Making sense of FDA approval designations
OK, this makes my head hurt
In this article, I want to address where the drug approval process goes after the NDA or BLA is accepted by the FDA.
FDA staff analysis
As you might expect, there are specialists at the FDA who begin to analyze the data provided in the application nearly the instant it comes in the door. For an application subject to accelerated approval, the work is nearly constant.
This is an in-depth analysis. FDA staffers go through the complete case histories of many - if not all - of the patients in each of the Phase I, II, and III clinical trials for the drug. At the end of the process, the FDA staffers assigned to the application create briefing documents. These documents cover every major part of the application. They advocate pro/con on the safety and efficacy of the product, the qualification of the manufacturing facility, and the content of the drug label. These briefing documents are then sent to FDA management.
FDA management has the option of taking action on their own or forwarding the application and the briefing documents to an advisory committee of industry professionals.
FDA Advisory Committee
The FDA has formed dozens of advisory committees. They are populated by leading scientists and physicians in their particular field. A "consumer" or patient representative is also included.
When a drug is sent to an advisory committee, a panel is convened. The FDA adds a series of questions to the aforementioned briefing documents. The panel votes on the questions, which is the mechanism by which the panels make recommendations to FDA management.
If the panel is discussing a drug of a smaller firm, the firm's stock is usually halted until the company can issue the results of the panel vote in a press release. Panels and the associated briefing documents are open to the public. Some panels can be viewed live via web cast through a number of different vendors.
FDA staffers and company scientists make presentations of the data. The panelists ask questions of the presenters and then debate the pros and cons of the drug amongst themselves. The debates can be quite animated. At the end of the process, the panel members vote on the questions provided by the FDA.
FDA Advisory Committee panel votes are not binding on the FDA. However, it is very rare for the FDA to substantially go against a panel's recommendations. Once the panel votes, FDA management reviews their input and makes the final decision on the drug.
From this point, four things can happen. The first is a request for more time to review the application. The second is to send an "approvable letter." The third is to grant "accelerated approval." The last is to grant "full approval."
When the FDA issues an approvable letter instead of an outright approval, the company's stock usually tanks. Whether this is legitimate or not depends on the contents of the approvable letter.
And there's the rub...
An approvable letter contains an FDA request for information. This request for information is probably best visualized as "we need the following information before we can consider approving your application." The information needed can range from paperwork related to a manufacturing facility to a request for additional clinical trials. When it comes to the company's stock price, the mere fact the FDA is requesting more information is not the problem.
The problem is far too many companies are not straight with their shareholders about the contents of the letter. All too often, a company will tell investors the requests are minor when the only way to provide the information is to conduct lengthy and expensive clinical trials.
When trying to determine whether the stock decline resulting from an approvable letter is justified, focus very closely on the veracity of the management team. If they are not completely open about the contents of the letter, be very cautious. Make sure management is especially clear about how fast they can respond to the letter and hold them to that timeline. Ask whether they plan to negotiate with the FDA over the contents of the letter. If negotiation is needed, it is unlikely the information requested in the letter is easy to provide.
The drug is approved and sales can begin immediately, but there are some "post-marketing" conditions. Accelerated approval is offered to a relatively small number of drugs whose medical worth to patients suffering from a particular disease tips the scale to allow for a lower bar for approval.
Accelerated approval involves approving a drug based upon a "surrogate endpoint." To make sense of this, I'm going to have to digress a little and use an example. The example is related to my previous article on next generation lipid science.
LDL (bad cholesterol) is an example of a commonly used surrogate endpoint. The goal of any anti-cholesterol drug is to reduce morbidity (serious health problems) and mortality (death). To determine with reasonable accuracy an anti-cholesterol drug's effect on morbidity and mortality would take 3-5 years or longer.
However, researchers have determined drop in LDL correlates strongly to a drop in morbidity and mortality. Because of this strong correlation, the FDA accepts a drop in LDL as a surrogate endpoint for a drop in morbidity and mortality. Determining with reasonable accuracy a drop in LDL takes only a few months, making approval on the surrogate endpoint very attractive to drug companies.
Accelerated approval is available primarily for drugs seeking approval on surrogate endpoints. It also allows for approval using smaller clinical trials and sometimes without even running a Phase III trial. Accelerated approvals on surrogate endpoints and without Phase III trials are most common in diseases like HIV/AIDS and cancer where treatment options are few and the consequences of the diseases are severe. Gleevec, Velcade, Erbitux, and Iressa are four cancer drugs recently granted accelerated approval.
There are two catches to an accelerated approval, however. One is familiar to most biotech investors and the other is not.
The familiar one is the need to actually follow patients or do post-approval trials targeted to non-surrogate (also called "hard") endpoints. For example, a drug designed to lower LDL will receive accelerated approval based upon a reduction in LDL but the company will need to follow the patients in the trial for a few years to prove an actual reduction in morbidity and mortality. The FDA extracts these "post-approval commitments" from the sponsor of the drug application before approval.
If a company does not perform the required post-approval commitments in a "timely fashion", the FDA has the power to revoke the drug's approval. While this has never happened, a recent study by the FDA showed companies are not doing a particularly good job of meeting their post-approval commitments. The FDA warned a few companies to get with the program and told the rest of the industry to expect more detailed post-approval commitment letters going forward.
The second, lesser-known catch is that a drug seeking accelerated approval must show it is superior to the current standard of care. This is the only time (outside of the Orphan Drug situation I discussed in part one) where a drug must show it is superior to be approved. Usually, proving superiority is something done post-approval for marketing purposes. Under the accelerated approval guidelines, however, it must be done as a condition of approval.
To my knowledge, this has never factored into an FDA decision. Particularly in the cancer space, most new drugs receiving accelerated approval treat groups of patients where the only therapy is palliative (make them more comfortable) or watchful waiting (doing nothing).
I can tell you this will be an issue going forward, however. By the end of 2005, there will be few spaces left in the treatment of cancer where there are no options for standard of care. Any company looking for an accelerated approval past that point in time needs to be very cognizant of the competitive landscape to make certain they run the right trials to prove superiority or simply run longer trials using hard endpoints so they qualify for full approval - which has no such competitive requirement (yet).
Full approval is simple. The FDA says "yes." The issue of superiority is a marketing problem. Even under full approval, however, the FDA will often extract post-approval commitments. These usually are required when the FDA is concerned about a particular side effect and they want the company to follow patients who receive the drug and report on the incidence rate of the side effect.
A final note
If you have questions about the biotech sector, please send them to me. While I cannot answer questions about specific stocks, I can and will use any and all questions as springboards for future articles dealing with broader subjects. I look forward to hearing from you!
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