It pains me to say this, since I'm no fan of the FDA, but I'm not sure the lower number of new drug approvals we've observed over the last few years is completely the FDA's fault.
While I agree that the number of clinical trials is a good measure of how hard the drugmakers are working, I'm not sure it's the best measure of their ability to discover new drugs. However, as my Foolish colleague Brian Lawler points out, the best measure -- the number of submitted applications -- is difficult to reconcile.
There are two problems with using active trials to measure a drugmaker's efficiency. The first is obviously that this metric includes failed trials. The latest statistic I've seen is that only one in five drugs entering the clinic actually make it to market. If that number has slipped because of increased clinical trial failures, that could explain the increased number of trials without a subsequent increase in FDA approvals.
It's possible that we're entering an age where most of the low-hanging fruit has already been picked. If so, companies climbing ladders to reach the remaining goods might fall and break a leg, as Vertex Pharmaceuticals
The other problem with using clinical trial data to measure efficiency of new drug discoveries is that it includes trials on existing drugs. Just as the FDA has probably tightened up its requirements for approvals post-Vioxx, drugmakers are probably worried about bringing new drugs to the market. Thus, some of the increase in trials could be due to drugs like ImClone Systems'
No matter who's at fault for the slowdown in approvals, I think that Brian's advice to "invest accordingly" is correct. Investors should look for management with a track record of getting drugs through the clinic, then factor in a good chance that the drug could get an approvable letter on its first FDA application.