Because NMEs contain active chemical  substances never before approved for marketing in the United States,  industry analysts and FDA generally consider them innovative. FDA Response to Concerns Over the Number of Drugs Developed

Over the past several years, numerous industry analysts and FDA noted a  decline in the submission of applications for NDAs overall, and for  innovative drugs, such as NMEs. Although the pharmaceutical industry reported a  147 percent real increase in annual research and development  expenditures from 1993 through 2004, and an increasing number of INDs  are being submitted to FDA, the number of new drugs developed has not  grown in a similar manner. Compared to industry-reported research and  development expenditures, the number of NDAs and NDAs for NMEs  submitted to FDA over the period increased at a lower rate—by 38 percent  and 7 percent respectively—which indicates that the productivity of the  research and development investments has been declining. Our review of annual research and development expense data  reported by PhRMA and IND submission data reported by FDA indicate  that there have been substantial and consistent increases in these  expenses over the past decade, and that the number of INDs submitted to  FDA has been increasing. Figure 11, which is based on these data, shows that FDA approved  an increasing number of NDAs and NDAs for NMEs from 1993 through  1996. Experts Identified Factors Contributing to Declining Productivity in Drug Development and Offered Suggestions for Improvement

According to experts, a variety of factors have contributed to the declining  productivity of pharmaceutical research and development efforts by  making it more difficult for the industry to successfully complete clinical  testing and submit NDAs for approval. These factors include limitations on  the scientific understanding of how to translate chemical and biological  discoveries into safe and effective drugs, business decisions by the  pharmaceutical industry, uncertainty regarding regulatory standards for  determining whether a drug should be approved, and intellectual property  issues, such as the length of patent terms. According to experts, these  factors have impacted the length, costs, and failure rates of drug  development, as well as the innovative potential of NDAs being submitted  to FDA. Factors in the Operating Environment Affect Drug Development Outcomes

Based on the results of discussion among panel members, our interviews  with drug development experts, and our review of prior studies, we  identified several other factors that affect the numbers, types, and costs of  drugs being developed. One of these areas included  developing new biomarkers which, according to FDA, could increase the  safety of new drugs, reduce the costs of clinical trials, and expedite drug  development. Recent trends reveal the  number of drugs developed has not been commensurate with research and  development investments by the pharmaceutical industry. Agency Comments

HHS provided comments on a draft of this report. To determine the trends in the number of submissions and approvals of  NDAs, we requested that the Food and Drug Administration (FDA) provide  information on all 1,264 new drug applications (NDA) submitted to FDA  from January 1, 1993, through December 31, 2004.
Why GAO Did This Study

Drug development is complex and costly, requiring the testing of numerous chemical compounds for their potential to treat disease. Before a new drug can be marketed in the United States, a new drug application (NDA), which includes scientific and clinical data, must be approved by the Food and Drug Administration (FDA). Recent scientific advances have raised expectations that an increasing number of new and innovative drugs would soon be developed to more effectively prevent, treat, and cure serious illnesses. However, industry analysts and the FDA have reported that new drug development, and in particular, development of new molecular entities (NMEs)--potentially innovative drugs containing ingredients that have never been marketed in the United States--has become stagnant. GAO was asked to provide information on (1) trends in the pharmaceutical industry's reported research and development expenses as well as trends in the number of NDAs submitted to, and approved by, FDA; and (2) experts' views on factors accounting for these trends and their suggestions for expediting and enhancing drug development. GAO analyzed data from FDA on all 1,264 NDAs submitted to the agency from 1993 through 2004. GAO also convened a panel of experts and interviewed other drug development experts and analysts to identify factors affecting, and suggestions for enhancing, drug development.

What GAO Found

Although the pharmaceutical industry reported substantial increases in annual research and development costs, the number of NDAs submitted to, and approved by, FDA has not been commensurate with these investments. From 1993 through 2004, industry reported annual inflation-adjusted research and development expenses steadily increased from nearly $16 billion to nearly $40 billion--a 147 percent increase. In contrast, the number of NDAs submitted annually to FDA increased at a slower rate--38 percent over this period. Similarly, the number of NDAs submitted to FDA for NMEs increased by only 7 percent over this period. FDA approved most NDA applications--76 percent overall, but the numbers of NDAs and NDAs for NMEs it approved annually have generally been declining since 1996. According to experts, several factors have hampered drug development. These include limitations on the scientific understanding of how to translate research discoveries into safe and effective drugs, business decisions by the pharmaceutical industry, uncertainty regarding regulatory standards for determining whether a drug should be approved, and certain intellectual property protections. These factors have been cited as affecting the number of drugs developed, the cost and length of the drug development process, as well as the types of drugs being produced. To address these issues, experts offered suggestions including increasing the number of scientists who can translate drug discoveries into effective new medicines and allowing conditional approval of certain drugs based on shorter clinical trials using fewer numbers of patients. In its comments on a draft of this report, the Department of Health and Human Services provided clarifications, which GAO incorporated as appropriate.