New Drug Development: Science, Business, Regulatory, and Intellectual Property Issues Cited as Hampering Drug Development Efforts
Published: 2006-11-17T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: 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.
section_title: What GAO Found
paragraphs: 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.

section_title: Letter
paragraphs: 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 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. 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. 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) for the  period 1993 through 2004, and adjusted it for inflation to 2004 dollars. 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.
subsections: section_title: Background
paragraphs: 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.
subsections: section_title: The Drug Discovery, Development, and Review Process
paragraphs: 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) that summarizes the data that have been collected on  the compound and outlines plans for the clinical trials. 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. 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.
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. 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. 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.
In response to concerns that FDA was taking too long to review and  approve NDAs, the Prescription Drug User Fee Act (PDUFA) 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. 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. 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.
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.
section_title: FDA Response to Concerns Over the Number of Drugs Developed
paragraphs: 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. 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.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. 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.
section_title: Drug Development Trends Are Not Commensurate with Research and Development Expenditures
paragraphs: 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.
subsections: section_title: The Productivity Associated with Research and Development Expenditures Has Recently Declined
paragraphs: 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. 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.
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. 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. 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.
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.
section_title: Most NDAs Were for Modifications to Existing Drugs
paragraphs: 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.
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.
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.
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.
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. 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.
section_title: FDA Approves Most NDA Submissions, and Approval Times Have Been Decreasing
paragraphs: 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.
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.
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. 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.
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. 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.
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.
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. 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. 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.
section_title: Experts Identified Factors Contributing to Declining Productivity in Drug Development and Offered Suggestions for Improvement
paragraphs: 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.
subsections: section_title: Lack of Scientific Understanding in Treating Diseases Contributes to Increased Failure Rates and Increased Research and Development Expenditures
paragraphs: 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. 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.
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.
Over the past decade, new technologies including genomics and high- throughput screening have provided tools for researchers to discover and  test compounds. 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.  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.
section_title: The Business Environment Drives Drug Development Decisions
paragraphs: 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. 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. 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. 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. 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 of 35 clinical research  organizations, merger and acquisition activity was cited as a large barrier  to drug development. 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.
section_title: Factors in the Operating Environment Affect Drug Development Outcomes
paragraphs: 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.
subsections: section_title: Regulatory Uncertainty Can Hamper Drug Development
paragraphs: 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. 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. 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. 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). 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. 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. 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. 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.
section_title: Intellectual Property Protections Have Affected Drug Development
paragraphs: 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. 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. 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.” 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. 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.
section_title: Drug Development Experts Offered Suggestions to Improve Productivity and Innovation
paragraphs: 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:    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.
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.
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.
section_title: Concluding Observations
paragraphs: 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.
section_title: Agency Comments
paragraphs: 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.
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.
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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.
section_title: Appendix I: Scope and Methodology
paragraphs: 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.
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. 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. 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.
section_title: Appendix II: National Academy of Sciences Expert Panel Participants
paragraphs: 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:  Edward Holmes, M.D., Dean, School of Medicine, University of California,  San Diego  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)
section_title: Appendix III: Comments from the Department of Health and Human Services
section_title: Appendix IV: GAO Contacts and Staff Acknowledgments
subsections: section_title: Acknowledgments
paragraphs: 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.