RAI Explainer: The Drug Development Process

By: Benjamin Glanz 

One of the greatest achievements in the history of biopharmaceuticals occurred in January 2020, when Pfizer and Moderna used genetic sequencing provided by Chinese laboratories to design mRNA vaccines for COVID-19. While the technology behind mRNA vaccines had taken decades of research to develop, the flexibility of the mechanics meant that the actual vaccine design took no more than a few hours. After 10 months of clinical trials, the vaccines were approved for emergency authorization by the FDA and soon distributed around the world.

Most drugs, however, take a very different development path. The entire process–from target identification to FDA approval–can take 10-15 years, and only one in 5000 drugs makes it to market. Over the course of this process, the cost can rise as high as $2.9 billion per drug. In this blog, we take a wide-angle look at the complex process of developing pharmaceutical treatments in the United States.

Target Identification

The first step in the process is identifying a target. A ‘target’ is a gene or protein within the pathogen that researchers believe can be disrupted by some sort of compound. For the mRNA vaccines, the target was the so-called ‘spike protein’ of SARS-CoV-2, the virus that causes COVID-19.

Identifying an appropriate target requires an advanced understanding of the pathogen’s genetic makeup. Therefore, target selection most often occurs not within pharmaceutical companies but in university labs conducting basic research on a pathogen.

This is where public funding comes in: most university researchers working on basic disease or pathogenic research operate through National Institutes of Health (NIH) grants. Pharmaceutical companies typically only fund drug development once the target has been selected; otherwise, the investment is considered too much of a long shot. A 2018 study in the Proceedings of the National Academy of Sciences found that NIH-backed research contributed in some form to every drug approved by the FDA between 2010 and 2016. Furthermore, a 2019 study in the British Medical Journal found that 19 percent of FDA-approved drugs from 2008-2017 incorporated late-stage public research, meaning activities beyond basic target identification. From 1981-1990, that number was only around 5 percent, underscoring the increasing importance of publicly funded research as drugs have become more complex.

Recently, a report from the Information Technology & Innovation Foundation (ITIF) listed a decrease in government funding for basic research as one of the reasons why the Japanese pharmaceutical industry has declined over the past 30 years. France has seen similar decreases in public funding and similar declines in its pharmaceutical industry since the 1980s. France also suffers from a weak technology-transfer system that hurts collaboration between universities and industry. Meanwhile, the United States has increased its share of health research as a percentage of all government R&D from 12 percent in 1998 to 27 percent in 2020. The U.S. possesses a thriving technology-transfer system and enjoys the most innovative and successful pharmaceutical industry in the world.

Pre-Clinical Testing and IND Application

Once a target has been identified, medical chemists–usually within pharmaceutical companies–look for ‘hits’: compounds that act on the target. Increasingly, this process is assisted by artificial intelligence (AI), and in 2020, the first AI-“invented” drug went into clinical trials in Japan.

The candidate drugs then enter preclinical testing mandated by the FDA, first in test tubes (in vitro) and then in animals (in vivo). Both efficacy and safety are factors at this stage–pre-clinical trials ensure dangerous drugs are not tested on human beings. Only one in every 1000 drugs makes it past this stage.

If the company thinks the new drug is safe and possibly effective, it applies for an Investigational New Drug (IND) filing from the FDA and provides all safety data from the pre-clinical trials. Once the IND is granted, the 20-year patent term for new pharmaceutical treatments begins.

Clinical Trials

Clinical trials consist of four phases. In the first phase, safety is the only priority. A few dozen people are given the drug and monitored for side effects for several months. The company also looks to establish the maximum dosage for the drug. According to the FDA, drug companies decide to move forward with roughly 70 percent of drugs that enter phase 1.

Phase 2 typically involves several hundred people and can last anywhere from several months to two years. With this sample size, researchers can begin to understand the human efficacy of the drug. Side-effects are still closely monitored. Around one-third of drugs are promising enough to make it past phase 2.

Phase 3 trials can incorporate anywhere from 300 to 3000 people, though the Pfizer trials for the COVID-19 vaccine involved over 40,000. Phase 3 can last up to four years. Here, the company is mostly looking at how effective the drug is in dealing with the disease, although safety remains an important consideration. Following Phase 3, approximately  20-25 percent of drugs will have demonstrated enough success for the pharmaceutical company to move forward with an application for FDA approval. This means that over 90 percent of drugs that entered human testing will have failed over the course of the first three phases of clinical trials.

Phase 4 occurs after a drug has been approved by the FDA and involves long-term safety and efficacy studies.

FDA Approval

After a successful Phase 3, companies file a New Drug Application with the FDA. An NDA contains the tens of thousands of pages of data that the pharmaceutical company has gathered on the drug’s safety and efficacy. The FDA then has ten months to make a decision: approve the drug for commercial use, request more information from the drug company, or outright reject the drug (a very rare occurrence). A review team analyzes the data and makes a recommendation to a senior official, who makes a decision. The FDA bases its decision on a drug’s safety and efficacy data but also on whether it has the correct labeling information and adheres to quality manufacturing practices.

The diligence involved in the approval process means that by the time a drug is approved, 10-15 years may have passed. Though some of that time occurs before the investigational new drug application–and thus before the patent period begins–drug companies often have less than a decade before the initial patent expires. Meanwhile, estimates for total cost to the pharmaceutical company for the median drug range from $757 million to $2.9 billion.

Overall, the process of bringing a drug to market in the U.S. is long and complicated, involving significant public and industry investment. The U.S. must continue to invest in basic research and private enterprise if it hopes to maintain its position as the world leader in pharmaceutical development.

Benjamin Glanz is a former intern with the Renewing American Innovation Project at the Center for Strategic and International Studies in Washington, D.C.

The Perspectives on Innovation Blog is produced by the Renewing American Innovation Project at the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).