Biotechnology-derived vaccines and therapeutics have featured prominently in the news during the past year. One such product is VaxGen’s AIDS vaccine, which has entered an advanced phase of clinical testing. Others include the antiangiogenesis factors endostatin and angiostatin, which interrupt the blood supply to tumors and cure all manner of cancers in mice. Following the media hyperbole over preliminary animal studies of angiostatin, investors stampeded to cash in on the imminent “cure for cancer”: Virtually overnight, the stock price of the drug’s manufacturer, EntreMed, increased sevenfold. But such behavior by journalists and investors ignores the realities of drug testing and regulation generally and the recent track record of biotech products in particular.
Drug development is lengthy and hugely expensive. It begins with a company’s (or, less often, an academic researcher’s) “discovery” of a compound, which then undergoes extensive laboratory and animal studies to test its safety and biological activity against a disease or condition. (The time required for this phase averages 6.5 years.) Following animal testing, the company then requests permission from the FDA to begin testing in humans. Assuming that the drug shows the desired effects and that there are no serious safety problems, clinical testing advances through three progressively larger and more complex phases in which data are accumulated on the product’s safety and efficacy. (This clinical testing requires on average another six years.)
When the company has finally accumulated evidence of safety and efficacy, it submits the data (often running to hundreds of thousands of pages) to the FDA, which then takes another year and a half or so to make a decision on approval for marketing.
This process has become progressively more expensive and burdensome: The total time required for drug development, from discovery to marketing approval, has more than doubled—from 6.5 to 14.8 years—since 1964. From 1977 to 1996, the FDA’s approvals of new chemical entities remained relatively flat while R&D expenditures by pharmaceutical companies increased from about $3 billion annually to almost $20 billion (1996 dollars). Bringing a new drug to market in the United States now costs more than $500 million, by far the highest price tag in the world.
A 1997 survey of the interactions between drug companies and the FDA conducted by researchers at the University of California, San Diego, revealed that in 78 percent of companies, poor “clarity of data requests” from the agency had “impeded or stopped” their products; in 62 percent, personnel turnover at the FDA had had that effect; and in 40 percent, limitations in the FDA reviewers’ “technical knowledge” had impeded or stopped the progress of a product.
Drug regulation in recent years has been particularly burdensome and discouraging for biotech products and companies:
Item: The FDA eliminated the two policy offices that had extensive involvement with the industry (the Office of Biotechnology and the Office of Small Business, Scientific and Trade Affairs); the result has been that biotech companies, which are often small and inexperienced, have been left without an intra-agency advocate and source of advice.
Item: The FDA vigorously sought reasons not to approve the veterinary drug bST (bovine somatotropin, a protein that increases the productivity of dairy cows), on instructions from the Clinton administration, which judged the product to be politically incorrect.
Item: During the 1980s, when the badly needed, second-generation, genetically engineered hepatitis B vaccine was developed, the FDA’s decision about testing its efficacy was vexing. Arguably, it would have been adequate to demonstrate that vaccine recipients synthesize the appropriate amounts and types of antiviral antibodies (a great deal was known about this “seroconversion” from the first-generation vaccine). Large amounts of time and money were at stake. Clinical trials to demonstrate hepatitis prevention had to be done in high-risk populations, which are only found abroad, primarily in Asia; and organizing, performing, and analyzing the studies would take years and be very costly. In the end, the FDA opted for the full clinical trials, rejecting even a middle course whereby seroconversion would be the primary measure of efficacy but a pilot study in Asia would confirm hepatitis prevention. The result was several years’ delay, while in the United States tens of thousands of cases of hepatitis B occurred annually that could have been prevented by the vaccine. (Approximately 5 percent of hepatitis B cases have complications and 0.1 percent are fatal.)
There is an unfortunate corollary of these delays, costs, and other regulatory obstacles to drug development. In April 1998, the Pharmaceutical Research and Manufacturers of America counted 350 biotech-derived drugs in clinical trials, while there are approximately a thousand biotech companies in the United States. Clearly, there is an inauspicious imbalance between products and companies: Too many companies are chasing the too few products that are fantastically expensive to put through the regulatory hoops.
Moreover, the companies have hardly enjoyed stunning success at negotiating those hoops: The FDA approved two new biotech drugs in 1994, one in 1995, none in 1996, five during 1997, and five during 1998 (not counting duplicates of products already marketed by other companies). That dubious record of achievement is reflected by the performance of biotech mutual funds, which, according to Charles Schwab, have underperformed the S&P 500 at every time point measured—three and six months and one, five, and ten years. Disenchantment with biotech compared to other high-tech sectors is also evident among venture capitalists: Total venture dollars invested in biotech in Silicon Valley declined from 25.7 percent in 1994 to less than 15 percent in 1997.
Biotechnology applied to pharmaceuticals has made signal contributions to our medical armamentarium during the past decade and a half but languishes far behind its potential. We have now a situation that is dichotomous: From the point of view of a patient, important and often life-saving products will continue to emerge (albeit at a trickle); but from the vantage point of an individual company or investor, there seems little reason to believe the trickle will become a stream.