Is FDA's annual new drug count a nothingburger?

[This post originally appeared on on December 24, 2017.]

Last week, FDA published its annual tally of approved new drugs – and with it came a flurry of analyses to put the number in context. The 46 new molecular entities (NMEs) approved so far in 2017 (not counting some cellular and gene therapies) are the most in over a decade. Does this mean that pharma’s R&D engine is becoming more productive? Or perhaps that FDA is becoming laxer in its approval process?

In the short term, "no" and "no" – because the year-to-year NME comparison doesn't mean very much. As I told Zachary Brennan for his article at RAPS:

The NME count is mainly a reflection of the number of applications – which, in turn, reflects the registration trials that were funded 2-3 years ago. With such relatively small numbers, there will always be noise – two more NMEs this year, three fewer next year, and an occasional year with many more or many fewer – but I don't think the short-term comparisons mean much.

But what about the longer-term trend? The number of NMEs approved annually appears to be generally higher today than it was a decade ago, notwithstanding my caveat above about the noisiness in the annual stats. My sense, which I voiced to Zachary, is that this probably reflects companies’ response to what we incentivize in drug R&D: fast, cheap, low-risk development in clinical areas that tolerate both high prices and regular price hikes:

Today, many drug companies would gladly fund several shorter, cheaper, and less risky Phase 3 programs in indications with robust premium pricing over a single expensive, risky, do-or-die bet in a larger indication with more pricing constraints or risks – regardless of the programs' relative clinical impact – because that's the strategy that garners loyalty and capital from investors. I think that's a big reason why we get more drugs per year now, especially in cancer and rare diseases, than we did 10 years ago.

I haven’t seen (or conducted) a rigorous analysis, but there’s at least some cursory evidence to support this claim. For example: from 2003 to 2005, FDA approved a total of 12 cancer therapies, compared with 15 (including CAR-T) in 2017 alone.* So, at least some of the uptick in new drugs over the past decade may be due to a shift of research funding toward areas that promise higher returns.

Pharma R&D budgets are barely growing in real dollars, so a decision to fund certain programs is a choice not to fund others. I'm thrilled that cancer and rare disease patients are getting more new (and, I hope, clinically impactful) therapies – but it’s not clear that more approvals in those areas are “worth” more than a single effective and affordable new drug for Alzheimer’s disease, opioid addiction, ultra-resistant bacterial infections, or chronic pain would be, in terms of clinical, societal, or economic impact.

Slightly more or fewer NMEs from one year to the next doesn’t tell us very much about what we’re buying for our R&D dollars. But over the long term, if we’re really seeing both more NDAs and a skewing of new drugs toward therapeutic areas like cancer and rare disease, that tells us something important – not about R&D productivity per se, but about what we’re incentivizing in R&D. Pharma companies today are rewarded for developing drugs quickly and cheaply in clinical areas that tolerate high prices, and discouraged from pursuing programs in which potentially high clinical value requires high cost and risk, and may yield low net returns. Rather than just tracking the number of new drug approvals each year, we should instead be asking if the drugs we're getting are the ones we really need.

* For this purpose, I’ve excluded supportive care therapies (treating symptoms associated with cancer), as well as drugs for non-malignant oncologic indications like benign prostatic hypertrophy.

Thanks to Zachary Brennan of RAPS for initiating this thought-provoking discussion.