What Is a New Drug Application (NDA)?

A new drug application (NDA) is a comprehensive document that must be submitted to the U.S. Food and Drug Administration (FDA) in order to request approval for marketing a new drug in the United States.

Drugs for which NDAs are submitted will have already passed through several clinical trials. As such, drugs that reach the NDA phase typically have a high probability of securing FDA approval.

Key Takeaways

  • The NDA is an application that drug companies must file in order to request regulatory approval for new drugs from the FDA.
  • The application must include detailed evidence from a series of clinical trials, each of which involves escalating standards of scientific evidence.
  • Although most NDAs are approved by the FDA, it is extremely difficult to develop a drug to the point where an NDA can be filed.

How New Drug Applications Work

The filing of an NDA represents an important milestone in the life of a new drug and is closely watched by investors. Once the NDA has been submitted, the likelihood of that drug receiving FDA approval is usually very high. Accordingly, companies that file NDAs often see their share prices appreciate even before their response from the FDA is obtained.

Yet, reaching the NDA stage is far from easy. Each NDA document must contain 15 sections containing detailed experimental evidence (including both animal and human studies). The document must extensively demonstrate the proposed drug’s pharmacology, toxicology, and dosage requirements as well as the intended process for manufacturing the drug. 

The NDA has formed the basis for regulating and controlling new drugs in the United States since the passage of the Food, Drug, and Cosmetic Act (FD&C) in 1938. Since that time, various amendments to the FD&C have gradually increased the standards of evidence required to obtain approval.

One consequence of these more stringent standards is that the approval process can become very time consuming. The goal of the FDA’s Center for Drug Evaluation and Research (CDER) is to review and act on at least 90% of NDAs for standard drugs within 10 months after the applications are received, and six months for priority drugs. Of course, the full timeline for drug development will frequently stretch to a decade or more.

Advantages and Disadvantages of the New Drug Application

The NDA submission process is just one phase of a multi-step process that pharmaceutical companies must navigate in order to successfully bring a new drug to market. From the perspective of the FDA, this rigorous process is necessary in order to protect the public from harmful or misleading drugs.

On the other hand, many have argued that the new drug approval process is excessively onerous, posing a barrier to innovation and causing upward pressure on drug prices.

Example of a New Drug Application (NDA)

Suppose that XYZ Pharma is an early-stage pharmaceutical company that has recently submitted its first NDA. Prior to reaching this stage, XYZ invested several years—and tens of millions of invested capital—into a series of clinical trials on both animal and human subjects. The results of these trials are among the most critical information contained in its NDA and will be central to the FDA’s decision about whether or not to approve its new product.

These clinical trials progressed in four phases. The first three phases had to be completed before the NDA is rendered, whereas the fourth and final stage involves the ongoing monitoring of the drug’s effectiveness after the product has been approved for sale.

With each phase of the trials, the standard of evidence required rises relative to the previous phase. Of critical importance is the third phase, in which XYZ was required to perform placebo-controlled double-blind experiments involving several hundreds of people.

So far, XYZ has obtained favorable results from each of the first three phases. In response, XYZ’s share price has risen substantially, and the company is now ready to file its NDA. Although most investors believe that the application will be approved, there is still a reasonable chance that the NDA will be rejected. If this occurs, it is likely that XYZ’s share price will rapidly decline.