Also from the FDA
http://www.fda.gov/NewsEvents/Speeches/ucm082906.htm
"I would like to note that almost 80 percent of all drugs tested are abandoned by their sponsors after either phase 1 or 2 because of excessive toxicity or lack of substantial benefit.
By the time phase 2 is completed, the drug developer knows quite a lot about the safety and activity of the drug. If the results are promising, the sponsor moves to phase 3. FDA strongly encourages sponsors to work closely with the Agency to optimize the design of their phase 3 trials to be sure they fulfil the regulatory requirements for demonstrating safety and effectiveness.
The large, controlled phase 3 studies often involve thousands of people with the target condition. The studies may examine additional uses for a drug, or consider additional population subsets, but are primarily aimed at obtaining the necessary effectiveness data. The phase 3 studies also continue to generate valuable safety data, including long term effects.
Once phase 3 testing is completed, the sponsor submits the test results to the FDA in the form of a New Drug Application, or NDA. FDA's scientists [medical officers, pharmacologists, chemists, microbiologists, and statisticians] review the application to validate the data and determine if they do, in fact, show that the drug is both safe and effective. The manufacturing facility is evaluated to ensure that a consistent and high quality product can be produced. Finally, the safety and effectiveness data itself is usually audited by the FDA to verify any questionable data.
Once the drug developer has completed testing the drug, it submits proposed labeling for its drug, which must be reviewed and approved by the FDA. (Labeling is generally reflective of the conditions of the trial in terms of indication and population, but once the drug is approved, under the practice of medicine, which is not regulated by the FDA, a physician may use the drug in any way he or she deems therapeutically appropriate.) Use of a drug product for other than its labeled indication is called an "off label use."
The traditional drug development process I've just described is a lengthy one. On the average, it takes about 10 years to complete. It is certainly expensive. But it is an effective system that does accomplish what is was designed to do. And that is...to protect the public from ineffective and dangerous drugs and assure that the risks associated with drugs are in acceptable ratio to the benefits to be derived."
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