An investigative report in the Cleveland Plain Dealer looks at the FDA Fast Track. For those who don't know, the FDA Fast Track was created to accelerate the drug approval process for drugs targeted at under-treated diseases. Yet there is a bit of debate about whether Fast Track drugs are approved more quickly or are more likely to be approved than other drugs.
However, this report suggests that news that a drug has been Fast Tracked has created buying frenzies on Wall Street that have made people a lot of money:
Overall, since 1998, Fast Track announcements for nearly 200 drug treatments triggered one-day stock price increases that averaged 10 percent for biotechs and pharmaceutical companies, according to The Plain Dealer's analysis of publicly traded firms.
The announcements also frequently set off trading binges for the same stocks, one-day increases in shares bought and sold that average almost 1,300 percent. A Fast Track announcement from one Silicon Valley biotech firm in 2003 generated a one-day increase in trading volume of more than 52,000 percent.
That's a lot of wheeling and dealing to be sparked by a non-event.
The Fast Track designation is not an indication that a drug willbe proven safe and effective. In fact, half of these drugs have been scrapped by developers or have had serious setbacks. Most will never win FDA approval.Those outcomes also can be disappointing for patients who believe that Fast Track status gives hope of a promising treatment. And the few time-saving advantages of the designation were available five years before the FDA introduced it. They are still available to drug makers without the designation.
Many companies didn't use the Fast Track tag en route to quick approvals for breakthrough drugs that treat life-threatening conditions, such as advanced kidney cancer and a rare form of stomach cancer.
Dr. John Jenkins, director of the FDA's Office of New Drugs, acknowledged that the Fast Track designation only gives companies the same access to FDA programs that was already in place when they lobbied Congress for the provision in 1997.
"There's really not much other, if any, benefit for Fast Track," he said.
The debate about whether Fast Track really does accelerate approval is ongoing:
It's not clear what Fast Track designation has accomplished for consumers, if anything.
A study published in 2003 by the Tufts Center for the Study of Drug Development at Tufts University comparing the development time of approved Fast Track drugs with other drugs concluded that Fast-Tracked drugs were developed 2 1/2 years quicker.
The FDA and representatives of the drug industry have cited this analysis as evidence of the designation's success, but the early numbers looked so good because many of the Fast Track approvals were for drugs to treat HIV, which generally have a shorter development time.
In revisiting the subject early last year, the Tufts center found the total development time for drugs that were Fast Tracked through 2005 to be the same as for other drugs - about eight years, on average.
Tufts drug center officials interpret those results to mean that the Fast Track designation is helping save time, given that the Fast Track drugs are "highly innovative products," according to the U.S. Drug Approval Trends and Yearbook.
Basically, the core question here is whether the market is being fooled about the true value of Fast Tracking. If Fast Tracking is indeed valuable, then the market should rise to reflect this. If it isn't, then day-traders and hedge funds are trying to make money off the widespread assumption that it is.
It reminds me of Keynes example of a beauty pageant from his General Theory of Employment Interest and Money (1936). Say you ask a set of people to judge a which of a hundred faces is the most beautiful. The individuals that select the face that is later judged to be the most beautiful by the group are all entered into a raffle.
There are two ways to approach the problem from the point of view of an individual wanting to be entered in the raffle. You can guess which face you think is the most beautiful. In this sense, you are trying to determine the actual correct answer. Or you can guess which face the majority of people will think is the most beautiful. In this sense, you are trying to guess the aggregate correct answer. The problem with the second choice is that if everyone did this the market for picking the most beautiful face would be in degrees circular. Everyone is looking at everyone else for information. On the other hand, your tastes for beauty could differ widely from the group, so using the first strategy might not work either.
Keynes analogizes this to the problem of predicting changes in stock prices. If you think a stock is valuable, you could vote for it with your money. If it is valuable -- a well-run company that sells a product that has a market -- the price of the stock will probably rise to reflect this. On the other hand, you could look at what other traders are interested in. If they buy stocks the prices of those stocks will rise.
Keynes uses this to argue how markets can behave irrationally. If the majority of agents are looking at what everyone else is doing, the market will never find the truly valuable stocks. Applying Keynes to this situation, the drug companies that are seeking Fast Track approval and the day-traders that invest in them are essentially trying to fake value to the market to get a rise in their stock price. (Assuming that Fast Track is valueless which is by no means clear.)
On the other hand, you can criticize the authors of this article -- and Keynes for that matter -- on the grounds that markets are not so easily faked. This is the argument that Alex Tabarrok makes over on Marginal Revolution:
But I'm also skeptical of stories that suggest markets are systematically fooled by non-events and the numbers presented do not seem wildly inconsistent with a modest but real positive signal from being listed as Fast Track.
Stock prices of companies that trade on the New York Stock Exchange rose just 1 percent after Fast Track announcements... Excluding these companies, most of which are major pharmaceutical firms, Fast Track announcements boosted stock prices 11.5 percent.
What do people think? Is the market being faked by non-events or is Fast Tracking actually of value? Fundamentally, it is an economic question of how valuable you think dubious regulatory acceleration can be and how much you think its dubious nature can be hidden from investors.
Hat-tip: Marginal Revolution
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Fast Tracking may not have much value in and of itself for streamlining approval, but it may be serving as an indicator for some important characteristics of the drug and company applying for it.
First, since Fast Track status is for treatments for unmet medical needs, it could serve as a 3rd-party assessment of how much competition the drug would encounter if/when it hits the market. Second, Fast Track status may serve as an indicator of how skilled the firm is at dealing with the FDA.
The Plain Dealer also doesn't compare approval rates for Fast Track v non-Fast Track. They cite 50% for Fast Track, but isn't the overall rate closer to 20% for INDs?
The differences for small vs large companies are probably instructive - traders probably don't know much about the small companies compared to the larger ones, so even minor signals can change their assessments significantly, while the larger ones barely budge.
The speculative trading angle is a bit of a red herring - you'll see speculative trading whenever you see price movement, whether based on solid fundamentals or not. Volume of shares traded may be a good indicator for whether speculative trading is occuring, but it doesn't say much about Fast Track itself.
From a policy perspective, Fast Track probably is useless, but I wouldn't write it off entirely from a market research perspective.
"the core question here is whether the market is being fooled about the true value of Fast Tracking"
Mr. Market is never fooled. It will always be chaotic in the short-term.
It may be good for biotech companies so that it increases their stock prices to avoid any buyout attempts. It may be easier to just buy the small biotech company than go into a bidding war for the licensing of a single drug.
A Servant To Others
The Food and Drug Administration (FDA) originated in its original form several decades ago, with thier objective being to ensure the health and safety of the citizens of the United States regarding products that they consume, and the catalyst for its development was due to the concepts originated by a man named Upton Sinclair. However, the objective of the FDA seems to have changed, as they appear to have formed a pathological alliance with the pharmaceutical industry possibly through the money that this industry gives the FDA for various reasons, so it seems. This is such a large amount of funds issued to the FDA by the industry that it has resulted in possibly half of the FDAs annual income for various reasons. Results of this relationship, one could posit, have been the approval of unsafe drugs on occasion and lack of sufficient regulation and monitoring of the pharmaceutical industry that the FDA is obligated to perform. In addition, the FDA lacks sufficient resources to complete thier duties completely, it has been said. In fact, in the FDA's own mission statement, they claim that they will always protect, advance, and improve public health.
An example of this support from the pharmaceutical industry is the Prescription Drug User Fee Act, which requires drug companies to pay around a million dollars for a priority review of a potentially approved drug of theirs. Implemented by the FDA in 1992, it has required increases in the amounts paid by drug companies since then. In fact, of the FDA's estimated 2 billion dollar budget, about 20 percent of this money is from this act. Since 1992 and the implementation of this act, there have been no less than 12 drug recalls, which statistically is significant. To improve public health, it may be best that the FDA receive all funding from the U.S. Treasury.
So this intimacy between the FDA and pharmaceutical industry seems to continue to progress, as illustrated with the new proposal by the FDA to allow the pharmaceutical industry's reps to discuss their products with prescribers off-label, which means that the FDA somehow is accepting and allowing the sales reps of the drug industry to possibly create harm to patients with this proposal due to uncertainty associated with unapproved uses of a drug promoted in this way, many believe.
A prescriber, upon their own discretion, can in fact prescribe a drug off-label. Historically, however, ad for good reasons, representatives from the pharmaceutical industry have been prohibited from suggesting or discussing off-label possibilities with thier promoted products with prescribers, due to the speculative nature of the concept. In fact, it is a federal offense for such reps to speak off-label about the drugs they promote, and some have been penalized for this behavior in the past in the form of monetary settlements by the Department of Justice, yet appears such penalties are not much of a deterrent for this behavior that may now be authorized and has continued to occur regardless of possible future permission by the FDA.
This FDA protocol that is being considered, called, Good Reprint Practices, would require reps to use what in fact may not truly exist, which is truthful and authentic clinical trials related to off-label possibilities of thier promoted products during any dialogues they may have with prescribers. This in itself may lack a necessary degree of validity for such discussions by reps, as it has been suspected that some clinical trials are flawed due to the trials being possibly manipulated by the pharmaceutical companies of the meds involved in such trials through possibly third parties, such as trial deception involving ghostwriting and invalid authors of such trials, which disintegrates the quality of such a study. These facts can be validated and have been discovered by others, so caution instead of autonomy should be utilized regarding clinical trial discussions with health care providers, some may say.
Furthermore, this proposal is additionally flawed due to the fact that most pharmaceutical reps have little of any clinical training. So the ability for pharma reps to analyze data from trials justifying an off-label concept is unlikely. This complicates the idea of this off-label concept- this ignorance of most drug reps in regards to the complexities of these once reliable and dependable methods of proof, and that is the clinical trials. In addition, the proposed relaxation of previous restrictions regarding off-label promotion could prove to be a catalyst for reps to manipulate statements to prescribers for their own benefit in regards to their promoted meds while disregarding the health of the consumers of these meds. So, our previous safety administration, the FDA, appears to be evolving into taking somewhat of an apathetic stance regarding the safety of public health by suggesting such practices with what appears to be deliberate intent and reckless disregard for public health, so it seems. This may be due to the FDA now viewing the pharmaceutical industry as thier sponsor or client. Its unbelievable this proposal ever came into existence, with the delusional fallacy that it would be an actual benefit to public health. Furthermore, this FDA proposal may complicate existing patient medication errors, such as in the elderly or dosing for children, complicated by the fact that many are unable to understand label instructions on their med. So there are enough problems with prescribing medications correctly, and adding this FDA proposal would just make the situation worse, it seems.
However, there is freedom of speech. Perhaps another alternative would be to have clinically trained people discuss such issues with prescribers, instead of the pharmaceutical sales reps, who, unlike those who may be more academically enriched, have the sole objective of increasing the market share of their promoted meds. Such people, ideally, would not have any association with the makers of such drugs spoken about to prescribers, yet this may be unlikely to occur. Regardless, awareness needs to be achieved by the public about the possible dangers of this FDA proposal, even though it's possible that the public has heard about it through media sources. As citizens, we have the right to insist that the FDA demand and direct the pharmaceutical company to prevent potential harm that may come to patients in need instead of thier apparent desire to please thier bread and butter. More congressional oversight is needed of this Association.
"It is difficult to get a man to understand something when his salary depends upon his not understanding it." --- Upton Sinclair
Dan Abshear
Author's note: what has been written was based on information and belief
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