Online Update

January 19, 2007

DRUG DEVELOPMENT
Spending is up, but approvals are down

From 1993 through 2004, pharmaceutical company spending on research and development increased 147 percent—from $16 billion to nearly $40 billion, according to the Government Accountability Office. In contrast, the number of new drug applications submitted to and approved by the FDA hasn't kept pace. Although the FDA has given a green light to three out of four applications, the total number approved annually has been declining since 1996. The GAO report cites several factors that have hampered drug development, including difficulties in translating research discoveries into safe and effective drugs, business decisions by the pharmaceutical industry, uncertainty regarding regulatory standards for determining whether a drug should be approved, and certain intellectual property protections. To address these issues, experts suggest increasing the number of scientists who can translate drug discoveries into effective new medicines and allowing conditional approval of some drugs based on shorter clinical trials using fewer numbers of patients.

MUTUAL FUNDS
Year-end winners and losers

International stock funds earned the largest returns for investors in 2006, an average of 27.1 percent for the year, says Morningstar. Pacific/Asian funds, excluding Japanese companies, came out on top with a whopping 45.8 percent. Ironically, Japanese stock funds did the worst among all types of international funds, losing an average of 1.8 percent.

Among US stock funds, those specializing in real estate and utility companies earned the largest domestic returns. Real estate funds returned 33.8 percent as of Dec. 29, while utility funds earned almost 26 percent. Overall, domestic funds notched 13.1 percent, compared to 15.8 percent for the S&P 500. The category that did the worst was bear market funds, which lost 9 percent. Funds specializing in healthcare companies did second-worst, with a measly 4 percent return.