Is the fast track system a sham?

Is the FDA's fast-track designation nothing but a dead end lined with a few quick bucks for the CEOs and investors who like to game the system? A story this morning from the Cleveland Plain Dealer apparently spells out how the system has been worked. Originally, the FDA set up the fast track system to help speed needed drugs into the hands of patients. Instead, few of the fast-tracked therapies are helped at all.

The quick assumption here is that the drug developers are playing fast and loose, hoping to gin a fast spike in the stock value. But if you look at the first examples cited by the newspaper--Dendreon and VaxGen--you'll see two companies that tried hard to get approvals by the quickest approach possible only to be handed setbacks by an agency looking for better data. As they say, bad data happens. Some investors and patients, though, feel they were tricked into believing that the therapies were an odds-on favorite for approval.  

On second glance, the story is less sinister than it first appears. There's a fundamental misunderstanding with the way drug development works in the U.S. You can't take something like fast-track designation--which isn't all that hard to get and doesn't mean that the regulators are giving the industry a nudge and a wink that all is clear sailing ahead. If the data isn't there, the FDA isn't going to back it. Period. Read the large print.

Marginal data? These days, that probably means the regulators are going to say 'try again.' That fast track designation? It's virtually meaningless, no matter how much companies tout it. Disappointed by a seemingly sudden switch at the FDA? Move to the back of the line.

Biotechnology is a notoriously difficult market to invest in. Really, you have to wonder why Las Vegas even exists when it's so much easier for small investors to lose money trading in biotech stocks. Some companies and their CEOs probably play this game. And certainly, as I know all too well, many, many biotechs tout every bit of positive news with all the enthusiasm of a marching band. But if some think a fast gambit and a loud noise will really pay off, they're fools. What goes up on inflated hopes today plunges on reality the next. And those CEOs are likely to disappear as fast as the equity value in their companies. - John Carroll