There has been a lot of debate about whether the FDA is approving drugs at a slower rate in recent years. Some analysts take that stance, and there has been plenty of anecdotal evidence.

Earlier in the week we looked at the FDA's approval of new drugs by calendar year, but today let's compare the rate of new drug approvals based on other criteria.

Shifting the data
Using the same data as I did before, let's examine whether the FDA is approving new drugs at a slower rate following the 2004 recall of Merck's (NYSE:MRK) anti-inflammatory compound Vioxx.

Just as a reminder, this data includes only FDA approvals of new molecular entities (NMEs), new vaccines, and new biologics, and not follow-on compounds like Flamel Technologies' (NASDAQ:FLML) extended-release version of heart failure drug Coreg. My data also excludes compounds used for diagnostic purposes, like Bristol-Myers Squibb's (NYSE:BMY) Definity contrast agent and other oddball compounds, like a sunscreen product from L'Oreal that somehow was categorized by the FDA as a NME. I exclude these compounds because I only want to capture FDA approvals of new therapeutic compounds.

Following the removal of Vioxx from the market on Sept. 30, 2004, and the temporary pulling of Elan (NYSE:ELN) and Biogen IDEC's multiple sclerosis drug Tysabri five months later, investor sentiment soured on the pharmaceutical and biotech sectors as it was assumed that the FDA would be much stricter on approving new drugs. For example, the AMEX pharmaceutical index is up only 11% since Vioxx was pulled from the market, although the AMEX biotech index has performed much better.

But taking a look at FDA drug approvals in the 36 months prior to and 36 months following Vioxx's removal from the market shows little difference in the number of NMEs and biologics approved by the FDA.

FDA Drug Approvals

36 months following removal   (10/01/2004 to 9/30/2007)


36 months prior to removal   (10/01/2001 to 9/30/2004)


Remember, this data includes drugs regulated by both branches of the FDA that approve therapeutics for humans: The Center for Biologics Evaluation and Research (CBER) and The Center for Drug Evaluation and Research (CDER).

Vioxx was approved through CDER, so it's logical to expect that Vioxx's removal affected drugs going through CDER more than the vaccines and some biologics that are regulated by CBER. Slicing the data another way shows that drug approvals through CDER are definitely down since Vioxx was pulled from the market.

CBER Approvals

CDER Approvals

Average Monthly CDER Approval Rate

36 months following Vioxx removal   (10/01/2004 to 9/30/2007)




36 months prior to Vioxx removal   (10/01/2001 to 9/30/2004)




In the three years following Vioxx's removal, CDER has approved an average of almost six fewer drugs per year than in the three years before Vioxx was removed from the market. Six fewer drugs may not sound like much, but it's a 20% decrease in the number of approvals.

Interestingly, Vioxx and GlaxoSmithKline's diabetes (NYSE:GSK) drug Avandia, which has come under much fire this year, were approved within five days of each other in 1999. Bad week for the FDA, eh?

An accurate conclusion?
However, the fact that the FDA has approved fewer drugs since pulling Vioxx doesn't necessarily mean that the FDA has become stricter. Other factors, such as the strength of drugmakers' pipelines, also are important determinants of the number of new drugs.

Equally important to remember: Some new and innovative drugs are still getting approved by the agency, despite the FDA denial of interesting compounds like Sanofi-Aventis' (NYSE:SNY) weight loss drug candidate Zimulti.

Next week we'll look at other pieces of data concerning drugmaker productivity and FDA approval to further get to the bottom of whether it is reduced drugmaker pipeline productivity or a stricter FDA that is the likely reason for fewer new drugs getting approved through CDER.

Preliminarily though, based on this data, it does appear that at least the CDER branch of the FDA has gotten tougher in its drug approval criteria. This has important implications for investors who own shares of drugmakers like Vanda Pharmaceuticals (NASDAQ:VNDA) with compounds awaiting a regulatory decision from CDER.

Looking for more Foolish drug stock coverage? Check out the Fool's market-beating Rule Breakers newsletter. You can check out all our recommendations with a 30-day free trial.

Fool contributor Brian Lawler does not own shares of any company mentioned in this article. GlaxoSmithKline is an active Income Investor pick. Biogen is an active Stock Advisor pick. Flamel is an active Motley Fool Hidden Gems pick. The Fool has an A+ disclosure policy.