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Mark B McClellan, M.D., Ph.D. - PhRMA

This text contains Dr. McClellan's prepared remarks. It should be used with the understanding that some material may have been added or deleted during actual delivery.

Speech before PhRMA
Remarks by
Mark B McClellan, M.D., Ph.D.
Commissioner, Food and Drug Administration

March 28, 2003
Thank you for having me here today, and thank you for your kind introduction. It’s a privilege to be with a group that has developed so many products of lasting value to the world’s citizens. According to your own statistics, 89 percent of drug industry spending goes toward new drug development. And more than 400 new medicines for cancer, 122 for heart disease and stroke, and 24 for Alzheimer's dementia are undergoing testing. These innovations came about in no small part due to the ingenuity and dedication of your scientists, clinical researchers, and many other experts.

The drugs already developed have brought tremendous benefits: preventing hospitalizations, eliminating surgeries, or getting a patient out of an institution. And even more important are the benefits of these medicines in terms of saved lives, and more productive and fulfilling lives. The Centers for Disease Control reported again recently on continuing improvements in mortality rates from heart disease, cancer, and AIDS, and improved drug therapies are proven contributors to these improvements.

But with these unprecedented medical achievements worth literally many trillions of dollars in better health have come concerns about rising medical spending, and in particular rising spending on prescription drugs. This includes concerns about rising drug prices – “list” prices for drugs have been rising faster than inflation, though most people with health insurance get significant price discounts. More important still, according to statistics on drug use, is that more people are using more new medications to treat more conditions. While this may be very good from the standpoint of the health of Americans, it’s an increasing challenge for their pocketbooks. Millions of Americans are finding it more and more difficult to afford the medications they think they need. This is especially true for many seniors, who often have the greatest medical needs but limited incomes, who often lack modern prescription drug coverage, and who too often pay the highest drug prices of anyone in the world.

The challenge of the affordability of health care, and particularly of prescription drugs, is appropriately a critical policy concern. More than ever before, rising costs threaten to price the benefits of modern technology out of the range of many of the patients who most need it. And there is no question in my mind that these cost pressures are going to increase, as more treatment options continue to become available in the years ahead and as our population continues to age.

This tremendous cost challenge to our public health is coming at a critical time for innovation in the prescription drug industry. Right now, the approval of new drugs and biologics is at the lowest level since the Prescription Drug User Fee Act was implemented over a decade ago. Last year, FDA approved 21 new molecular entities – the truly new drugs – down from 44 such entities in 1996. And FDA approved 12 new biological license applications, down from 27 BLAs in 1998. The decline is directly related to a decline in the number of new applications for drugs and biologics coming in to the agency.

From talking with many of you and looking at the facts, I think this slowdown in drug approvals is likely to be only temporary. Right now, the NIH is completing a doubling of its budget over the past five years, to over $27 billion. Less well known is that spending on research by pharma companies has also doubled since 1995. And while this is starting to show up already to FDA as more investigational new drugs in development than ever, the breakthroughs in basic biomedical research have the potential to lead to even more fundamental improvements in drug treatment. There are still some traditional “blockbuster”-type drugs in development that, based on understanding the molecular biology of a particular receptor or other active protein, may bring important relief to millions. But breakthroughs in genomics, proteomics, and other new fields hold the potential for truly individualized drug therapy in which diagnostic tests and novel drug delivery mechanisms guide the use of medications that are highly effective for particular patients.

Yet delivery on the promise of the “biomedical century” is far from a sure thing. The process of bringing a truly new drug to the public is getting steadily more expensive and now costs over $800 million, according to Tufts University studies – more than twice what it was just a decade ago. Nor has the process become any more certain. Only a small fraction of drugs that undergo the initial stages of development reach early-stage trials, and only a small fraction of those result in new drug applications to FDA. The percentage of drugs that make it through this process has been largely flat over the last decade, and recently, has actually declined.

So, one possibility for the future is that the costs and uncertainty of drug development keep rising. It’s easy to see how this could happen: there aren’t many more easy receptor targets to exploit; developing genomics-based therapies remains very costly, because additional microarray-testing steps are added at the front end of the development process and additional, more complex clinical safety testing is added at the back end to make sure in silico abnormalities don’t have clinical consequences; and it proves too hard to identify clear and valid relationships between findings at the level of gene expression and clinical consequences at the level of a patient’s illness.

At the same time, policymakers under intense pressure to control costs may adopt policies that seem, based on the experience of other governments, to reduce medical costs in the short run – instead of finding ways to act on creative but difficult health policy reforms, ones that make health care more affordable while still encouraging innovation. Because they tread on the meaningful rewards for developing valuable intellectual property that has made the United States the world leader in many areas of high technology, such reforms may reduce drug costs in the short run. But they would combine with the rising cost of product development to keep us from realizing the benefits of genomics, proteomics, and other innovations that hold tremendous promise. This would lead to higher long-term costs from failures to prevent more illnesses, and failure to achieve continuing improvements in our public health.

I don’t think the future needs to be like this, and I don’t think it will be. I think we can find ways to reduce the costs of developing, producing, and using new and more effective drug treatments. And I think we can find health policy solutions that make drugs more affordable for those who need help, without impeding the development of still more effective treatments in the years ahead. But this will not be easy for FDA, it won’t be easy for health policymakers, and it won’t be easy for you. That’s because we all need to find ways to realize more value in what we do to promote the health of the public. And we need to do it now.

I can tell you that FDA is committed to doing all we can to reduce the cost and uncertainty of developing, producing, and using prescription drugs. But despite what many may think, FDA can’t solve these problems alone. We are both going to have to find ways to alter the way we think and work to meet the unprecedented challenge of avoiding unnecessary costs and providing greater value in health care.

My own research background is in economics, and a lot of people ask me: Does that mean that FDA is going to start doing cost-benefit analysis of the products that we regulate? The answer is no. That’s not our statutory mandate. Our mandate is to make sure new medical products are safe and effective, not to ask ourselves whether there are cheaper alternatives, or if a new drug may be worth the cost. But health care purchasers are increasingly demanding high value in the treatments they pay for, and so anything we can do in our activities to reduce the cost of developing and using the products we regulate will help. That’s why a key element of FDA’s new strategic action plan – a plan that I’m proud to say reflects the ideas and perspectives of all of our center directors and top staff – is what we call “efficient risk management.” In all of our major policies and regulations, we are seeking to use the best biomedical science, the best risk management science, and the best economic science to achieve our health policy goals as efficiently as possible.

Why are we doing this? Two main reasons. First, if we can fulfill our mission of determining whether products are safe and effective at a lower cost, to the agency but especially to society, then this translates into lower costs and greater use of new products – and probably more diverse products for more health problems being developed as well.

Second, we’re doing it because we have to. Thanks to the research investments I mentioned, we are having to deal with more complex and innovative products in development than ever before. The agency has also taken a significant role in helping to speed the development of bioterrorism countermeasures. And we’ve been given some challenging authorities for limited regulation over dietary supplements. And direct to consumer advertising is way up. All this is hopefully translating into better health and better life for consumers, but at the same time, it has immensely complicated FDA’s mission. We have responsibilities over 20% of the consumer economy – an amount that’s growing every year. Only by becoming consistently more productive at what we do – always working to get the most public health bang for our regulatory buck - only this way can we have any chance of fulfilling our increasingly complex public health mission.

Our approach of efficient risk management has implications for every aspect of the process of drug development and use, as you may have noted in a series of recent policy announcements from the agency. Coupled with the reauthorization of the Prescription Drug User Fee Act last year, we have great opportunities at a critical time to improve our regulatory approach. Again, though, this will all only work if industry makes similar, major reforms.

To begin with, we need a more efficient drug development process –less costly, more rapid, and more predictable ways of determining that new drugs meet FDA’s high standards of safety and effectiveness. Earlier this year, to address some of these challenges – to make sure we have regulatory processes that are as efficient and up-to-date as possible – FDA announced a major new medical technology development initiative with three main elements.

First, we are conducting a “root cause analysis” of recent “multiple cycle” product approvals – products that required two or more “rounds” of review before they could be approved. An extra round means at least an extra 10 months or more, and that can add many millions to the cost of new products. It also delays availability to patients who might benefit. Often, multiple cycles do not appear to be FDA’s fault. But in our preliminary analysis, it appears that in some cases, early communication and more transparency in our regulatory requirements might help avoid multiple cycles.

To that end, we are in the process of implementing two PDUFA pilot programs to evaluate the impact of extensive early communication and of reviewing pieces of an application for potential problems as they come in, rather than waiting for a complete application. These review processes require more agency time up front, but they may pay off in terms of avoiding multiple cycles and thus reducing the total cost of product development significantly.

Second, we are developing “quality systems” for our review procedures. The idea is to apply best management practices internally to our review processes, such as using peer review programs for reviewers to exchange ideas and use each others’ experience to learn about best practices – much as academic clinicians do on rounds. And we’ll be developing performance measures designed to make sure were approving safe and effective treatments as efficiently as possible. Applying such quality systems for technically complex enterprises in which every case has many unique features is a complicated task. But I have been impressed by the response to this initiative by many of our professional reviewers. They believe that clearer measures for evaluating the agency’s performance with respect to its mission goals can help them and therefore the agency do a better job.

The third part of our medical innovation initiative is to work to publish new guidance documents. I know, FDA has lots of guidances, but these will be in areas where we think the regulatory pathways could be improved or better defined, and we expect to learn something from outside experts in the open process of developing the guidances. They include new product guidances for obesity, diabetes, and cancer. In these critical areas, we think that new regulatory standards can reduce the time and cost of product development. That, in turn, should lead to more investment in much-needed new products.

We’re working to publish similar guidance in critical new areas of product development, where clear regulatory pathways are not yet well defined – including pharmacogenomics, novel drug delivery systems, and cell and gene therapy.

For example, CDER has just begun developing procedures for the use of imaging techniques for drug distribution and product development. As you know this is an important new area. With these tools, we can develop definitive evidence that drugs are reaching their target tissues – for example, preferential uptake in tissues or cancer, or in bone for antibiotics to treat osteomyelitis. These are the kinds of tools take the guesswork out of regulation. They can help increase the certainty and reduce the cost of determining that new products are safe and effective.

A second and underappreciated contributor to drug costs is drug manufacturing. And here as well, major reforms are underway. Another application of our principles of risk management and adopting quality measures is overhaul of pharmaceutical good manufacturing practices. GMP policies haven’t been updated significantly in 25 years. Meanwhile, best practices in manufacturing technologies and methods have undergone significant progress. This broad-based program is developing new GMPs based on the latest science of risk management and quality assurance. The new standards are being designed to encourage innovation in manufacturing and technology; coordinate submission review and inspection programs; and ensure their consistent application by all three FDA centers that regulate pharmaceutical products. Last month, we provided a detailed update on this major effort, including the announcement of some preliminary reform steps, such as adjustments in part 11 regulations and inspection processes. Next month, we are holding a major conference to lay out and discuss key ideas that may be implemented in our final regulations.

A third major opportunity to reduce unnecessary drug costs and increase the value of pharmaceuticals involves reducing costly adverse events associated with approved drugs. Too often, the drugs, devices, and other products we regulate are involved in preventable adverse events. As many as 20% of Americans have experienced some kind of medical error. Preventable errors and complications involving prescription drugs alone are responsible for thousands of deaths, millions of hospitalizations, and billions of dollars in additional health care costs each year, not to mention all of the unnecessary suffering. And a lot of wasted money that would be better spent on care that actually made people healthier. FDA has a role in helping to avoid these costly errors, with initiatives such as requiring a universal barcoding system for prescription medications, to support the development of better systems to support health professionals. We also intend to do a major overhaul of the physician labeling on the products we regulate.

Adverse events that I consider preventable aren’t just caused by human error. Even with the best available data, drugs are sometimes found to have adverse effects that couldn’t have been predicted or uncovered in any feasible clinical trial. Most of these subtle or rare problems such as liver toxicities or adverse interactions in certain patient groups occur with new products, and usually become apparent only after the product has been on the market in use with real-world patients for some period of time. It’s during this time that we have to be especially vigilant; if we don’t have effective systems in place to detect such problems, then preventable adverse events are occurring that should not, and that needs to be addressed.

So we are working on developing information technology tools that will allow us to link into the electronic medical records of large healthcare institutions and organizations, and automatically scan medical records for combinations of new drugs and clinical endpoints that might be harbingers of trouble. We recently rolled out a pilot collaboration with New York’s Columbia Presbyterian that does just this; a similar pilot project involving medical devices will hopefully expand to 200 institutions and to additional product types within the coming year. More collaborations are being negotiated. The idea is to acquire automatically, in real time or close to it, information that might be a red flag. We want to have systems in place that allow us to be proactive and collect this clinical information rather than hoping that vigilant doctors spot it and send it to us. For this, we’re also going to need your help, to work with us on ways to monitor and improve the safety and effectiveness of new drugs after their approval. This is a two-way street: we are working on new initiatives such as automatically-updated electronic labels so that the institutions and companies working with us will benefit from early feedback about what we find.

Finally, FDA can encourage more effective, high-value use of prescription drugs by helping patients and health professionals get better information. For all that improving medical technology can do – and it can do a lot – it is much less than people can do through their own choices to improve their health. From better patient labeling, to clearer guidance for direct to consumer advertising, to new enforcement initiatives against dietary supplement manufacturers who make health claims without scientific foundation, FDA is undertaking new efforts to help consumers make better-informed decisions about how to use their health care dollars. For example, package inserts have become so laden with legal considerations that they are virtually unintelligible to the average consumer and ignored by many physicians. They’ve become liability avoidance tools rather than efficient risk communication tools. They should be written with a patient in mind, not a jury. How many patients and doctors ignore hard-to-read labels? How many of these patients then go on to have an adverse event that could have been avoided if they knew what to watch for?

These are some of the challenges we’re working on at FDA. We are working hard, but we will only succeed if industry assists in our goal of promoting the public health by addressing the critical problem of rising health care costs. We need industry changes in each of the areas I’ve outlined.

First, you need to help us find ways to improve the efficiency of the development process. This includes, for example, looking for ways to target treatments to patients who are most likely to benefit from them. We are undertaking a concerted effort at FDA to use pharmacogenomics information effectively, and we will have more to say about this soon. At this research stage, we need help from industry in understanding how to best use all the microarray information on gene expression that is coming in now; we have much information, but relatively little understanding. Developed properly, such information can make our regulatory process more efficient, but we need your help in making sure that this opportunity to provide more value doesn’t pass us by. And you need to work even harder to find ways to compress the development process.

Second, you need to improve manufacturing processes. According to some experts, the amount of downtime and discarded materials in the pharmaceutical production process, if addressed, could reduce production costs by 25 percent or more. Other high-tech industries with essentially no tolerance for errors or impurities, such as the semiconductor industry, have achieved enormous productivity gains in manufacturing in the last 25 years. We should expect nothing less from the pharmaceutical industry.

Third, you need to help reduce adverse events. It is time to take postmarket activities very seriously. This is not only important for reducing avoidable medical costs. More certain, effective, and timely phase 4 studies could also streamline the approval process.

Fourth, you need to help us find better ways to get accurate, evidence-based information to patients and health care providers. Much progress has been made, but much more remains to be done.

Lowering the cost of drug development, lowering the cost of manufacturing, lowering the cost of medical errors, and lowering the cost of bad medical decision making – all of this means lower drug costs while promoting valuable drug innovation. Yes, clearly much more should be done in terms of health policy reforms to support greater value. We need prescription drug coverage as part of making modern health insurance coverage available to Medicare beneficiaries. We also need liability reform that encourages quality care and patient safety. And we need innovative approaches to making health insurance more affordable to all Americans. While Congress works on these issues, though, let’s start making progress right now.

We must work to make sure your innovations provide the greatest public health benefit to the greatest number of people. We’re now doing more than ever to meet this challenge, as must you. And so I look forward to working with you to achieve our two organizations’ shared goals. We both aim to bring new drugs to the greatest number of people who will safely benefit from them. That is our mission. That is in the best interest of the public health. And that is why I’m sure you’re enjoying your jobs as much as I’m enjoying mine. We’re in the right place at the right time to make a real difference in the health of all persons, today and in the future. Let’s get to it.