Clinical Trials and FDA Approval (a 5-minute guide)

4 min readJun 21, 2018

Why is developing a new drug so expensive for pharma companies? What is the difference between Phase I, Phase II, and Phase III clinical trials?

This article aims to provide foundational knowledge about the journey to FDA approval for a new drug.

The FDA

The U.S. Food and Drug Administration (FDA) regulates the development, production, marketing, and selling drugs in the United States. It has one of the most stringent drug approval processes in the world, and as a result, many drugs and therapies are available in foreign countries before they are approved in the U.S. [1]

When considering the application for a new drug, the FDA looks at [2]:

Whether the drug is safe and effective. This includes whether the drug is effective in a realistic clinical environment, where a patient may be taking other drugs and may not follow dosing instructions perfectly.
Whether the drug’s labeling is appropriate. Labeling includes not just the label on the pill can, but all information about a drug’s safe and effective use, written for health care practitioners.
Whether the drug can be manufactured safely and reliably.

The IND

The FDA approval process starts when the sponsor company files an Investigational New Drug Application (IND), which requests permission to start human trials.

The IND must include, among other things [3]:

Animal Pharmacology and Toxicology Studies. How is the drug absorbed, metabolized and excreted in animal models? At what dose does the drug become toxic in animals? The goal here is to convince the FDA that, based on prior animal studies, the drug will be safe in humans.
Manufacturing Information. How will the drug be synthesized? How do you test that the drug was made properly and without impurities? Can you produce the drug at the needed scale?
Clinical Protocols and Investigator Information. Includes a comprehensive review of the compound. Also outlines the planned Phase I, Phase II, and Phase III studies, including number and types of patients, with particular focus on safety-related concerns such as dosage escalation and adverse effect monitoring.

Working backwards from the IND, you can get a sense of the pre-clinical work that must be done before clinical trials can even begin. Biotech companies often contract out to Contract Research Organizations (CROs) for one or more of these subcomponents.

If the FDA doesn’t object within 30 days after an IND is submitted, human tests can begin.

The Three Phases

Phase I

Is the drug safe? (<100 patients)

Phase I is typically done on healthy volunteers. The goal is to understand how the drug interacts with human bodies. Are there side effects? What is the effect of various dosages on the body? What is the drug’s half-life? How is the drug absorbed and excreted?

Phase II

Does the drug do anything? (100–300 patients)

Phase II is done on patients. The goal is to establish the drug’s actual efficacy (how well does it actually work on sick patients?) prior to broader, more-expensive Phase III trials.

If the drug doesn’t perform as well as expected at this stage, a company may choose to stop development for financial reasons, even if the drug does work to some extent. For example, maybe the drug isn’t projected to generate enough profit in light of competition and market demand.

Phase II trials (for example, those for cancer therapeutics) often lack placebo control arms, are not blinded, or are not randomized properly. Poor experimental design in Phase II is one of the reasons for expensive failures in subsequent Phase III trials. [5]

Phase III

Is the drug safe and effective for real-world clinical use? Is it better than alternatives? (1000+ patients)

Phase III trials are longer and involve many more patients. They are almost always randomized, blinded, and have placebo control arms. Phase III trials will try to mimic the actual demographic distribution of the drug’s target population. They will try to understand any long-term side effects of the drug, how the drug interacts with other drugs, and any other aspects of the drug that will impact its safety and effectiveness in the wild.

The FDA typically expects two independent Phase III trials to be conducted in order to provide substantial evidence of drug safety and effectiveness. [2]

The NDA

When everything is completed, the process ends with the submission of a New Drug Application (NDA), which requests permission to begin marketing and selling the drug to physicians. The FDA will typically review the NDA within 180 days. [2]

Rules of Thumb

As a rule of thumb, it takes roughly 10 years for a drug to go through the stages of clinical human trials (also called clinical development).

Cost estimates range anywhere from $100m — $1b+ per drug (once marketing and failed drugs are factored in). [6] The per-patient cost can range from $15k — $60k (based a study run by the pharma industry) [7]