag compared to approval in the United States and Europe.
Today, as a result of regulatory changes made by the China Food and Drug Administration (CFDA, now the National Medical Product Administration), requirements for drug manufacturers have been streamlined and review timelines shortened, particularly for foreign drug companies.14 There is a new fast-track approval process for novel drugs with “significant clinical value” that treat severe or rare diseases, early generics, and drugs that supplement products in short supply. For some drugs designed to treat rare diseases, the need to perform local clinical studies may be waived.
These reforms have significantly increased the number of approvals for drugs made by multinational pharmaceutical companies (MNCs).14 For instance, in 2016, only five drugs were approved in China — two from domestic companies and three from MNCs. In 2017, the total number rose dramatically, with 39 MNC drugs approved that year. In 2018, a total of 52 products were approved, including some of the 180 candidates that were granted priority review status in 2018. The drug lag has also been reduced, with some drugs approved in China within 12 months of receiving approval in the United States and Europe. From 2017 to 2018, average delays were reduced from 85 and 84 months to 28 and 31 months in the United States and Europe, respectively.
Modernization of the FDA
The review and approval processes for Investigational New Drug (IND) applications and NDAs continue to undergo changes that are having an impact on approval trends. In mid-2018, then FDA Commissioner Scott Gottlieb announced plans to modernize the agency’s drug review office, and the agency issued draft guidance documents on how the FDA would incorporate patient input in regulatory decision-making.12 In fact, the FDA is now required to consider real-world evidence from off-label drug use in regulatory approvals.15 The FDA and other regulatory agencies are also considering patient-reported outcomes (PROs) when evaluating drugs for approval.
Of the 34 NMEs approved in 2018 with orphan drug designations, 65% were outsourced.
The Impact of Changing R&D Spending
Changes in the industry are affecting research and development strategies, which are in turn having an impact on new drug approval trends. One of the biggest influences has been the heightened M&A activity in recent years. Approximately 50% of all new drugs approved by the FDA in 2018 were initially developed by companies other than those that received the approval. More products today are acquired or in-licensed rather than developed in-house from the discovery phase.16 Notably, global spending on M&A and licensing activities in the first half of 2019 reached nearly $140 billion — exceeding estimated 2019 R&D spending by more than 60%.17
Despite these concerning numbers, global pharma R&D spending increased by 3.9% from 2016 to 2017, reaching $165 billion and representing 20.9% of prescription sales.18 Industry investment in R&D is supplemented by government funding; in the United States, for instance, the National Institutes of Health academic research budget for the fiscal year 2017 totaled $33.1 billion. Through 2024, overall R&D spending is projected to expand by 3% annually to reach nearly $204 billion. This number is lower than the 3.6% CAGR observed between 2010 and 2017. The average R&D intensity is expected to fall to 16.9% in 2024 compared with the 19.5% observed between 2010 and 2017.
This slowdown could be due to increases in efficiency or could reflect the recent declines in return on investment experienced by the top pharma companies.18 There is, however, no evidence that bringing NMEs into big pharma companies is reducing R&D costs or cycle times.16 In fact, while clinical development times decreased from 2010 to 2013, they have since risen by about 7%. At the same time, the average peak sales achieved per approval declined by half from 2015 to 2018. Similarly, with orphan drugs accounting for a growing percentage of new drug approvals, the average size of the patient populations being treated by new approved drugs has decreased by 15%.17 These trends raise questions about the sustainability of the pharma industry.
Looking Down the Road
Going forward, many of the recent industry trends impacting drug approvals will remain in play.19 Further consolidation can be expected with acquisition and licensing of novel technologies continuing, particularly in the specialty pharma sector.20 The continued advance of biologics, including next-generation cell and gene therapies, bispecific antibodies, RNAi technologies, and live microorganism–based treatments, will likely lead to more BLA approvals.19 More diverse monoclonal antibody-based therapies are also expected,20 and development of orphan drugs will continue to increase as well.19
Other issues may have a less obvious impact on drug approvals but will be important nonetheless, including the changing leadership at the FDA and EMA, the struggles of the generics market, drug quality and potential new requirements for impurity testing, drug pricing reform in the United States, and the growing importance of digital technologies and patient-centric models in drug development.19 Greater use of genomics data will be a result of both of these latter two trends.21
Overall, these industry trends will lead to even faster approvals for new drugs, an increasing importance of advanced therapies, and consideration of drug pricing to some extent within the approval process.22 Steve Hahn, the new head of FDA, will leave his imprint on the drug review process with respect to timelines and data flexibility with the reauthorization of PDUFA.
He will be challenged to help the pharma industry improve the success rate for new drug development. A recent study found that the success rate for compounds entering phase I trials has not changed over the last couple of decades and still remains at <10%.23 That equates to a >90% failure rate at the early development stage. Compounds in phase III, however, have historically been successful nearly 50% of the time, and this percentage appears to be creeping up. The ones that fail do so, generally, because of efficacy and/or safety issues, underscoring that the industry still lacks critical knowledge about disease mechanisms.
It is also important to remember that it takes a long time for a new drug to reach the market from the time the initial patent is filed — nearly 14 years, according to IQVIA.21 So, drugs reaching the market over the next 10 years will be based on technologies introduced in the late 2000s through 2016 or so. There have been many changes over this period, including the growing use of digital technology, the first approval of a prescription digital therapeutic, as well as approval of the first cell and gene therapies. Biosimilars first emerged in the United States in 2015. All of these technologies will continue to expand in the next decade.
Pricing pressure on small molecule generics arrived more recently, but is expected to continue to create challenges for generic producers.21 As more companies exit the market for products with no profitability, shortages of supply will continue to occur. This scenario is already driving the FDA to encourage more development of generics. Only time will tell if the agency’s tactics will have an impact. Pricing reform in the United States will impact both branded and generic drugs and drive even greater reliance on outsourcing to increase efficiency and productivity and reduce costs.20
On the innovator side, more firsts can be expected from China now that the regulatory approval process has been revamped there.21 Chinese companies are increasingly developing their own novel medicines, and many of these candidates will soon be evaluated by the EMA and FDA. In fact, the Chinese company BeiGene has already received FDA approval for its lymphoma therapy Brukinsa in late 2019.
All of these trends suggest that the pharma industry is becoming more diverse,21 and this diversity will likely be reflected by an array of new drug approvals over the coming decade.
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“FDA New-Medication Approval Times Dropped Significantly in Recent Years.” US Pharmacist. 22 Jan. 2020. Web.
“2018 Specialty Drug Trends.” Advanced Medical Strategies. 2019. Web.
Raper, Austin. “The Rise of Specialty Medications: Hope for Patients. Hurdle for Health Care.” Cover My Meds. 14 Mar. 2019. Web.
Bradbury, Adam. “Increase In Drug Approvals. Priority Reviews Points To Bright Future For CMO Industry.” Outsourced Pharma. 15 Oct. 2019. Web.
“BioPlan Associates Notes Another Record Year For Drug Approvals From U.S. FDA; 35 Approvals In 2019.” Biosimilar Development. 22 Jan. 2020. Web.
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Kashoki, M., et al. “A Comparison of EMA and FDA Decisions for New Drug Marketing Applications 2014-2016: Concordance, Discordance, and Why.” Clin. Pharmacol. Ther. 15 Jul. 2019. Web.
FDA Approves First PI3K Inhibitor for Breast Cancer. U.S. Food and Drug Administration. 24 May 2019. Web.
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“Novel Drug Approvals for 2020.“ U.S. Food and Drug Administration. 31 Mar. 2020. Web.
Xie, David, Xiaofeng Li and An Li. “The rewards of regulatory change: Launching innovative biopharma in China.” Deloitte Insights. 2019. Web.
Doyle, Leslie. “Emerging Trends in Regulatory Affairs in 2019.” Northeastern. 29 Aug. 2019. Web.
Munro, Jamie. “The changing nature of approvals – what does the future hold?” The 2019 CMR International Pharmaceutical R&D Factbook. 21 Jan. 2020. Web.
“New Clarivate Analytics report shows the cost to bring a drug to market has decreased to under $2B for the first time in over five years.“ Clarivate Analytics. 26 Sep. 2019. Web.
Singh, Amandeep. “Pharmaceutical R&D global spending trends in 2019.” Prescouter.com. Jun. 2019. Web.
van Arnum, Patricia. “A Top 10 Pharma Watch List for 2020.” DCAT Value Chain Insights. 22 Jan. 2020. Web.
Rickwood, Sarah. “Nine pharma trends for 2020.” Pharmaphorum. 14 Jan. 2020. Web.
“Top pharma industry predictions for 2020.” Pharma Manufacturing. 8 Jan. 2020. Web.
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Lowe, Derek. “The Latest on Drug Failure and Approval Rates.” Science. 9 May 2019. Web.