It’s no secret that drug development is a challenging way to make a profit. For every blockbuster compound with broad demographic application like Lipitor, thousands of once-promising compounds wash out in the preclinical phase and hundreds more fail in clinical trials. For every drug that achieves approval from the U.S. Food and Drug Administration (FDA), hundreds of millions of dollars are spent on pharmaceuticals or biologics that fail to make it to market.

However, for the handful of drugs that do win approval, the return on investment can be tremendous. Lipitor racked up total sales of well over $100 billion before its patent expired, and that much money will fund a lot of failed compounds that may be in the Pfizer pipeline. In terms of profitability, backing blockbuster drugs over many decades made Big Pharma what it is today, but as time goes on, it has become evident that the risks of this strategy are increasing and the rewards decreasing.

An alternative to spending enormous sums developing these blockbusters is to concentrate on developing products for niche markets that may have smaller market potential, but that can be approached with dramatically lower development costs using the Section 505(b)(2) pathway to FDA approval.

While the standard 505(b)(1) route is high-risk, high-reward endeavor, 505(b)(2) is an opportunity for small, but consistent profits.

The 505(b)(2) advantage
Before drugs like Lipitor or Zoloft could begin to realize their earning potential, they had to be approved by the FDA under the standard 505(b)(1) regulatory pathway. Historically, drugs under 505(b)(1) take as long as 15 years and a nine-figure investment to work their way through the system.

Drugs approved under 505(b)(2), on the other hand, can rely in part on data from existing reference drugs. This means they can be developed and achieve FDA approval in as little as 30 months with only a fraction of the number of required clinical trials and at much lower cost. Additionally, unlike generic drugs approved under Section 505(j), where exclusivity can be held for only 180 days, the 505(b)(2) applicant may qualify for three, five, or seven years of market exclusivity, depending on the extent of the change to the previously approved drug and the type of clinical data included in the New Drug Application (NDA).

Regardless of the regulatory pathway one chooses for approval of an NDA, the FDA standards for the demonstration of efficacy and safety are the same; it is only the source of information that differs between the two paths. It is important to understand what constitutes sufficient evidence—and therefore which specific studies can be replaced by existing data for individual compounds.

Not for everything
While a novel treatment for cancer is unlikely to reach patients through 505(b)(2), there are a wide range of products with great societal benefit, good market potential, and an opportunity for relatively rapid approval. When other types of data provide a way to apply the known safety and effectiveness of a drug to a new population or to a different dose, regimen, or route of administration, the effectiveness of a new product may be adequately demonstrated without additional clinical trials.

These situations include:
• Pediatric. The FDA must conclude that the course of the disease and the effects of the drug are sufficiently similar to permit extrapolation from adult efficacy data to pediatric patients. Acceptable evidence may include common pathophysiology of the disease, common drug metabolism, and experience with other drugs in its therapeutic class.
• Bioequivalence. Alternative formulations and new dosage strengths may be assessed on the basis of evidence of bioequivalence.
• Modified release dosage forms. In some cases, modified release dosage forms may be approved on the basis of pharmacokinetic data linking the new dosage form to an approved immediate-release dosage form.
• Different doses, regimens, or dosage forms. Where blood levels and exposure are not very different, it may be possible to conclude that a new dose, regimen, or dosage form is effective on the basis of pharmacokinetic data alone.

In addition, a single clinical study of a new use, when combined with independent substantiation from study data in related uses, can often provide adequate evidence of effectiveness in, for example, other phases of a disease, in closely related diseases, or in other populations.

A significant opportunity
One significant advantage a 505(b)(2) NDA enjoys over a standard 505(j) generic new drug application is that the former may be eligible for up to seven years of market exclusivity for an orphan drug and up to three years for applications where one or more of the clinical investigations was essential to approval of the application. Patent protection may allow companies to recoup the substantial development costs and provide profits to support further research efforts.

The Pharmaceutical Research and Manufacturers of America organization (PhRMA) estimates that of 5,000 to 10,000 compounds that come from drug discovery, only one is likely to be approved. Thus, specialized techniques have developed such as 505(b)(2) also called “repurposing” or “repositioning”, to improve the drug substance or formulation, or revise or add therapeutic indications.

Congress hoped that instituting the 505(b)(2) pathway would increase the number of available drugs by easing approval requirements for treatments with significant available data. Beyond the benefits to society of a greater variety of available drugs, 505(b)(2) also represents a substantial marketing opportunity not only for existing patent holders, but also for smaller, even virtual organizations. This includes international drug developers who are looking to additionally gain approval of their product for sale in the United States.

In the end, drug development requires both the consistency of 505(b)(2), as well as the occasional  505(b)(1) development program in order provide relief for the many debilitating diseases and conditions that affect patients.

Making 505(b)(2) the foundation of a drug development program is a fast and cost-effective strategy that’s been shown to work.

About the author
Ken Phelps used more than three decades of experience in the health science and services industry to found Camargo Pharmaceutical Services in 2003. As an expert in drug development, specifically the 505(b)(2) regulatory approval pathway, Phelps has aided in the successful FDA approval of numerous compounds.