The hardest thing about being an investor in drug companies has always been figuring out what the Food and Drug Administration is going to do. Except for releases to the public and briefing documents that the agency gives advisory panels, there's very little information that comes out of the FDA to help investors figure out what the agency is thinking. The offices in Silver Spring, Md., are essentially a black box.
That might all change. Or at least the agency is considering lifting the lid on the box. Yesterday, the FDA established a Transparency Task Force to explore ways it can let a little more information out. The task force is even meeting with the public at the end of the month to get their opinion. I wonder if it'll be held in a glass-walled conference room.
The agency essentially has two tasks when it comes to drugs: make sure they're safe and make sure they're effective. My guess is that most of the unveiling of information will come on the safety side and we'll get more information about situations like why Merck's (NYSE:MRK) Vioxx was pulled and the reasoning for slapping a black box warning on several anti-inflammatory drugs, including Johnson & Johnson's (NYSE:JNJ) Remicade, Abbott Labs' (NYSE:ABT) Humira, and Enbrel from Wyeth (NYSE:WYE) and Amgen (NASDAQ:AMGN). That'll be somewhat useful for investors -- safety information affects sales to some extent -- but information about the agency's thinking before approvals would be more useful. That's where the growth is, after all.
But information about preapproval discussions isn't likely to be released, because companies will probably fight it. They'll argue that keeping the discussions they have with the FDA a secret gives them a competitive advantage. It would be nice to know, for instance, if Eli Lilly's (NYSE:LLY) resubmission today of its application to market Cymbalta for chronic pain has satisfied the FDA requirements, but I'm not holding my breath.
On the other hand, if FDA decisions could be predicted easily, investors might not get to enjoy triple-digit returns, so perhaps we shouldn't be too upset about the tight-lipped nature of the FDA.
