Sometimes it pays to look a gift horse in the mouth.
For example, take the FDA's rare course reversal on Tuesday: It let Amicus Therapeutics Inc. seek accelerated approval for rare-disease drug Galafold, after last year saying the biopharma firm would need more data before seeking approval.
Amicus shares jumped nearly 26 percent on the news, which could be a positive sign for other drugmakers dealing with tricky FDA issues. They may have reason to hope the agency will be more flexible, as new commissioner Scott Gottlieb has vowed. But it's hard to tell how far that flexibility will extend -- and whether it really is the boon it seems.
The FDA's decision is clearly big news for Amicus. Galafold, which treats Fabry disease, is already approved in Europe. But it faced a potentially multi-year path to the much more lucrative U.S. market. The medicine could now U.S. see approval in 2018, which should substantially boost sales expectations that took a hit after the previously announced delay.
Markets took this hint of a friendlier FDA as great news for other firms worried about getting drugs approved. For example, shares of GW Pharmaceuticals PLC, which wants the agency's OK on a marijuana-derived medicine in a rare seizure disorder, rose more than 6 percent on Tuesday. Meanwhile, PTC Therapeutics Inc. -- whose application for a muscle-wasting disease drug has gotten rocky FDA treatment so far -- rose more than 5 percent.
Any shift in the FDA's approach is most relevant to firms making drugs for rare diseases, also known as orphan drugs. The agency is already somewhat more flexible in these cases anyway, because alternative medicines aren't available, because Congress has mandated more leeway, and because patient populations are so small that it's hard to run gold-standard clinical trials.
Firms with such treatments also get longer exclusivity periods, speedier FDA reviews, and unparalleled pricing power. According to an analysis by life-sciences data company Evaluate LLC, the average annual per-patient cost of an orphan drug last year was $140,443, compared to $27,756 for a non-orphan medicine.
Investors may think the FDA will now be even more flexible with these drugs, leading to a flood of lucrative new approvals. That jump in PTC Therapeutics' share price suggests expectations may have gotten ahead of reality, though. PTC is is forcing an FDA review of its drug over the agency's objections after its medicine failed a Phase 3 trial.
Even a more-flexible FDA doesn't necessarily mean drugs with little evidence of effectiveness or dangerous safety issues will get approved. The FDA may now review some drugs it might previously have rejected out of hand. A few medicines that might previously have been rejected may get to market. But it's unlikely the FDA's standards will be drastically lowered.
And an FDA approval is far from a guarantee of success anyway. Someone has to pay for these costly medicines, and it's usually not patients -- it's insurers, which are increasingly throwing up roadblocks to obtaining such drugs. There have already been reported reimbursement barriers for Sarepta Therapeutics Inc.'s treatment for Duchenne Muscular Dystrophy, which was approved last year despite the strenuous objection of some FDA scientists due to limited evidence of its usefulness. A looser FDA won't make insurers any more willing to pay for high-priced drugs that may have safety or efficacy issues.
So the FDA's Amicus decision either represents a new approach to approvals, in which case payers and patients may balk. Or it is just a one-off or marginal shift, meaning its impact is limited. Either way, investors hoping for a flurry of new orphan-drug approvals should prepare to be disappointed.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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