July 12, 2021 BARRON’S 13
Breakthrough Stocks
Following the FDA's approval of Biogen's treatment for Alzheimer's disease, the shares of both
Biogen and Eli Lilly soared.
Source: FactSet
80%
60
40
20
2021
0
Biogen(BIIB / Nasdaq) Eli Lilly(LLY / NYSE)
July
of more than $5 billion by 2025.
Scientists who had sat on the re-
view panel were furious. “I think this
will go down in history as one of the
worst decisions that the FDA has
made,” Alexander says. “It’s contrary
to the typically very careful and scien-
tifically rigorous approach that the
FDA has used.”
Three of the 11 voting members
who had sat on the panel that advised
the FDA on Aduhelm resigned, while
others, including Alexander, criticized
the decision publicly.
“This sends a concerning signal to
manufacturers about the minimum
levels of evidence that the FDA will
require for new drug approval in any
field,” says Dr. Aaron Kesselheim, a
professor of medicine at the Harvard
Medical School and one of the panel
members who resigned. “The FDA’s
standards are what motivates compa-
nies to test their drug in a rigorous
way.”
Woodcock, the FDA’s acting com-
missioner, has said that claims that
FDA standards are lowering are
nothing new. Speaking to STAT, she
said that the criticism the agency was
facing would fade as more informa-
tion about the decision became avail-
able. “We’ve been down this road
before, and things sort themselves
out,” she said, referring to controver-
sial approvals of early HIV drugs.
The FDA serves as the gatekeeper
between the biopharma industry and
the public, making sure that the thera-
pies pitched by Big Pharma are safe
and effective. Despite the complexities
of its role, including the fact that Con-
gress chooses to have the FDA raise
nearly half of its budget through user
fees paid by the industries it regulates,
the agency still commands respect.
Still, the Aduhelm decision has also
resurfaced old concerns. Five years
ago, the FDA granted accelerated ap-
proval to another drug that had been
panned by one of its advisory commit-
tees. That drug was Sarepta Thera-
peutics ’ (SRPT) eteplirsen, a treat-
ment for a rare genetic disorder called
Duchenne muscular dystrophy, or
DMD. As in the case of Aduhelm, the
data supporting eteplirsen’s efficacy
was controversial. Woodcock, who
then headed the agency’s drug-review
division, overruled colleagues who
didn’t want to approve the drug.
Woodcock justified the decision, in
part, by saying that Sarepta wouldn’t
have enough funds to continue its
work on rare diseases like DMD if
the drug wasn’t approved.
That particular comment was
brought back to mind this spring with
the Aduhelm approval. “If it’s not the
same thing, it’s rhyming with the way
people are perceiving this event,” says
Dr. Steve Pearson, president of the
Institute for Clinical and Economic
Review, or ICER, an influential voice
on drug pricing.
It’s not as simple as saying that the
FDA is loosening its standards. Inves-
tors who follow the biotech industry
could rattle off a list of tough stands the
agency has taken in recent months.
Still, some see an agency that is
increasingly beholden to the short-
term interests of the drug-develop-
ment industry. Daniel Carpenter, a
professor of government at Harvard
University who has written exten-
sively on the FDA, says he has seen
a change in the approach of the
Center for Drug Evaluation and
Research, or CDER, the division for-
merly run by Woodcock and now
run by Cavazzoni. “I think there’s
been a shift, at CDER especially, in
terms of thinking more as to how can
we facilitate the development of new
therapies?” Carpenter says.
Just days after the Aduhelm ap-
proval, Cavazzoni seemed to hit back
at the criticism. At a biotech industry
conference, she said that the conflict-
of-interest rules for advisory commit-
tees should be loosened, and criticized
the committees as too “emotional.”
“The FDA is less interested in feed-
back from the independent academic
community,” says Dr. Joseph Ross,
a professor of medicine and public
health at the Yale School of Medicine,
referring to Cavazzoni’s comments.
“There is a good reason why there are
pretty strict conflict-of-interest rules
in place.”
Having a regulator that is less inter-
ested in the opinion of academics, and
more interested in facilitating the de-
velopment of new drugs, might seem
like a positive for healthcare investors.
Since the Aduhelm approval, the two
main biotech exchange-traded funds
and the S&P 500 Pharmaceuticals
index are all slightly outperforming the
broader market.
In the long term, however, bio-
pharma needs a tough FDA. In part,
that’s because investors have come to
expect a tough FDA. After Aduhelm,
investors don’t know quite what to
make of the agency, or whether to
expect rigor from their decisions.
“The FDA is far less predictable,”
says Christopher Raymond, an analyst
at Piper Sandler. That is bad for the
industry, he says. “Having some level
of predictability... is important, so you
can have a pretty reasonable way of
predicting how the FDA is going to
look at what you’re doing.”
Early on Thursday, Biogen an-
nounced that the FDA was changing
the label that describes the approved
use of Aduhelm. While the original
label placed no restrictions on which
Alzheimer’s patients could receive
Aduhelm, the updated label says it
should be used by the early-stage
population on which it was tested.
The change will not affect analysts’
sales estimates for the drug, and ulti-
mately didn’t weaken Biogen’s share
price.
Still, in staking out a broad label for
Aduhelm and then reversing itself, the
agency may reaffirm the perception of
its increasing unpredictability.
B
eyond consistency in its ap-
proval decisions, the assump-
tions built into the biopharma
industry require FDA approval
to be the global gold standard.
It’s important for the industry “that
the FDA is always seen as the tough-
est, strict regulator on the planet,”
says Dr. Peter Bach, the director of the
Center for Health Policy and Out-
comes at Memorial Sloan Kettering
Cancer Center. The FDA’s reputation
is critical to companies’ defenses
against litigation, Bach says, but more
important it helps guarantee coverage
of approved drugs.
“In the old days...FDA approval
meant the best scientists, the most
serious and most concerned about
public health, have required the right
studies and evaluated them, and it
passes muster,” he says. That meant
insurers followed the FDA’s lead.
“FDA approval rarely was followed by
noncoverage.”
That has changed for many rea-
sons, including higher prices and a
more complicated payer system. In
part, though, Bach says it also has to
do with the perception of the FDA. He
says that now, insurers see approval
as the first of several steps.
When eteplirsen was approved,
insurers balked, and many sought to
deny coverage. There is speculation
now about whether Medicare will try
to do the same with Aduhelm.
For investors, that means that ap-
proval is no longer an automatic ticket
to expected sales. “There’s uncertainty
there,” Bach says.
Some of that uncertainty, and the
broader questions about the agency’s
predictability, may be eased if the Bi-
den administration chooses to appoint
a permanent FDA commissioner, and
give a clear signal of the agency’s fu-
ture direction. But some of it will be
resolved only over time.
ICER’s Pearson points to the long-
standing understanding that insur-
ance companies should largely cover
drugs approved by the FDA.
“When that social contract starts to
break down,” he says, “I think it cre-
ates a lot of irritation, a lot of uncer-
tainty, maybe some unfairness.”B
“I think
there’s been
a shift...in
thinking
more in
terms of,
howdowe
facilitate
the develop-
mentofnew
therapies?”
Daniel Carpenter,
aHarvard
professor