The U.S. Food and Administration has approved a new drug Xeljanz (tofacitinib) from Pfizer Inc., for the treatment of rheumatoid arthritis.

The agency said the drug can be used to treat moderate to severe rheumatoid arthritis in people who aren't responding or are intolerant to methotrexate.

"Xeljanz provides a new treatment option for adults suffering from the debilitating disease of RA who have had a poor response to methotrexate," said Badrul Chowdhury, director of the Division of Pulmonary, Allergy, and Rheumatology Products in the FDA's Center for Drug Evaluation and Research.

FDA said that the drug was tested in seven clinical trials. Participants who participated in the drug studies reported improvements in the symptoms related to rheumatoid arthritis and had better physical functioning when compared to people who were kept on placebo.

Xeljanz was also found to be associated with increase in the risk of opportunistic infections, tuberculosis, cancers and lymphoma. The agency added that most common side effects of the drug included upper respiratory tract infections, headache, diarrhea, and inflammation of the nasal passage.

Industry analysts say that the sales of the new drug could reach $3billion, Reuters reported. The new drug comes in the form of pills which could give it an edge over the currently used once-a-week injectable drug - Abbots's Humira.

Rheumatoid arthritis is a long-term disease that leads to inflammation in joints and surrounding tissues and results in moderate to severe pain. In rheumatoid arthritis, the body's immune system starts attacking body's tissue. What causes this disease is unknown. Genes, infection and hormones might lead to the disease.

Around 1.3 million people, or about 0.6 percent of the U.S. adult population, suffer from rheumatoid arthritis, according to the National Institute of Arthritis and Musculoskeletal and Skin Diseases.