This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

FDA Not Solely to Blame for Drug-Approval Delays

It is taking longer for new drugs to get approved by U.S. drug regulators. But while aspersions have been cast at the Food and Drug Administration as the main source of the delays, drugmakers should shoulder some of the blame.

One of the newer theories floating around about why drug regulators seem to take their sweet time is that drug companies are filing inferior applications. If the data submitted in the application are spotty or don't address issues likely to be raised in the review process, the FDA has little choice but to return the application or reject it altogether.

If this is true, drug companies should be spending a lot of time and money making sure their regulatory staffs are up to snuff. Unfortunately, says Merrill Lynch analyst Steven Tighe, the quality of new drug applications sent to the FDA seems to vary widely.

Tighe covers the pharmaceutical industry, so he and his colleagues looked back six years to analyze approval times and rejection rates. The best performers were Merck (MRK) and Eli Lilly (LLY), which got their drugs approved in an average time of 10.9 months and 11 months, respectively. The average review time for Bristol-Myers Squibb (BMY), Schering-Plough (SGP) and Pharmacia (PHA) ranged from 14.6 months to 15.6 months.

Alas, American Home Products (AHP)and Pfizer (PFE) brought up the rear of the rankings, with slothlike average review times of 19.8 months and 25.5 months, respectively.

Lost Time Means Lost Money

This is not just an academic exercise. Remember, time is money. By Tighe's reckoning, a one-month delay in a drug's approval equals $41.7 million in lost revenue. So in the past six years, Pfizer has lost a whopping $7.7 billion more than Lilly has due to drug-approval delays, according to the Merrill Lynch analysis.

Now, there are some extenuating circumstances that affect drug-review times, Tighe cautions. For starters, the FDA grants some drugs accelerated-review status, which means decisions are usually reached in 6 months. In 1999, 54% of new drug applications were granted such priority reviews, which pushed down the median review time for the year. But in 2000, only 33% of drugs were granted priority review.

And certain classes of drugs are given more attention at the FDA. AIDS and cancer drugs, for instance, tend to be reviewed faster because of the urgent medical need. At the other end of the spectrum, drugs focused on women's health, such as contraceptives, take the longest to work through the FDA because the need is less, says Tighe, adding that Pfizer develops a relatively large number of women's health drugs.

This variability makes it a bit difficult to judge the future performance of the drug companies, based on their historical records. But for the record, Merck has had one drug, a new antibiotic for bacterial infections, sitting at the FDA for the past 10 months. Lilly has already received tentative approval for its osteoporosis drug, Forteo, less than a year after submission.

Meanwhile, Pfizer has three drugs submitted to the FDA in 1997 and 1998 that are still awaiting decisions.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs