Since rejoining the FDA in May as its leader, Gottlieb has been extremely productive. With an eye to bringing down prices, he has presided over record generic-drug approvals and a multi-year high in novel drug approvals, while also working to speed more medical devices to market. His agency has suggested it might be more flexible in approving drugs and will try to get cancer drugs to market more quickly, using data from smaller and faster clinical trials. He has also directed agency policy toward tackling the opioid crisis and curbing tobacco use.
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Specialty pharma firms -- those that tend to acquire drugs rather than develop new ones and focus on complicated older medicines -- may come off the worst. Gottlieb's moves have seemed designed to rapidly create trouble for such drugs, including publishing a list of price-hike-prone medicines. Specialty-pharma products featured heavily.
Traditional generic drugmakers are feeling the heat, too. Generic approvals set a new record in the FDA's 2017 fiscal year. New generic-drug applications surged, as well, suggesting next year may break the approval record.
One would assume the uptick in generic approvals is good news for the industry -- more products on the market mean more revenue. But generics are not made equal. When there is a single generic version of a medicine, it is generally priced at a meager discount to the original and is extra-profitable.
But once there are multiple generics on the market, price war follows. And Gottlieb's FDA loves conflict. In the past, first generics for branded medicines were the agency's main priority. Now, the FDA also wants to prioritize applications for medicines when there are fewer than three competing generic options. As a result, the most profitable generic drugs will have a shorter lifespan and see margins rapidly eroded.
Big pharma may have the most complicated relationship with Gottlieb.
More flexibility in the drug-review process may have benefits -- Eli Lilly & Co., for example, is grateful the FDA recently reversed course on its demand for a new trial for a potential blockbuster arthritis-drug candidate -- but negative consequences are possible, as well. More and more rapid approvals will crowd disease areas, which could lead to price competition and give leverage to pharmacy benefit managers. A world where every treatment area looks like the heavily discounted diabetes market is not especially appealing.
Big pharma also generates plenty of revenue from older drugs. Gottlieb plans to target the various mechanisms companies use to unnaturally extend drug monopolies. And increased generic productivity means revenue from expired or expiring drugs is likely to evaporate more rapidly than it did in the past.
Smaller biotech companies don't rely on older drugs. And they are especially likely to benefit from Gottlieb's regulatory shifts, given their slim budgets and emphasis on drug development. The ability to get faster approval with smaller trials should be a tailwind. Some are already benefiting. Amicus Therapeutics Inc. saw its share price soar in July after the FDA changed its mind about accepting one of its rare-disease drugs for review.
Others have discovered flexibility can be a double-edged sword. Tesaro Inc., for example, had a seemingly commanding lead in a promising group of new cancer drugs after a broad approval in ovarian cancer patients in March. But then the FDA gave AstraZeneca PLC's competing drug a similarly broad label in August -- even though that company ran a narrower clinical trial -- seemingly endorsing the notion that these medicines may be substitutable. It was a novel move for the FDA, and AstraZeneca competition will shrink the sales potential of Tesaro's medicine and the company's chance of being acquired.
Gottlieb seems to believe in the price-lowering power of competition. It sounds like a talking point. But it's already working in the generic-drug market. And a series of rapid hepatitis C drug approvals have lowered prices so significantly that it slowed the entire country's drug-spending growth. And he's also shown a willingness to use the FDA's regulatory muscle to combat what he sees as abusive behavior.
