As a result of this inertia, medicine’s innovators in the biotechnology have mostly opted out of addressing these large, common disorders, leaving them in the hands of the lumbering R&D giants like GlaxoSmithKline and Pfizer. Instead, increasingly, the upstart biotechs are focusing on more specialized diseases, like rare cancers, where they can conduct inexpensive clinical trials, and gain approval after mid-stage phase II studies, using what’s known as the accelerated approval process.

The accelerated approval process, instituted in 1992 at the behest of AIDS activists, gives the FDA a mechanism to tentatively approve drugs after phase II if a drug shows promise in a serious disease using a surrogate endpoint...

The problem with the accelerated approval process is that it is only used in very narrow areas, such as cancer and AIDS, where the FDA has to its satisfaction established surrogate markers that it believes to correlate to broader clinical outcomes (such as tumor shrinkage being a surrogate for cancer survival). But there are a lot of areas where surrogate markers aren’t as easy to define. In addition, the FDA focuses on using the accelerated approval process to address life-threatening diseases like cancer, neglecting serious but more chronic ailments such as diabetes, where the cost of clinical trials is prohibitive.

While this problem has harmed patients by making it harder for them to gain access to new treatments, it’s been great for the big pharmaceutical companies. As my colleague Matthew Herper recently showed, from 1997 to 2011, twelve multinational pharma companies spent $802 billion to gain approval for just 139 drugs: a staggering $5.8 billion per drug. While these companies have been remarkably unproductive on the R&D front, they do have one huge advantage: they generate billions of cash from their already-approved drugs, a luxury that smaller biotech companies don’t have.

As a result, the small biotechs are forced to partner with the big pharma companies to get their drugs to market. The biotechs are forced to give up the economic upside of success for their innovations, while big pharma skims the cream off of biotech pipelines for their own purposes.

Sen. Kay Hagan (D., N.C.) is attempting to do something to address this problem. Today, she is introducing a bill called the Transforming the Regulatory Environment to Accelerate Access to Treatments (TREAT) Act, which seeks, among other things, to incrementally the accelerated approval process.

But what you didn’t hear from Sen. Hagan today is what happened behind the scenes. It turns out that big pharma helped to kill an earlier version of the TREAT Act, which would have created an entirely new “progressive and exceptional approval” pathway for innovative new drugs: something that could have turbocharged drug development in several fields.

The new pathway would have addressed a much broader range of drugs than the existing accelerated approval process, such as: the first drug approved for a specific and identifiable disease subpopulation; patients unresponsive to, or intolerant of, existing treatments; improvement in patient outcomes due to either improved safety or efficacy; or “otherwise satisfy an unmet medical need.”

Unlike the accelerated approval process, which requires an FDA-sanctioned surrogate marker, the new process would involve a case-by-case negotiation between the industry sponsor and the FDA, in which both sides could come to an agreement as to what would demonstrate an early signal of clinical benefit. If confirmatory phase III studies didn’t reproduce that benefit, the FDA could revoke its approval, as with the Avastin case.

Sen. Hagan’s proposal would have been devastating to the big pharma R&D oligopoly. If small biotech companies could get their drugs tentatively approved after inexpensive phase II studies, they would have far less need to partner those drugs with big pharma. They could keep the upside themselves and attract far more interest from investors. Big pharma, on the other hand, would be without its largest source for innovative new medicines: the small biotech farm team.

Hence, big pharma, through its trade association PhRMA, objected to Sen. Hagan’s proposal, instead arguing for window-dressing reforms to the existing accelerated approval process. Instead of allowing for phase II data to achieve approval for a wide range of drugs, the new TREAT Act merely allows for the existing, surrogate marker-driven accelerated approval process to address “highly targeted therapies for distinct subpopulations.” Relative to the bold, innovative proposal contained in the bill’s original version, the new version amounts to window dressing.