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The FDA Says It Needs a Pep Pill

In the past, I've detailed how some Food and Drug Administration divisions are approving new drugs at a slower rate, along with possible causes for the slowdown. On Monday, the FDA held an advisory panel meeting to discuss the direction the agency is heading, and to make its case for additional funding from Congress.

Its detailed report on the state of the agency can be summarized as, "We need more money and can't do our jobs without it." The FDA said that with its current budget, "[its] scientific base has eroded and its scientific organizational structure is weak" and "its scientific workforce does not have sufficient capacity and capability."

The FDA claims that the cause of its troubles is an increasing amount of mandated responsibilities, but no commensurate increase in funding to cover them. To be clear, the issues that the FDA claims to have are not just with the human-drugs branch of the agency, but also with the parts responsible for overseeing the safety of the food supply.

Drugmakers like Novartis (NYSE: NVS  ) , which dealt with an inexplicable delay in the review of diabetes drug Galvus, or Momenta Pharmaceuticals (Nasdaq: MNTA  ) , which was recently denied approval for a complex generic on concerns that the agency had never mentioned before, can certainly attest to some of the FDA's organizational issues. And Encysive Pharmaceuticals (Nasdaq: ENCY  ) , for which a drug review was delayed several months because the agency wanted to see its data in a different format, likely has some valid grumbles, too.

While the report took a mostly gloomy outlook on the FDA's operations without more funding, there were individual bright spots. The one division that the FDA highlighted as having "outstanding" scientific leadership was the Center for Biologics Evaluation and Research (CBER), which rules on the approval of new vaccines and some biopharmaceuticals. Coincidentally (or perhaps not), new drug approvals from the CBER have been up in recent years.

Compounds like Merck's (NYSE: MRK  ) GARDASIL human papillomavirus (HPV) vaccine are approved through CBER, but the Center for Drug Evaluation and Research (CDER) rules on most drug candidates.

The investing takeaway from this report is that innovative and new technologies are where the agency seems to be struggling the most in terms of the drug approval process. The report cited "a dearth of scientists who understand emerging new technologies" and an insufficient "expertise in quantitative methods ... to effectively assess products and guide sponsors to design valid and informative studies."

Investors owning shares of drugmakers working on more traditionally targeted and designed compounds or follow-on therapies of already-approved drugs probably don't have much to worry about. But those owning shares of non-traditional drugmakers working on new compounds or technologies, such as RNAi or stem cells, should see this report as confirmation of some of the issues at the FDA and as a warning.

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