In my last two posts, I touched on some pretty significant FDA-related developments—and even though they’re barely a week old, a lot has happened since my commentary. Here’s a look at where things stand now. It’s not pretty.
The FDA, Avastin, and Wall Street
In a post last week, I urged the FDA not to approve Avastin for use with breast cancer patients, because (1) the science shows it’s not effective enough to warrant approval and (2) giving it the okay would set a precedent for approving mediocre drugs..
Naturally, the FDA approved Avastin at the end of last week.
In a comment quoted by MarketWatch, analysts called the FDA’s decision “a welcome outcome” because "investors and companies have expressed growing concern that the FDA’s hurdle for approving drugs is a moving target and that a survival benefit is a necessity.”
But wait—just last week the Wall Street Journal noted that FDA “evaluation methods have remained largely unchanged over the last half-century.” In fact, the Journal cited this long-term consistency as emblematic of the agency’s “bureaucratic culture”—and yet here are the analysts, claiming that the problem is inconsistency.
Of course, the logic behind approval is a secondary concern to
investors—what really matters is the financial consequences of an FDA
decision. In this case the green light from the FDA sent Genentech
shares shooting up by almost 10 percent in a single day. Predictably,
financial analysts see big things in the company’s future: the
investment bank Cowen & Co. forecasets a peak potential sales
estimate of $1.5 billion in 2012 and RBC Capital Markets analysts have
upped their 2008 and 2009 sales forecasts by $17 million and $30
million respectively (the drug’s 2007 sales already clocked in at a
whopping $2.7 billion).
This is indeed a welcome outcome—at least for Wall Street.
The FDA’s Capacity and Medical Devices
Earlier this week
I commented on the Supreme Court’s medical device decision, arguing
that—regardless of the legal arguments—a policy of preemption (i.e.
when federal approval precludes future personal injury lawsuits) is
wrong-headed because the FDA is in shambles. Its “approvals” are
unlikely to be a truly reliable seal of safety.
in the Wall Street Journal (the paper is alternately enlightening and
infuriating), FDA Commissioner Andrew von Eschenbach made clear that
his agency was in fact hanging by a thread and needed “a systemic
overhaul that must go on over a period of years.” He went on to say
that “to do what we need to do requires substantially more dollars than
what has been invested in the FDA thus far.”
How many more dollars? Earlier this month in a congressional hearing,
former FDA lawyer Peter Barton Hutt said that over the next two years,
appropriations for the agency need to double and its staff must be
increased by 50 percent. Eschenbach plays it a little closer to the
vest, saying that he needs slightly more than a 2.95 percent increase
in overall agency appropriations proposed in the president’s 2009
budget. According to NewsInferno.com,
this amount is $2.4 billion—which means that Eschenbach wants around
another $72 million. Without such an injection of cash, the agency will
only have enough to “barely cover scheduled pay raises and inflation.”
Meanwhile, today it was reported
that a director of Medtronic (a medical device manufacturer) has
completed “the largest stock purchase on record by an insider” at the
company. Jack W. Shuler reported buying about $13.7 million in
Medtronic stock (3.060 shares), “including some for his wife and some
for trusts in the name of his children.” After this purchase was
disclosed, “[Medtronic] President and Chief Executive William A.
Hawkins and Chief Information Officer H. James Dallas also reported
buying company shares.”
Why does this matter? Because Medtronic was the defendant in last week’s Supreme Court ruling. Two days before the Supreme Court decision, Medtronic profits plunged,
largely because of costs associated with its legal woes. But now that
the company has a guarantee of blanket immunity to personal injury
lawsuits, insiders are looking to score big.
In sum, the FDA that has given in and is on its last legs as drug and
device makers jump for joy over huge paydays. Surprising? Not really.