Banc of America Securities Healthcare Institutional Investor Conference

Presentation by

Lester M. Crawford, D.V.M., Ph.D.
Acting Commissioner of the FDA

for
Banc of America Securities
Healthcare Institutional Investor Conference

July 7, 2004

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

Thank you, Andy (Bressler, Director of BC Health Care Research) for the introduction, and good afternoon. It's an honor and a pleasure to meet with you again, and have an opportunity to discuss with you significant regulatory issues of mutual interest -- issues that affect the work of our agency to protect and advance the public health as well as the activities of the health care industries.

The Food and Drug Administration, as you know, regulates a myriad of products that come from diverse parts of the industrial landscape -- in addition to drugs, biologics and medical devices, our purview includes 80 percent of the food supply, all animal drugs and feed, all equipment that emits radiation, and even cosmetics.

This is a highly diverse and demanding job, but what makes it doable is that at the FDA, we're guided by two straightforward basic principles. One of them is that our finite resources can never cope with all of the infinite and ever-changing hazards attending human lives. Therefore, to best fulfill our mission, all our activities must be focused on managing, mitigating, or preventing the most acute public health risks. Risk management is an important function throughout our government, but it is the sine qua non for the FDA.

Our second principle, derived from many years of experience, is that to protect and promote the public health, it is not enough to merely establish and enforce the highest standards for drugs and other health care products. The corollary is to encourage and facilitate their efficient development and manufacture in order to make them available to those who need them. This means is that FDA regulations should not be a barrier, an albatross around manufacturers' neck: they should set desirable goals, and as much as possible, enhance industry's capacity for their achievement.

These two tenets are the bedrock of a set of priorities I have selected as making the best use of our agency's resources in the pursuit of our mission. My top tasks for the agency include efforts to confront the obesity epidemic, one of the greatest challenges facing millions of Americans; modernization of the GMPs -- the Good Manufacturing Practices -- for the food industry and their establishment for dietary supplements; and a vigorous implementation of our counter-terrorism programs.

Most of my FDA priorities, however, involve the pharmaceutical, biotech, and device industries, and they are the main topics I want to discuss today. They include a reform of the pharmaceutical GMPs; upgrading of FDA's inspections; a new initiative to increase the predictability along the "critical path" of drug development; improvement of the labeling for prescription drugs; and a resolution of the drug importation problem. I will also sum up some more recent developments in two areas in which, I am told, you are interested, follow-on biologics and combination products.

I'll start with the overhaul of the pharmaceutical GMPs which, as most of you know, was launched in August two years ago, and should be completed in a month of so. This is a broad-based, comprehensive, in-depth reform project that's emblematic of the principles that FDA rules should be risk-focused, and facilitate the achievement of the highest public health standards.

The specific goals of this initiative are to ensure that our drug review, compliance and inspection policies are based on state-of-the-art pharmaceutical science; that our policies do not impede rapid adoption of new manufacturing technologies; and that the GMPs should help ensure the highest quality in drug manufacturing while increasing its efficiency. Let me say it again: the goal is to improve product quality while lowering the cost of manufacturing.

We've already developed most of the new policies that make this progress possible, and explained them in five draft guidances. For example, one of these documents creates a framework for regulatory processes that will more readily allow the adoption of cutting-edge technologies in the development, production, and quality assurance of drugs. We have also launched successful cooperative projects with academia, industry, and sister government agencies to promote innovation in drug development and regulation.

One of these achievements is a formal agreement with Pfizer to cooperatively research chemical imaging applications in the drug manufacture and quality control. We're also collaborating with the Center for Pharmaceutical Processing Research of the National Science Foundation to expand FDA's scientific expertise in new pharmaceutical manufacturing technology, and we've promoted our new GMP goals in scientific workshops abroad and through ICH, the International Harmonization Conference.

An important part of this reform is modernization of our inspection programs. You may be familiar with FDA's past attempts to grapple with the complexities of this function, which on the one hand is critical for the protection of health, but on the other can be burdensome for industry. One attempt to resolve this equation was launched six years ago, when our agency created a new expert group whose task has been to improve the consistency of FDA policies, practices and activities affecting biologics.

This was the so-called Team Biologics, which combines the experience and skills of FDA's top field investigators with the scientific know how of reviewers and other scientists in the FDA's centers for biologics and drugs. The new formula has been a big success. Team Biologics has helped to improve the quality and safety of biological products, resolved some inconsistencies between the centers and the field, and improved the efficiency of FDA's inspections. We're now building on this achievement.

As part of the GMP reform, our Office of Regulatory Affairs -- which includes FDA inspectors and investigators in the field -- and our Center for Drug Evaluation and Research have agreed to jointly develop another group of highly trained investigators, called the Pharmaceutical Inspectorate. This is a very exacting program that won't be fully on stream for a while, because all members of the Inspectorate will have to take advanced courses -- some of which are yet to be developed -- and earn Level III Drug Certification.

When the group is fully functioning, its members will concentrate on inspecting complex or high risk pharmaceutical operations, and conduct preapproval inspections and investigations that require exceptional sophistication and advanced skills. Because of their special status, members of the Pharmaceutical Inspectorate will report directly to, and receive their assignments from, FDA's district managers.

Incidentally, we're in the process of developing risk management strategies for inspections done by all FDA centers. Our approach is to use the best available scientific data and analytical methods to assess the existing risks, and then decide how to best manage them with inspections and other means at our disposal.

The GMP overhaul, which was launched several months after I took charge of the agency, is primarily designed to help modernize, upgrade, and make more efficient the manufacture of pharmaceuticals. This is an important part of the route that brings a new therapy to patients, but it essentially concludes the process. What precedes is a long and arduous development routine that starts years earlier, when a sponsor selects a candidate product and submits it to a succession of increasingly rigorous tests to evaluate its safety and effectiveness.

I believe that all of us in this room are familiar with the fact that this process, which we call the "critical path" of drug development, is underperforming. In recent years, the vast majority of the tested compounds have never made it all the way from the sponsor's lab to the patient's bedside. Historically, 14 percent of the tested products eventually cleared the hurdle of FDA's approval and entered the market place. Today, the chance of success of a candidate drugs entering the Phase 1 trial is estimated at 8 percent.

This extremely high attrition rate has had two inescapable consequences: we've been getting fewer drug and biological submissions; and the development costs of these products have reached unprecedented proportions. For example, the filings of standard new medical entities have gone down from 34 in 1995 to 12 last year. Original biological license applications have declined from 33 in 1997 to 14 last year. At the same time, in some estimates the cost of a single drug development has soared from $1.1 billion in 1995 to $1.7 billion in 2002.

Part of the problem, of course, is the increasing complexity and toxicity of new therapies, which increases the difficulty of proving their safety and effectiveness. But at least equally serious is the sponsor's inability to foresee these hurdles along the product's critical path. This leads to mistakes that frequently derail the development process when it is in an advanced stage, and has cost millions of dollars.

And these unexpected obstacles are becoming increasingly common. In the past, we used to see a 20 percent product failure in the late stages of the Phase 3 trials. Currently, the failure ratio at this stage is 50 percent. The reason for this unpredictability, in our analysis, is the growing disconnect between the dramatically advancing basic sciences that accelerate the drug discovery process, and the lagging applied sciences that guide the drug development along the critical path.

Not enough advanced applied scientific work has been done to create new tools to provide early, less costly, and more dependable answers about the tested products' potential for demonstrating safety and effectiveness. A measure of the economic consequences of this lack of foresight is our estimate that a mere 10% improvement in predicting products' failures in clinical trials could save $100 million in development costs per drug. The public health consequence is the understandable tendency of drug sponsors to hedge their bets by focusing on me-too drugs of proven performance, and shy away from the risks of developing medications for rare diseases, counter-terrorism, and the Third World .

We are therefore planning to address this fundamental problem by launching an initiative whose purpose is to make the challenges along the critical path more predictable. We want to cast a badly needed light on the greatest development obstacles, and identify the best opportunities for overcoming them. This search will be focused on all three dimensions that decide the success or failure of a pharmaceutical product -- its safety, medical utility, and its potential for industrialization.

More specifically, we're launching an aggressive effort to create a new generation of performance standards and predictive tools -- including assays, computer modeling techniques, biomarkers, and clinical trial endpoints -- by building on recent advances in such sciences as bioinformatics, genomics, and imaging technologies. For example, we can develop safety assessment programs for new biomaterials by applying genomic and proteomic techniques. With better scientific methods, we can develop more appropriate animal models and biomarkers for clinical safety and effectiveness.

I believe we can develop and improve standards for product characterization and product safety testing, both for traditional and innovative products. This is a bold undertaking that has a huge potential for public health and economic benefits, but it is a very demanding, and as such a quintessentially collaborative enterprise. It can only succeed if industry, academia, and other government agencies lend us their full support.

Therefore, as the first step, we plan to stimulate their interest by asking a wide variety of stakeholders to identify opportunities for targeted investment in the necessary research. With our stakeholders' help, we plan to develop a list of concrete examples of research projects that, I hope, will inspire the cooperation of individuals and organizations that can appreciate the potent stimulus that a more predictable critical path can bring to drug development. And I hope that you and your organization will reflect on the positive impact such a paradigm shift can have on the nation's health care, and the pharmaceutical, biotech, and medical device industries.

My next priority in the pharmaceutical arena is to reform the prescription drug labeling. This is part and parcel of FDA's many efforts to help reduce medication errors -- a hazard that can be deadly, and each year puts thousands of Americans in hospitals. One such recent example is our requirement, issued in February, that all prescription drugs and blood products, and widely used OTC drugs, should be barcoded with identifying information that would help minimize errors when they are dispensed or administered in hospitals and clinics.

In the very near future, we plan to release another new rule, this time to help medical doctors and other health care professionals get the drug information they need when prescribing for their patients. The profession's mainstay is the hefty PDR, the Physicians' Drug Reference, which lists all of the product data as developed by the manufacturers and approved by our agency.

But for all of its completeness, reliability and accuracy, this elaborate labeling information does not serve its purpose nearly as well as it should. For one thing, there tends to be more of it than the doctors find useful. The great length is partly due to the complexity of new drugs, which requires the listing of additional information about, for example, drug/drug interactions and the best use in various subpopulations. In part, the labels have acquired excessive details because manufacturers try to protect themselves against malpractice suits by including every adverse event information, regardless of its plausible connection with the drug.

The information surfeit has made the label's poor organization even more confusing and hard to navigate. For instance, "Dosage and Administration," the section that the doctors look for most frequently, is hidden deep inside the text, while the rarely needed data on clinical pharmacology are at the head of the label. The labeling also makes a distinction between "Warnings" and "Precautions", which most physicians find baffling. The upshot is that the labeling is such a hard read that most doctors -- people who are usually hard-pressed for time -- rarely bother to use it. This is a real waste, because manufacturers spend a fortune to develop the labeling information, and our agency takes painstaking care to ensure its integrity.

We have therefore proposed several models for reforming the labeling contents as well as the form to make it more user friendly, and we expect one of the proposals to be soon finalized. The changes, which may also apply to some older labels, will be substantial, but they're bound to bring benefits to patients, prescribers, as well as manufacturers, by reducing adverse events caused by misuse of their products.

The last, though by no means least, pharmaceutical priority I want to discuss today is the FDA's obligation to protect Americans from illegally imported drugs. You know the background: the newspapers are full of stories about governors and mayors who are sanctioning this importation on a large scale, and about the seniors who e-mail their orders or cross the border for the same purpose. And in some of the stories, the FDA is portrayed as the bad guy trying to stop this trade and make sick pensioners pay high prices for their medicines.

Well -- yes, we are doing what we can to throttle this traffic, but hardly for the reasons imputed to us by some columnists. Far from being indifferent to the rising drug prices, we have a solid record of many vigorous steps to lower the costs and increase the efficiency of the pharmaceutical industry.

Even before the GMP reform and the critical path initiative, our agency doubled the speed of the drug reviews and accelerated communications with the sponsors. We are testing the effectiveness of early and continuous consultations with drug firms in reducing the overall development time. And last year, we adopted an unprecedented measure to increase the availability of generic drugs, which are 70 percent cheaper than their brand name counterparts.

That measure alone is expected to save patients $35 billion over the next decade. One compelling reason for taking a stand against the mounting drug imports is because they are illegal under the Food, Drug and Cosmetic Act, whose enforcement is FDA's responsibility. This act makes clear that only manufacturers may import drugs into the United States . A second and even more serious reason for our position is that the vast majority of the illegally imported foreign medications present a health hazard instead of cure.

We know this because drug counterfeiting abroad has grown into a big business, and some of these worthless knock-offs have found their way into our drug distribution system. Since the late 1990s, our counterfeit drug investigations have increased four-fold. And we know it from the results of a series of spot examinations of imported drugs carried out last year by our agency and the Customs.

One of the probes, which checked mail shipments, found that 88 percent of the more than 1,500 examined packages contained unapproved drugs. The second probe, which included both mail facilities and commercial carriers, inspected almost 3,400 shipments and found that 69 percent of them contained unapproved products. Included in the lot were drugs that were withdrawn from our market as unsafe; animal drugs unfit for human use; drugs that in the U.S. are subject to stringent risk-management; and drugs that had no dosage information.

These findings illustrate a serious public health threat we cannot, and do not, ignore. We therefore do all our resources allow to confront this practice. We take the worst offenders to court: last year, a federal judge granted our request to shut down a chain of storefronts that facilitated illegal drug imports from Canada . We explain our concerns to the governors and mayors who are contemplating authorizing these imports. When asked, we deliver the same message on the Hill where, as you know, there are several pending bills dealing with this issue. And we participate in a task force of the Department of Health and Human Services that is conducting a comprehensive study of drug importation mandated by the Medicare Modernization Act.

In other words, we're doing all we can and are mandated to do to protect our public's health while awaiting the report of the task force, and the legislation that may be adopted by Congress.

Finally, I want to briefly update you on a couple of issues in which, I am told by the organizers of this conference, you are interested. One of them is the generic or "follow-on" proteins, and the other one is combination products. Regarding the follow-on biological products, which are best described as close copies of original protein-based drugs no longer under patent protection, this is a new approach that requires new scientific insights.

We have a group of experts from our centers of drugs and biologics working on one part of the problem. They are preparing a scientific framework for evaluating the similarity of two protein products, whether they are regulated as drugs or, under the Public Health Service act, as biologics. This is a very complex issue.

As a scientific matter, FDA believes that for some biologic products (primarily relatively simple peptide or protein products regulated under section 505 of the Food, Drug and Cosmetic Act), science has progressed sufficiently that we are able to assess the degree of similarity or identity between the innovator and the follow-on product. The principle underlying such a determination is that the greater the degree of similarity or identity between two proteins, the greater the confidence that their clinical performance will be similar or the same.

We've therefore asked our expert group to delineate the technical aspects of assessing the similarity of therapeutic peptides and proteins, whether derived from animals, microbial sources, or recombinant DNA. The assessment can be done through physicochemical characterization, animal studies, or human studies. We also want the group to identify the limitations of the current methods in this area, and the extent to which extrapolation of animal or clinical findings is possible, based on the degree of similarity.

From a legal perspective, for products approved under section 505 of the FD&C Act, we also believe there is existing authority to allow applications for such products under section 505 (b)(2) of the Act, relying on the earlier approval of the innovator product. In contrast, we do not believe such authority exists for follow-on proteins applications under section 351 of the Public Health Service Act that relies on the prior approval of the biological product, or on data submitted by another sponsor.

This is a difficult and controversial issue, but it is an issue that must be addressed. The European Medical Evaluation Agency has already issued its framework for regulating what it calls "biosimilar" products. There are several bills in our Congress to allow the creation of an approval mechanism for follow-on biologicals as one of the ways of helping bring down the cost of our health care. And our agency has agreed to respond to several citizen petitions that challenge the FDA's authority to approve biogeneric versions of certain biologics the law allows to be regulated as drugs. Before we move forward, we plan to solicit public views and host a scientific workshop to explore the issues.

Regarding combination products -- these are therapeutics that combine elements of drugs, biologicals, and/or devices -- there has been much progress since their regulation was assigned, a year-and-a-half ago, to our new Office of Combination Products. The OCP has been working hard to make this complex and relatively little known regulatory area more transparent, more efficient, and better understood by both our reviewers and the product sponsors.

One significant regulatory problem we've recently addressed is the lack of a statutory definition of what constitutes the "primary mode of action" of combination products. Lack of clarity on this subject has been a crucial shortcoming, because it left in doubt the criterion for deciding the very important matter of which of the involved product centers is to have the lead for the product's review and regulation.

Two months ago, the FDA addressed this issue in depth in a proposed rule. First of all the document, which is open for comments, defines the primary mode of action. It says that it is the single mode of action that provides the product's most important therapeutic benefit. Moreover, the proposed rule goes on to discuss the still more difficult problem presented by products whose most important therapeutic action cannot be determined with reasonable certainty. In that case, the rule suggests a systematic method for assigning the product's review and regulation to one of the involved centers.

This is a proposal that should go a long way toward ensuring that each combination product receives the most appropriate, knowledgeable, and efficient regulatory handling. The rule provides the consistency, predictability and transparency of the assignment process that the sponsors have been asking for. We've also charged working groups with resolving other issues that have puzzled both us and the combination product sponsors.

For example, we're working on definite answers to the question of when it is necessary to apply for a separate approval of each component of a combination product, and how to select for these therapeutics the most applicable Good Manufacturing Practices.

Another issue we've tackled is the perception of some of our reviewers that the cross-center consultations on applications for combination products are not as urgent as they should be. We've addressed these doubts by issuing a standard operating procedure that governs all formal consultative reviews among the three health care product centers -- drugs, biologics and medical devices -- and delivers the clear cut message that "consultation counts!"

The SOP makes the involved centers accountable for the quality and timeliness of consulting reviews, and gives them credit for their contribution to the review. There has been a whole slew of additional innovations -- more than I have time to mention. For example, the Office of Combination Products closely monitors the timeliness of the consultation processes, and is developing a web-based tracking system to move them along. The Office now also offers its advice to sponsors and review staff to help address sophisticated combination product issues; it has developed regulatory pathways for products that had been stuck in a regulatory limbo; and it provides statistics on combination product reviews and approvals.

I have tried to give you an overview of some of the overarching and some of the more specific innovations and changes we are considering and implementing in order to accomplish two goals: lower the health hazards for our public while creating a more positive regulatory climate for industry. We see these aims as complementary, and promising the greatest gains for the well-being and vigor of our population, as well for the success of our science and our economy. I trust that these aims are shared by the investment community. Its support is essential for the work of our agency, and for the attainment of the mutually desired, greatest public good.

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