FDA Incentives Could Pay Dividends For J&J

By Rob Wright, chief editor, Life Science Leader

In January, the FDA approved Sirturo, a drug developed by J&J (NYSE: JNJ) to treat multidrug resistant tuberculosis (MDR-TB). What makes this announcement particularly interesting isn’t the fact that Sirturo is the first new drug in 40 years to be approved to treat tuberculosis. What makes it interesting is the fact that J&J
targeted the United States for approval, when fewer than 100 Americans have this potentially fatal disease. Even more interesting is the fact that the drug was granted accelerated approval based on data from a pair of Phase 2 studies. You may be wondering if this is another case of the scientists being too close to the compound, pushing for drug approval where a viable commercial market does not exist. It’s no secret that Paul Janssen, founder of J&J’s Janssen Pharmaceutica NV, was passionate about finding a treatment for the disease which killed his sister. But there is a method behind what might be viewed as madness. Here is why a $65 billion global pharmaceutical bellwether sought FDA approval for a drug where the commercial market is < .00003% of the population (and, coincidentally, is one of the topics I focus on in this month’s feature story on page 20). Basically, if you want success in the global pharmaceutical world, the United States still holds the keys to the pharmaceutical kingdom.

Many countries in the world use FDA and EU opinions as points of reference for approving drugs in their homelands. This makes sense when you consider that the U.S. is the largest pharmaceutical market in the world, and the 27 member-country EU is second. J&J is betting that FDA approval of Sirturo will increase the likelihood of its being approved in China, India, Russia, and Eastern Europe, home to 60% of the world’s 630,000 MDR-TB cases. But J&J is getting something else as well, and it isn’t just capitalizing on launching a drug which can benefit < .009% of the world’s population, or the goodwill created among regulators, governments, and patients around the world for developing a rare disease drug. What J&J gets is a reward, in the form of a voucher from the FDA, for its “commitment to advance innovative medicines that help address serious public-health issues,” says J&J spokesperson Pamela Van Houten.

Under the FDA Amendment Act of 2007 (FDAAA), companies receiving FDA approval for a tropical disease treatment (e.g. TB) are eligible to receive a transferrable voucher that allows the bearer to designate a single human drug application submitted under section 505(b)(1) or section 351 of the PHS (Public Health Service) Act, to receive six-month priority review status. So not only did J&J hit the FDA drug approval lottery with this gamble, but also the company did so while the approval process was “on sale.” For in September of 2012, the FDA announced a 32% reduction in fee rates for companies wishing to use a tropical disease priority review voucher for the fiscal year 2013. Obviously, J&J sees the benefit of getting another drug in its pipeline a priority review, beyond the $3.6 million bargain fee associated with using the voucher. The idea behind the voucher program is simple and yet brilliant. If you want companies to develop drugs for diseases found primarily in poor and developing countries, provide the appropriate incentive. By developing a nonrevenue-generating and yet lifesaving drug, J&J has the opportunity to accelerate FDA approval of another drug within its pipeline. And if it is approved in the U.S., the world is likely to follow.