The Food and Drug Administration and the European Medicines Agency have the same essential role on either side of the pond, but their mentalities are far from the same. It's essential for investors to understand the differences to keep from making assumptions about the approvability of a drug.

Mechanism for approval
Understanding the differences starts with understanding the approval process.

The FDA has established goals that it shoots for when making decisions: currently 10 months for a standard review and six months for an accelerated review. There's lots of back and forth between the agency and the drugmakers during that time.

The EMA, on the other hand, issues questions to drugmakers during the review process, which stops the clock. The agency shoots for a decision within 210 days -- about seven months, excluding clock stops.

The FDA elicits the help of outside experts during advisory-committee meetings, but it isn't bound to the recommendations the committee makes. The EMA relies on the Committee for Medicinal Products for Human Use, or CHMP, but don't be fooled by the "committee" part: CHMP doesn't play the same role as an FDA advisory committee.

In fact, CHMP is essentially the equivalent of the FDA. Technically, CHMP makes recommendations to the European Commission, but the EC's decision is nothing more than a rubber stamp. The only example I know of where the EC didn't ratify a CHMP recommendation is Johnson & Johnson's (NYSE: JNJ) antibiotic Zeftera, where new information came up between the recommendation and the EC approval. CHMP revisited its decision, eventually recommending against approval.

Standards
If the FDA and the EMA were teenage girls, the EMA would be the head cheerleader and the FDA would be that scary goth girl no one talks to. Put bluntly, the EMA's standards are a little more lax than the FDA's.

There are some examples of drugs the FDA approved that the EMA didn't -- Bristol-Myers Squibb's (NYSE: BMY) Ixempra, for example -- but there are far more instances of the reverse.

In 2008, Merck's (NYSE: MRK) Cordaptive was approved by the EMA based on its ability to lower cholesterol levels, but before approving the medication, the FDA asked Merck to run an outcomes trial, which the company is still in the process of completing.

The FDA rejected InterMune's (Nasdaq: ITMN) Esbriet because the drug worked in only half of the phase 3 trials. CHMP recommended approval and the EC concurred; apparently the lack of treatment options for idiopathic pulmonary fibrosis patients trumped the lack of concrete data.

And I could go on.

So be careful
Earlier this month, Cell Therapeutics (Nasdaq: CTIC) got a positive recommendation from CHMP for its non-Hodgkin's B-cell lymphoma drug, Pixuvri. The clinical trial wasn't exactly a textbook example of how a trial should be run, but CHMP apparently figured it was worth approving as a last-ditch effort for patients who had failed multiple other treatments.

Will the CHMP opinion and inevitable EC approval affect the FDA decision? I doubt it. The FDA already rejected the drug once after an advisory panel unanimously recommended against approval. Somehow I think the agency has already made up its mind about the company's appeal of the first rejection.

Is half good enough?
True, something is better than nothing, and if a company can't get approval stateside, at least a European approval will bring in some revenue. But don't assume sales in the two regions are equal. For most indications, potential sales in the U.S. are much higher than in Europe. (Unfortunately, there are no drugs for debt crises, where they'd have us beat.)

And getting approved in Europe is only half the battle. Many European countries have centralized health care and weigh the cost versus efficacy to decide whether they'll pay for the drug. Drugs with questionable efficacy -- such as those the FDA doesn't approve -- are going to have a hard time getting paid for. In December, Germany's Institute for Quality and Efficiency in Health Care, for example, concluded that no additional benefit could be found for Esbriet.

Final Foolish thoughts
It's important to understand the approval process in Europe, but rather than focusing on whether a drug can specifically get approved and paid for there, investors are better off looking for high-quality drugs that clearly work, increasing the likelihood of an FDA and EMA approval.

And if your stomach can't take the binary regulatory approvals, consider other high-quality stocks that aren't as regulated by the government. Here's our top pick for this year.