Clinical Trials and the FDA
By Zeke
Ashton (TMF Centaur)
April 5, 2000
The biotechnology
sector has emerged as one of the hottest of the past year. More and more
investors are pouring their money into this sector, hoping that companies
will translate flashy new technologies into revenue-producing drugs. While
biotechnology has come of age, and the number of profitable companies with
products on the market has continued to swell, the vast majority of companies
are still pinning their hopes on the positive outcomes and subsequent FDA
approval of the drugs being tested in clinical trials. This article is
for those investors who are interested in learning a little more about
the FDA and the clinical trial process.
The FDA, short for Food and Drug Administration, is the government agency
responsible for ensuring the health and safety of consumers in the areas
of drugs, biologics, food, cosmetic products, and medical devices. It is
the agency's mission to ensure that these products are safe, effective,
and are produced under sanitary conditions. In addition, all product packaging
and labeling should be truthful, informative, and not deceptive in any
way.
The FDA: A Short History
In 1911, in response to the widespread sales of "snake venom" and other
wonder cures, the Sherly Amendment was passed. This amendment made it a
crime to make false claims in drug labeling.
In 1928, the government formed a separate law enforcement agency, originally
called the Food, Drug, and Insecticide Administration. In 1930, the name
was changed to the Food and Drug Administration.
The foundation of the modern clinical trial process was enacted in 1938
with the Federal Food, Drug, and Cosmetic Act. This was also the first
attempt to regulate cosmetics and medical devices. This act required that
drugs be proven safe prior to marketing. The manufacturers of drugs now
had to provide scientific proof of safety by submitting an Investigational
New Drug (IND) filing prior to human trials, and a New Drug Application
(NDA) before marketing new drug products.
In 1962, the FDA was thrust into public view as a result of the discovery
that the use of Thalidomide, a sleeping pill, resulted in thousands of
birth defects in western Europe. Because of the FDA's role in keeping the
drug off the market in the U.S., the agency received a lot of positive
press. Twenty years later, the much publicized deaths of seven people from
Tylenol laced with cyanide prompted the passage of tamper-resistant packaging
regulations by the FDA in 1982.
In 1983, the Orphan Drug Act provided incentives for drug companies
to develop drugs for rare diseases.
Finally, in 1992, the Prescription Drug User Fee Act was passed, which
required drug and biologic manufacturers to pay application and other fees
to the agency. This revenue is used to hire more FDA reviewers, and has
resulted in increased efficiency in the drug approval process.
The Clinical Trial Process
Assuming the company decides to pursue human studies, it must first
submit an Investigational New Drug application to the FDA for approval.
The IND becomes effective 30 days after receipt by the FDA (assuming the
FDA does not require further information), and must be filed annually thereafter
until the completion of clinical testing. The IND must provide pre-clinical
data of sufficient quality to justify the testing of the drug in humans.
About 85% of all IND applications move on to begin clinical trials. Assuming
the company receives FDA go-ahead, the company will move the drug on to
Phase 1 testing in human subjects. At this point, the compound has a one
in five chance of eventually reaching the market, and will normally take
another five to nine years to reach that destination.
Phase 1
Assuming the data from Phase 1 are positive and the safety of the compound
is established, the drug moves on to Phase 2 testing. If the company moves
on to begin Phase 2 trials, the drug's chance of eventually making it to
market improves to just under 30%.
Phase 2
A drug that moves on to begin Phase 3 testing has about a 60% chance
of actually being approved by the FDA.
Phase 3
Assuming the drug reaches the desirable end point in Phase 3 trials,
the company will then file a New Drug Application, which can contain 100,000
pages of data supporting the efficacy and safety of the drug. At this point,
the drug has better than a 70% chance of being approved by the FDA.
Approval of the NDA can take anywhere from two months to an extreme
of several years (in the case that the FDA requests additional information),
with an average wait of between 18 and 24 months. Upon approval, the company
may begin to market and distribute the drug.
Phase 4
For the Investor
Investors interested in the biotechnology sector would do well to consider
companies that already have one or more successful products on the market,
have a large pipeline of candidate drugs, and have plenty of cash to fund
the development of their new drug candidates. Amgen (Nasdaq:
AMGN) , Biogen (Nasdaq:
BGEN) , Chiron (Nasdaq:
CHIR) , and Genentech (NYSE:
DNA) are the largest companies in the biotech sector. You can find
their drug pipeline information at the following links:
The FDA's roots date back to 1862, when Abraham Lincoln appointed chemist
Charles M. Wetherill to serve in the newly created Department of Agriculture.
Wetherill's appointment marked the beginning of the Bureau of Chemistry,
later the Food and Drug Administration. In 1902, the Biologics Control
Act was introduced, which authorized the Public Health Service to regulate
and license biological drug laboratories in the production of antitoxins
used in vaccines. The catalyst for this act was the death of 10 children
after they received a vaccine shot. It was later discovered that the horse
used in the production of the antitoxin was infected with tetanus.
The drug approval process starts in the laboratory. After discovering
a promising compound, studies using the compound in cell cultures, isolated
tissues, and laboratory animals are conducted. This gives researchers a
pretty good idea of what to expect in human trials. On average, only one
compound in a thousand will actually make it to human testing. Assuming
the data is promising, the company makes the decision whether to begin
the long and costly process of getting the compound to market. Since most
drug companies have multiple candidates, the company must take into account
the size of the potential patient population, whether the market for that
particular drug is already well-served, and the company's financial situation.
Also, the patent protection for the drug, generally lasting 17 years, begins
to tick once the compound begins pre-clinical trials. The pre-clinical
trials for most drugs average about five years.
Phase 1 trials concentrate on developing the drug's safety profile.
The human subjects in the study are normally healthy volunteers, though
sometimes patients who have terminal illnesses and have no other therapeutic
alternative will take part in Phase 1 studies as well. The sample is normally
not more than 100 patients in Phase 1. The basic goal of Phase 1 is to
determine how the drug is absorbed, distributed in the body, metabolized,
and excreted. The duration of the drug's effects are also measured. Phase
1 testing ranges from one to three years, on average.
Phase 2 trials consist of small, well-controlled experiments to continue
to evaluate the drug's safety and assess side effects. The drugs are given
to volunteers (usually between 100 and 300 patients) who actually suffer
from the disease or condition being targeted by the drug. This phase is
where the optimal dosage of the drug is established. Also, statistical
end points are established for the drug that represent the targeted favorable
outcome of the study. The current standard of care for the medical condition
can be used as a benchmark in setting the end point. Phase 2 trials last
an average of two years.
Phase 3 testing is intended to verify the effectiveness of the drug
against the condition that it targets, based on the statistical end points
established in Phase 2. The study also continues to build the safety profile
of the drug and record possible side effects and adverse reactions resulting
from long-term use. Phase 3 studies are tightly controlled, double-blind
studies with a sample size of at least 1000 patients. If the drug proves
to be effective in this stage, the trial is deemed successful (pivotal).
Normally two pivotal trials are required to ensure the validity of the
studies, although if the results are extremely strong, one may suffice.
Phase 3 testing averages between three and four years.
Once the drug is on the market, the company must continue to perform
observational studies in an ongoing evaluation of the drug's safety during
routine use. The company also attempts to monitor any usage of the drug
for conditions other than the approved medical indication. If the drug
is being successfully used for off-label indications, the company will
often initiate further clinical trials for those indications in order to
widen the potential market for the drug. The company cannot advertise or
endorse off-market use of the drug, however.
The clinical trial process is costly as well as time-consuming. Estimates
as to the cost of pushing a drug through clinical trials range from between
$350 million and $500 million. Investors interested in early stage companies
should factor in the costs, risk, and extended time to market required
for FDA approval.
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