The FDA's higher bar on new drugs

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NEW YORK (CNNMoney.com) -- It's looking like the number of drugs that got an OK from the Food and Drug Administration plunged in 2007, even as Big Pharma faces a slew of patent expirations.

The FDA approved 69 drugs in 2007, a 26% drop from 93 approvals in 2006, said Jim Kumpel, analyst for Friedman, Billings, Ramsey.

Like many other analysts, Kumpel believes the FDA has raised its bar for approving new drugs in the post-Vioxx era. The FDA would not comment for this story, but it has consistently denied it toughened its stance on drug approvals.

Kumpel also estimated that the approval rate of new drugs dropped below 60% in 2007, down from 76% the year before. The FDA has yet to release its own figures. Kumpel said this is the lowest approval rate since 1994.

The FDA appears to be "holding the pharma industry to a tougher standard," he said. "It appears that they're requiring a margin of safety, and a reduced margin of error, that has made it tougher for drugs to make it through the system."

Only 16 of the drugs approved in 2007 were new molecular entities, or members of a completely new class of drugs, down 11% from 2006, according to Kumpel.

The industry needs new drugs like never before. Some $20 billion worth of brand-name drugs are expected to go off patent in 2008, according to estimates from research firm IMS Health. The patent on Pfizer's (PFE, Fortune 500) cholesterol-cutting Lipitor, the top-selling drug of all time with nearly $13 billion in annual sales, is scheduled to expire in 2010. And on Wednesday, Merck & Co.'s (MRK, Fortune 500) patent expires on the blockbuster osteoporosis drug Fosamax.

"People are saying the pipelines are dry, but the numbers don't bear that out, because the number of applications is going up," said Kumpel. "I think it's fair to say that the culture at the FDA appears more risk-averse."

The agency's credibility took a hit in 2004, when Merck pulled its FDA-approved blockbuster Vioxx off the market after a study linked the arthritis painkiller to increased risk of heart attack and stroke, sparking tens of thousands of lawsuits against the company. In November, Merck announced a $4.85 billion settlement that resolved a majority of these cases.

Les Funtleyder, analyst for Miller Tabak, said the FDA has "gotten slower and more conservative" in the drug review process and "more cautious" about drug safety in general. But the agency does not seem to have changed its stance officially, he said, which is why regulators continuously deny they've gotten tougher on Big Pharma.

Funtleyder said the FDA is "not insensitive to public perception" and media reports, and does not want to be seen as soft on safety.

"There's been been significant media attention placed on safety issues," he said. "It seems almost weekly we're getting a safety missive from somewhere. We're almost getting safety fatigue."

But Dr. Raymond Woosley, chief executive of the Critical Path Institute, a non-profit organization that develops drug development tools for the FDA and the pharmaceutical industry, said the FDA is receiving less drug applications, not more.

"The number of new products going into clinical development, the number of new products being submitted to the FDA, and the number of products waiting for review, have been in parallel decline, and it is a serious problem for this country," said Woosley. 'It's not the FDA's fault. They have not changed the standards for their science."

The FDA is not demanding higher-quality data from drugmakers, said Woosley, but it is demanding greater quantity. If a company is developing a drug that's in the same anti-inflammatory class as Vioxx, then the FDA will require safety data on risk of heart attack and strokes, he said. The FDA did not require this type of data prior to the Vioxx withdrawal in 2004, because those risks were not known.

"The science demands it, not the FDA," said Woosley. "It's not good business to bring a product to the FDA without an adequate science base."

The FDA is requesting a 5.7% increase in its budget for fiscal year 2009, to $2.4 billion, partly to "modernize drug safety" and "speed approval of generic drugs."